Australian trading view

After a brief pull back to end trade last week, the ASX is looking buoyant to begin the new week, as trader sentiment receives a boost from a successful OPEC+ meeting.

Market data
Source: Bloomberg

The ASX 200 climbed to decade long highs, despite a global pull-back in risk appetite last week to close trading around the 6225-mark. A recovery in bank shares drove the run higher, with the Big 4 banks regaining ground after several weeks of aggressive selling – and in doing so, dragging the rest of the index with it. Consumer stocks also got a boost during the week, after Parliament successfully passed the Turnbull Government’s tax-cut package on Thursday. The developments underpin strong foundations to start the new week, with SPI futures indicating a higher open for the ASX, largely thanks to expected gains to materials stocks following a rally in oil prices post Friday’s OPEC+ meeting. The question now is: how far can this run go? Perhaps an answer could lie in the chart below, which reveals the development of a potential topside trendline for the index.

The winners and losers

As mentioned, it was all about the banks last week, which carried local stocks to their 10-year highs, even amidst growing trade war risks. Having given up ground recently, due to a series of regulatory disasters, the CBA was the leader in the bank’s recovery, bouncing off its ~$64 lows to presently trade just shy of $74 per share. Big hitters Rio Tinto and BHP Billiton look like early winners today, rallying in the New York session 2.2% and 1.4% respectively after OPEC+’s agreement to boost oil production, boding well for the other miners on the ASX. On the other side of the coin, one can’t go past Telstra as the biggest laggard last week, which shed almost 5% in value on Tuesday. The losses came following an announcement from the company that it will undergo a massive restructure (which includes the loss of 8,000 jobs), along with a downgrade of profit forecasts from approximately $10bn to around $8bn. 

The little Aussie battler

The AUD managed to recover ground late in last week’s trade, after being dumped to 12-month lows following US President Trump’s threats of increased tariffs on a further $US200bn worth of Chinese imports. The AUD/USD traded as low as ~0.7345 in the middle of the week, opening-up several fragile levels of support in the process. The dive was arrested and reversed late Friday night (AEST), solely by virtue of a pullback from the exhausted US Dollar. The dynamic benefited the EUR, with the AUD/EUR taking a spill towards the 0.6350 level, having held above 0.6400 for a couple of weeks. The best measure of the AUD’s position at the moment is the AUD/JPY, which seems to be more accurately reflecting global risk, with the pair trading at around 81.75 at time of writing.

The data week ahead

The local data week is looking quite uneventful at this stage, typical of the final week of a month. Australian traders will be taking their cues from overseas news and markets, before a dense Tier 1 data week next week. The fortunes of the major global stock indices will establish the tone to trade-off throughout the week, which seems likely at this stage to grow out of new trade war developments from the US and China. One fundamental data release worth emphasising is Chinese PMI figures (released on Saturday), which will provide insight into whether the feared slowdown in China’s economy is emerging. Naturally, if that suspicion is supported, concerns about the health of the Australian economy will be raised — a sentiment that could weigh on the AUD and local shares.

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