The winners and losers
It’s difficult to push passed the banks presently, who built upon their overall recovery last week to underpin much of the strong activity in the ASX. The CBA, having come furthest behind the pack, has been driving activity in absolute value-added terms; however, the NAB and Westpac have taken their turns to lead the charge.
Perhaps the surprising matter last week was the resilience of the materials sector. Commodity prices are generally seeing a dumping amidst trade-war concerns, with copper being possibly the greatest exemplar of this. Iron Ore prices have held their line, although they are a long way off their YTD highs. Despite this, material sectors are witnessing a general advance, maybe due to investors wishing to buy into the space to gain exposure to the overall index.
In terms of individual stocks, Domino’s suffered last week following price-target downgrades from both Credit Suisse and Citi. Cited by each analysis was growing regulatory concerns applying to franchisers, and slower revenue growth in expansion markets (Europe and Japan). Conversely, Telstra shares staged a recovery, seeing very large volumes throughout the week, although the company is a long way off regaining all its recent lost ground.
The little Aussie battler
The AUD staged a modest rally in Friday night’s North American session, after US Non-Farm Payrolls figures revealed weaker than expected wage growth. The news was interpreted by traders as a sign that the Fed are currently under less fundamental pressure to ram through rate hikes. The AUD/USD has broken a short-term trend channel on the back of this news, to open-up a challenge of resistance levels around 0.7440, 0.7470 and finally 0.7500. With the local calendar light on market moving data, look to US CPI data and ongoing trade war risks as the major stories driving activity in the local unit.
The data week ahead
Local data looks light in the week ahead, with NAB Business Confidence and Westpac Consumer Sentiment data the only real stand out economic release. It’s unlikely that the sentiment readings will affect markets too greatly, but given highly negative press generated by the unfolding US-Sino trade war, an insight into the psychology of business and consumers will be interesting.
Considering the dearth of local fundamental data, watch for traders to take a greater lead from overseas cues. Watch for volatility in currency markets around the release of UK GDP data on Tuesday night, coupled with a spate of speeches from central bankers. While in the indices space, markets will pay some attention to Chinese Trade Balance data for signs that the trade war is impacting China’s trade flow.