Atlantic Pacific Securities Market Wrap Up: Australian shares on fourth week of consolidation

“However, outside of the gold miners and energy stocks, there was very little to put a smile on investors face this week,” said Gary Huxtable, client adviser at Atlantic Pacific Securities.

According to Huxtable, gold miners had an outstanding week following a poor reading in last week’s US jobs report, which put expectations of a US rate hike well and truly on hold.

The result appears to be an outlier, and the market will be looking for next month’s numbers to confirm if the US labour market is as dire as the numbers showed.

Nevertheless, the subsequent sell off in the greenback boosted gold and other commodities earlier this week. According to Huxtable, “These sectors have managed to keep their best performer status as we close the week.”

Oil drawdown a boost to energy shares

Local energy stocks were up following US inventory draws showing a third weekly drawdown. However, he added that, “One must note that oil had a very similar rally leading into northern hemisphere driving season last year, before turning sharply lower into February this year.

“The market will need continued inventory drawdowns as evidence of improving supply and demand dynamics to support prices as the seasonality effects fade,” Huxtable said.

Financial stocks down led by insurers

The local financials stocks were down close to 1% for the week.

“Insurers were punished earlier in the week amid expectations of a high number of pay-outs following storm activity on the Australian Eastern Seaboard over the weekend,” he added.

According to Huxtable, the weaker US dollar and lower expectations of a US rate hike wouldn’t have helped, with many of the local insurers directly exposed to US interest rates.

Bank shares were also lower following hosed down expectations that the Reserve Bank of Australia (RBA) will cut interest rates.

“Clearly the market was pricing in more than the RBA delivered, and as a result yield plays, such as the banks and Telstra were sold off after losing a level of appeal for yield chasers,” Huxtable said.

Brexit and US Fed impact on markets

The impending Federal Open Market Committee (FOMC) meeting and Brexit will be the main dictators on market sentiment next week.

Huxtable said that, “While markets are always dealing with a sense of uncertainty, Brexit is certainly an event of significance. And we can expect to see some volatility as portfolios are restructured accordingly over the coming weeks.”

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