What we liked

  • The Dow Jones Index rallied 370 points (+1.65%) this week as US markets overcame the Las Vegas massacre and focused its attention on Trump’s tax reforms and upbeat expectations for third-quarter corporate results.
  • Asian spot LNG prices rose by more than 10% on bullish tender results, but rises may be as prices near oil-link contract parity levels ahead of a public holiday in China and South Korea next week. Two major tender awards this week boosted demand. Strong Chinese demand has also helped spot prices rise some 55% from their 2017 lows.
  • China’s has ordered North Korean businesses operating in the country to close within 120 days as it enforces UN sanctions after Pyongyang’s continues to fire missiles. China is North Korea’s largest trading partner and has become more willing to take steps to reprimand North Korea for its ongoing non-compliance.
  • Australian Treasurer Scott Morrison is confident Australians will receive a pay rise as the government promises to introduce a new wave of reforms to expand productivity growth and investment. Wages have remained low as a result of the end of the mining boom but conditions are on the mend and things are looking good.
  • House prices are finally falling. CoreLogic’s Home Prices index showed that Sydney fell 0.1% in the first month of the spring selling season. It is the first fall in prices for Sydney since 2015. Overall, capital cities rose 0.3% against 1.0% last year. Melbourne remains the strongest, growing 0.9% for the month but lower than last year’s 2.3% monthly rise.
  • The RBA kept rates on Hold again at 1.5%. It was a copy and paste statement with no real talk of hiking next year. However the central bank was optimistic on the state of the economy but is keeping its eye on wage growth and inflation which remain low. Markets are pricing in a one-in-four chance of a rate rise by the February next year. By the end of the 2018 markets are pricing in the RBA to have increased twice.
  • CoreLogic released an interesting article that says investors are moving away from Sydney and Melbourne and investing their money in the Brisbane property market. With sentiment at its peak and property prices sky high, more investors see Brisbane as the new property hot spot with a growing population and improving job prospects making it an appealing place.
  • Lithium stocks are booming after a number of lithium exporters have landed offtake deals with car and battery companies and the lithium spot price continues to soar. To add to it, China has announced that it will ban fossil fuel cars. Stocks in the sector include Orocobre (ORE), Pilbara MInerals (PLS), Galaxy Resources (GXY), AVZ Minerals (AVZ) and Mineral Resources (MIN).
  • The Australian dollar extended its fall dropping below US77c on the back of a surprisingly weak August retail sales report which has raised doubts that the RBA will hike anytime soon.

Market Indicators    

What we didn’t like

  • US Federal Reserve chair Janet Yellen’s fate will be known soon. President Donald Trump said he will soon decide on who replace her when her term finishes up in February 2018. So far he has narrowed his list to four potentials: Gary Cohn, Kevin Warsh and Jerome Powell. Online betting site PredictIt has Warsh and Powell in front of everyone else.
  • A mass shooting in Las Vegas has become the worst shooting in US in history. At least 58 people were killed and about 515 were injured when a gunman opened fire Sunday night on people attending a country music festival in Las Vegas. It is being called the deadliest mass shooting in modern US history.
  • According to UBS Global Real Estate Bubble Index – Sydney has been highlighted as the among the cities most at risk of a housing bubble as cheap lending has pushed up property prices to  eye watering levels. Toronto, Stockholm, Munich, London and Hong Kong were the most at risk. Chicago on the other hand, was the most undervalued city.
  • Oil took a pause this week after US government data released showed its shale gas drillers lifted output almost 9% during the past three weeks, the biggest three-week increase in half a decade. The increase in supply might offset any supply curbs by OPEC and Russia. Not great news for our local oil producers.
  • Gold has fallen to its lowest point in almost seven weeks after a Federal Reserve interest rate hike in December looks more and more likely. The US dollar has also risen against most currencies.
  • US president Donald Trump has dismissed any chance of negotiating with North Korea and labelled it as a waste of time.
  • Toyota has shut its Victorian car manufacturing plant this week. Ford closed in October last year and Holden closes its plant on October 20. It’s a sad day for Australian car manufacturing. After Holden closes, the country will be without a car manufacturing industry. The Toyota factory will end the jobs of 2,700 workers.
  • Platinum Asset Management’s Kerr Neilsen is betting big on China, in-fact the company has over a quarter of its funds ($6.5bn) invested in Chinese-related stocks. The company believes China’s debt problems aren’t an issue. Mr Neilson’s optimism on China is supported by his confidence in the macro-economic outlook. Many don’t have the same outlook. S&P downgraded China’s debt rating recently.