The macro-economic indicators have been impacting the markets globally. The mixed sentiments as reflected in the global markets were witnessed because of the number of risk factors coupled with the fading optimism with regards to the USMCA (United States-Mexico-Canada Agreement). The European markets were impacted by the fiscal sustainability of Italy as well as Brexit outcome. The US treasuries and USD have been witnessing an upward momentum and the treasury yields (10 year) stood at 3.05%.
The woes in the European region have been clearly benefiting the US dollar. Actually, the strong USD is supported by two primary factors. One, the Federal Reserve’s hawkish monetary stance has been bringing the participants which are risk averse and want higher yields which is supporting the USD. Second, the global risks have been pressurizing the traders to stay invested in safe asset class which, in turn, is positively impacting USD.
Upside Momentum in Australian Stocks Helped by Mining Companies
On October 3, 2018, the Australian markets witnessed an upward momentum because of the stocks of mining companies. For instance, Saracen Mineral Holdings Limited (ASX: SAR) and St Barbara Limited (ASX: SBM) ended the day with 8.108% and 7.418%, respective upward movement in their stock price. The Australian economy is positively affected by the weaker Australian dollar. The fall in the Australian dollar is witnessed on the back of lower interest rates compared to the United States. The cash rate in Australia is 1.5% while in the US the rate is 2.25% which makes the gap of 75 bps (basis points). Moreover, the global economists as well as broad markets are in the anticipation that Australian central bank would be maintaining the same rate for a minimum of one year.
Since January 2018, the Australian dollar witnessed the fall of 11% which places the economy in the better position. Falling dollar can help Australia in witnessing a rise in the wages, employment as well as economic growth. All this is coming to Australian economy without reducing the interest rates.
The central bank is trying to improve the growth prospects of the economy and has also witnessed some progress. In Q2, the economy saw an annual growth rate of 3.4% while the unemployment was reduced and stood at 5.3%. It can be said this is not robust growth but a gradual one and thus, a further push is required.
At the close of October 3, 2018, Bellamy’s Australia Limited (ASX: BAL) and Fortescue Metals Group Limited (ASX: FMG) ended the day by declining 4.928% and 4.124%, respectively. Meanwhile, BHP Billiton (ASX: BHP) ended 1.1% higher as Brazilian prosecutors reached a final compensation arrangement with BHP, Samarco and Vale on the 2015 Smarco dam tragedy. In another big news, Ardent Leisure Group is making changes to its stapled security structure and getting a simpler model in place.
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Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkinemedia.com and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
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