ASX closes shortened week at fresh 11-year high


The major banks welcomed the news, leading the market advances this week. Commonwealth Bank shares rose 2.8 per cent to $75.45, Westpac advanced 3.4 per cent to $27.74, ANZ climbed 2.3 per cent to $27.40 and NAB closed 1.6 per cent higher at $25.67.

Infrastructure and REIT stocks were also stronger this week. Goodman Group rose 7 per cent to $13.60 while Transurban shares advanced 4.1 per cent to $13.73.

Growth stocks were also boosted mid-week, with the prospect of increased liquidity on the back of a rate cut pushing investors toward healthcare and technology stocks.

CSL shares climbed 3.4 per cent to $196.98, Sonic Healthcare rose 5.5 per cent to $25.75, ResMed advanced 7.1 per cent to $14.57, and Mayne Pharma added 5.3 per cent to close the week at 69.5¢.

The WAAAX stocks were also helped by solid earnings from the US tech names. Wisetech Global rose 6.8 per cent to $22.73, Appen added 5.2 per cent to closed the week at $24.98, Afterpay Touch advanced 4.4 per cent to $23.82, Altium closed 4.9 per cent higher at $33.89 and Xero climbed 5.1 per cent to $53.95.

Bellamy’s Australia shares closed the week 16.8 per cent higher at $10.99 after the company received approval from China’s market regulator, the State Administration for Market Regulation, for a new Bellamy’s branded formulation-series to be produced at the ViPlus Dairy facility in Toora, Victoria. The approval means the company is a step closer to being able recommence sale of its infant formula products in China. A2 Milk also added 6.1 per cent to close at $15.55.

Flight Centre shares fell after the company reduced its full-year profit guidance for the 2019 financial year by 10 per cent citing a weaker-than-expected performance in the Australian leisure market. Flight Centres shares closed the week 10.6 per cent lower at $39.00.

Stock watch

NORTHERN STAR RESOURCES

Macquarie retained its ‘outperform’ recommendation on Northern Star Resources despite the company delivering a weak third quarter result with group production 20 per cent below and group costs 30 per cent above expectations. The broker expects the gold miner to rebound to a record final quarter for the financial year however, with strong Australian operations and production from its lagging Pogo operation expected to lift 50 per cent.
“Given the soft quarter at Pogo we have reduced our production expectations for the reminder of 2019,” said analyst Ben Crowley. “We retain our long-term outlook at Pogo but look to Northern Star’s 2019-20 production guidance, long-term outlook and maiden JORC resource/reserve statement in mid-2019.” Macquarie reduced its price target on the miner from $10.50 to $10.30.

What moved the market

COFFEE

ICE Arabica coffee prices have fallen to their lowest levels in more than 13 years, with prices now below the cost of production in almost every coffee producing country in the world except Brazil. The front month May contract had dipped below US90¢ a pound. “This is in part due to expectations on the coming Brazilian harvest and the great shape of the trees there, combined with a weak currency,” Rabobank analysts noted in a report. “It is also supported by significant volumes of coffee accumulating in origin countries.” Rabobank is forecasting a recovery in the price although it is unlikely to trade anywhere near its levels from the last three years.

COPPER

The price of copper slid on Thursday as investors remained concerned by the global economic outlook and a strong US dollar. The greenback hit its highest level in almost two years, putting pressure on base metal prices across the board. Copper slid 1.3 per cent on Thursday, closing at $US6,364 a tonne, its lowest price since March 28. Stocks in London Metal Exchange warehouses are also elevated at the moment, rising by 8,675 tonnes to 194,800 tonnes, close to the 7-month highs hit earlier in April. A US-China trade deal is expected to lift copper prices.

AUSSIE DOLLAR

The Australian dollar briefly dipped below US70¢ for the first time since January on Thursday. The last time the dollar was at these levels, excluding January’s flash crash, was in early 2016 when the RBA last cut rates. “The interbank futures market is pricing two rate cuts by the RBA by the end of 2019,” said CBA senior currency strategist Joseph Capurso. “While financial markets are pricing a RBA rate cut cycle, we expect the Aussie to stay heavy and spend more time below US70¢ in the near term. An upward surprise in US Q1 GDP [on Thursday night] could push the Aussie below US70¢ again.”

CENTRAL BANKS

Central banks across the globe are turning dovish amid global economic growth concerns. Earlier this week, central banks from three separate continents all struck firmly dovish tones despite keeping rates on hold. The Bank of Canada kept its overnight rate on hold at 1.75 per cent but dropped any reference to future rate hikes in its policy statement, the Bank of Japan left its rate unchanged saying it would keep policy loose for at least another year while the Swedish Riksbank struck a more dovish tone as they revised down their inflation forecasts.

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

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