Boosted by healthcare stocks Australian shares closed the week at a record high, as investors look ahead to corporate earnings and announcements of bumper dividends from more heavyweights this week.
The stocks of export-reliant healthcare companies such as CSL Ltd continued to record impressive gains helped by a stronger US Dollar.
Financials also added 3% for the week, with the country’s top three insurers all soaring after their earnings report highlighted improving conditions.
Commonwealth Bank, however, was the only exception as it snapped out of its recent rally, soon after announcing a bumper dividend of $2 per share and a large share buyback as analysts flagged concerns around its revenue growth going forward.
A continued decline in iron ore prices on concerns over output controls of steel in China and signs of economic slowdown in China, the world’s largest metal consumer resulted in losses for major miners with BHP and Fortescue leading the losses.
The earnings season is set to kick into full gear this week, with BHP, Westpac and CSL Ltd all set to post their results this week.
With more bumper payments expected, analysts believe it will be about time that the payout finds its way back to the markets.
According to one of the analysts with Australian interest rates continuing to sit at near 0% and most Australians unable to travel or do much due to the pandemic related lockdowns, most of them would not want all the bumper cash announced through these dividends to sit in a bank and earn near-zero interest. It is only a matter of time this money will find its way back to the market.
As such we believe that ASX 200 is all set to reach 8000 points shortly once all this cash finds its way back into the market. Probably the COVID lockdowns currently plaguing the nation being the main drawback for the momentum.
There were also some new record highs reached by some major Australian stocks last week.
Macquarie Bank shares touched a record $164.89, Wesfarmers hit a record $65.30 and Domino’s Pizza shares jumped to reach a high of $127.62.
A dip in gold prices to a four-month low of $1667 on Monday resulted in gold being snapped up in Asian markets, with premiums in China and Asia rebounding to a multi-month high.
Dealers in India were charging a premium of up to $5 an ounce over official domestic prices on physical gold, the highest in five months. Last week the premium on physical gold in India was only $1 per ounce.
According to Harshad Ajmera from JJ Gold House in Kolkata, “Retail demand is improving because of price correction in gold. Jewellers are also making purchases for the upcoming festivals.”
With COVID cases continuing to decline in India jewellers are optimistic about the upcoming festival season in India and with a decline in gold prices across the region the demand has received a much needed new boost.
In China, the premiums on physical gold rose to their highest since the beginning of June at $5-10 per ounce over global benchmark spot gold prices. According to Ronald Leung, chief dealer for Lee Cheong Gold Dealers in Hong Kong, “Gold demand in China was a little better when prices dropped, people rushed to buy gold.”
Trade reports showed there was an increase of 60% in demand for gold in China last week compared to the week before. On Friday gold futures closed at USD 1780 per ounce after reaching a four-month low of $1667 on Monday.
Oil on the other hand was little changed last week as it weathered concerns that the spread of coronavirus variants is slowing oil demand. On Thursday the International Energy Agency said that demand for crude oil came to a ground halt in July and was set to rise at a slower rate over the rest of the year because of surging infections from various variants of coronavirus. Having said that oil has continued to find support by improved demand in the USA and other nations where the rate of vaccinations are higher.
Moving forward the fast-spreading COVID19 Delta variant will remain the biggest challenge for oil markets with investors watching the rapidly rising infections with alarm. The situation in China, the world’s biggest oil importer, is of particular concern as China imposed lockdowns in 144 of the worst-hit areas nationwide to stop the spread.
About the Australian Dollar, it continued to drive sideways within 0.7288 and 0.7430 boundaries against the US Dollar for a third consecutive week. The Aussie dollar continues to struggle in registering any uptick above the 20-day moving average. The Technical Oscillators reflect an indecisive market as well. The RSI has failed to return above the broken tentative ascending trend line and the 50 and 200-day moving averages continue to deviate after negatively intersecting each other, keeping the bias on the bearish side.
In light of the rising numbers of Delta variant cases of coronavirus emerging in New South Wales, the investors will be keeping an eye on RBA Assistant Governor who will b speaking on Friday for further insight into the central bank’s stance.
Just like the Australian Dollar the Indian Rupee remained indecisive and range bound against the US dollar. The USDINR pair kept trading a 50-day moving average and a descending resistance line from July 21.
Even compared to the Australian Dollar the Indian Rupee remained range-bound between 54.50 and 54.80.
In the world of Cryptocurrencies, Bitcoin recorded a fourth weekly gain. The bulls continued to rally as they took over the 50% Fibonacci of the $64,895-$28,600 mark at $46,747.
With Bollinger uptrend channel also holding the bulls will be targeting a price of $51,030 for the next target.
Ethereum also continued to rally before hitting resistance around the USD3250 mark. Ethereum prices have now surged 60% over the last 30 days. The redesign of Ethereum to make it ready for Ethereum 2.0 release in December have been more positive about the rally in Ethereum with calls for Ether to energize above USD 5,000 going day by day.
Last week we spoke about our bias for green coins such as Cardano, Stellar Lumens and Polkadot. All three coins rallied and outperformed Bitcoin in the previous week, indicating that the market is optimistic on alts. With the majority of the measures showing signals of good health, we continue our positive bias towards these coins.
In agricultural products, wheat prices hit an eight-year high after big cuts to wheat production in Russia and Canada. The big cuts surprised the market and raised concerns about declining food supplies.
With more hot and dry weather continuing in the Northern hemisphere soybean and corn also finished strong for the week. With dry summer expected to continue the prices for agricultural goods could be pushed farther North this week.
Author: Ateev Dang is a trader and trading coach by profession. He runs a business called Glow trades Pty Ltd where he teaches anyone interested in starting their trading journey how to trade. He can be contacted at adang@glowtrades.com.au.
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