Far East Capital Newsletter
Strength continues in US and Aussie markets
28 Apr 2019

In This Issue


Strength continues in US and Aussie markets

The strength of the US economy, with GDP production rising by 3.2% in the March Quarter, has spurred the US equity markets to new highs last week and this has had a flow-on effect on the Australian market. The front running has been taken by the All Ordinaries while the Metals and Mining Index has been correcting heavily due to BHP and RIO going off the boil while the lethargy regarding the gold price has been causing leading gold producers to be sold down. On the positive front the higher oil price caused by the push for stronger sanctions on Iran oil exports has enabled our Energy Index to shake off its recent downtrend, so we could see funds flowing into the oil and gas stocks.
Whereas only a few weeks ago the dispatches were all about a slowing of economies all around the world, the markets have moved beyond this view to find new optimism. That is good but how long will it be until the hawks start talking about resumption of interest rate rises in the US? Watch for this rhetoric as a potential brake at some point.
Note that these markets tend to perform when when we don’t hear from Trump. There is a lesson in that.
It is interesting that our market is moving higher leading up to the Federal election. Does this mean that it isn’t worried about the damage that a Labor government might do to the business sector, or does it mean that the Liberals will win? Having Scott Morrison at the helm seems to be providing better confidence for the Liberals than what Malcolm Turnbull provided in the previous drawn out campaign that Labor only lost by a whisker. This is a difficult election to call. While the polls suggest Labor is in front, the final weeks of the electioneering campaign could tip the result either way.
 

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