ASX advances on dovish Fed


The major miners remained firm this week, lifting the market through the week. BHP Group closed the week 3.1 per cent higher at $37.61, Rio Tinto rose 2.7 per cent to $94.17 and Newcrest Mining advanced 2.7 per cent to $25.39.

Estia Health extended its strong run, rising 17.3 per cent to $2.85 this week. Chief executive and managing director Ian Thorley upped his stake in the company, acquiring 50,000 more shares via an on-market trade.

A number of companies posted big losses, with Eclipx Group shedding more than half its market value this week.

The company’s shares fell 60.5 per cent to 74.5¢, wiping more than $300 million from its value, after warning shareholders its financial performance had deteriorated markedly and it was exploring the sale of Grays and Right2Drive, businesses it only acquired in the last three years.

New Hope Corp’s half-year results disappointed investors this week, as its shares fell 26.3 per cent to $3.25. The company said China’s shipment squeeze on Australia was putting downward pressure on prices in all markets in the Pacific.

Morgan Stanley slashed its price target on Eclipx Group by 56.9 per cent, on the news that a merger with McMillan Shakespeare is unlikely to proceed. The broker said earnings conviction in the company renamed very low, given the business had issued four earning downgrades since August 2018 and described its share sell-off on Wednesday as a “justified market response”. The company had issued a downgrade on January 29, before downgrading for a second time in less than two months on Wednesday. Analyst Bradley Ablett acknowledged that while the company appeared cheap on valuation, there were a number of issues keeping the broker on the sideline, including processing errors in the Right2Drive business. Morgan Stanley reduced its target price on Eclipx from $2.32 to $1.00.

What moved the market

US OIL OUTPUT

US oil output is expected to rise in April according to the Energy Information Administration. The EIA expects the rise to be led by nearly all of the seven major basins including the Permian, Bakken, Eagle Ford, Niobrara and Appalachia basins. The Anadarko basin is expected to see a fall in output while the Haynesville basin will likely see output remain stable. “While rising US oil output is a negative for oil prices, evidence of ongoing compliance with the OPEC-led deal to sideline 1.2 per cent of global supply in the first half of 2019 should help oil prices lift,” said CBA mining and commodities analyst Vivek Dhar.

COPPER

Copper prices rose to an eight-month high on Thursday following a fall in stocks on the London Metal Exchange before retreating later in the session on a stronger US dollar. Benchmark copper on the LME hit a session high of $US6,555.50 a tonne before closing at $US6,433 a tonne, down 0.8 per cent for the day. The base metal was helped higher on Thursday by the softer US dollar, which fell on the back of the Federal Reserve’s more dovish comments. A fall in the greenback makes dollar-priced commodities cheaper for holders of other currencies. Positive economic data in the US on Wednesday helped the greenback unwind its losses, ultimately pushing most base metals lower.

BRITISH POUND

The British pound lifted slightly on Friday morning after European leaders handed UK Prime Minister Theresa May a lifeline, saying if she could pass her Brexit deal next week, Britain’s withdrawal would take place on May 22. If Ms May can’t secure a deal, however, the UK will leave the European Union without a deal on April 12. While the deal extends the Brexit “cliff-edge” by two weeks, it remains to be seen whether Ms May will be able to secure a deal in parliament with a third vote on her Withdrawal Agreement unlikely to garner much more support than the previous two votes. If she is unable to secure a deal, European leaders could hold an emergency meeting to discuss the path forward.

BANK OF ENGLAND

The Bank of England made no changes to its monetary policy on Thursday and maintained its tightening bias as it struggles to see through the fog of Brexit. The central bank noted that while Brexit’s uncertainties continued to weigh on business development, the macro-economic projections from the February inflation report appeared on track. “Shifting expectations about the potential nature and timing of the United Kingdom’s withdrawal from the European Union have continued to generate volatility in UK asset prices, particularly the sterling exchange rate,” the bank said in its policy summary. “As the Committee has previously noted, short-term economic data may provide less of a signal than usual about the medium-term growth outlook.”

William McInnes covers markets from Sydney including editing the Markets Live blog.

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