Disappointing labour force data also gave local shares a boost, as the futures market signalled the RBA would cut the cash rate as soon as June.
The major iron ore miners led the market for most of the week as the price of the bulk headed toward $US100 a tonne, unfazed by the ongoing trade war.
BHP Group rose 4.5 per cent to $38.46, Rio Tinto advanced 6.4 per cent to $101.35 and Fortescue Metals Group climbed 18.7 per cent to $8.95.
CSL was also among the market leaders this week as UBS lifted its price target on the healthcare giant following an analysis of its competitors, suppliers and partners’ first-quarter financial results. Its shares closed the week 4.7 per cent higher at $206.51.
Lendlease rose firmly this week amid speculation it had become a takeover target for a Japanese company. Although the company denied it had received any approach, the company’s shares still closed the week 11.5 per cent higher at $14.20.
Xero continued its march toward profitability, reporting this week its first positive free cash flow for the 12 months ended March. It also recorded a modest net profit in the second half of the year. Its shares added 11.2 per cent to close the week at $61.30.
The major banks dragged the market this week, with the financial sector dragged lower on a number of fronts. ANZ fell 6 per cent to $25.85, NAB slid 7.8 per cent to $23.92 and Westpac closed 6.6 per cent lower at $25.41 as all three stocks traded ex-dividend. Macquarie Group also traded ex-dividend, losing 3.8 per cent to end the week at $119.93.
Commonwealth Bank fell 3.4 per cent to $72.83 after its quarterly earnings update on Monday disappointed the market’s expectations.
UBS increased its price target on Goodman Group despite a slower than normal quarter, with the broker noting the company’s very bullish outlook commentary. The broker added that the market’s expectations for the company remained very high, but that it was priced accordingly. “We continue to expect Goodman to outperform the A-REIT sector as the market should continue to reward strong fundamentals and superior earnings growth over the medium term,” said analyst Grant McCasker. “At this point we see no inflection point to suggest the development led growth is diminishing.” UBS retained its neutral rating on Goodman Group but increased its price target from $12.32 to $13.10, just slightly below its closing price on Thursday of $13.54.
What moved the market
RATE CUT PROBABILITY
The Reserve Bank of Australia is likely to cut rates when it meets for the first time under a new government in June, according to interest rate futures. If the bank doesn’t cut rates in June, a cut in July is a certainty, with the market implying a 100 per cent probability the cash rate will be at 1.25 per cent following the July meeting. The likelihood of a cut at the next two meetings has accelerated rapidly over the past fortnight. Two weeks ago, the market had been implying an 18 per cent likelihood of a rate cut to 1.25 per cent in June, while a July cut had been priced at 48 per cent.
Iron ore surged towards $US100 a tonne on Thursday amid reports most steel mills in China were running low on iron ore inventory. The price of the bulk rose 3.2 per cent to $US98 a tonne amid supply concerns. Elevated iron ore prices meant Chinese mills had been looking to delay the purchase of the bulk commodity in the hopes prices would fall but they have only moved higher. With prices now at a five-year high and shipments from both Australia and Brazil tight, the price could well surge over $US100 a tonne as Chinese steelmakers rush to buy the limited supply.
The British pound has continued to deteriorate in the last few days as the US dollar firms and the future of the country’s leadership remains in doubt. The pound has slid 1.6 per cent against the greenback this week, dipping to $US1.279, its lowest level since January 11. “UK political instability is contributing to the pound’s weakness,” said CBA senior currency strategist Joseph Capurso. “UK PM May is again facing calls from some in her party to step down as her latest push to get a Brexit deal has shown few results.” Ms May has agreed to set a date for the election of her successor after the Brexit vote in early June.
William McInnes covers markets from Sydney including editing the Markets Live blog.