What we liked

  • Lloyd Williams has taken out the Melbourne Cup winning his sixth title after his horse Rekindling stormed across the finish line beating another Williams runner. Pre-race favourite Marmelo finished ninth. Rekindling paid $16.30 for the win. Lloyd took home $3.6 million for first-place prize and $200,000 worth of trophies, plus another $900,000 for taking second place. Not a bad day at the races. UWJ was on the money as well. Here is our article published on Monday on the races click here.
  • The RBA decided to leave the cash rate unchanged at 1.50%. The low level of interest rates is continuing to support the Australian economy. Monetary policy was kept unchanged, consistent with sustainable growth in the economy and achieving the inflation target over time.
  • The ASX 200 Index busted through the all-important 6000 point mark on Tuesday afternoon closing at 6,014 points, a milestone it has not cracked in nearly a decade since the GFC. The breakout is quite a technical bullish signal. If the momentum can continue, we should see the index move higher.
  • Apple is on track to becoming the first US$1 trillion company as its shares hit new highs. The company posted its earnings results which beat expectations with demand for the new Apple X described being off the charts. Apple shares are now trading at US$173.88 taking the market capitalisation to above US$900bn. Since the first iPhone was produced in January 2007, Apple’s stock is up 1,300%.
  • Myer (MYR) – Ownership Matters who are a proxy adviser, has warned all shareholders of the retailer to be weary of Solomon Lew’s influence and ability to exert control on the company without making a takeover bid. It advised shareholders to reject all resolutions.
  • The Fed’s ability to deliver another rate hike in December before the changeover in February remains intact: after Donald’s Trump nominee was revealed, the market is still ascribing a 92 per cent probability to a US hike next month.
  • Bitcoin looks like it may have just gone mainstream with the introduction of a new futures market. The Chicago Mercantile Exchange will soon begin trading Bitcoin Futures which signals that Bitcoin is an legitimate financial instrument. With the introduction of Futures contracts an investor can manage the large volatility swings and risks by locking in a future strike price, so that it becomes easier to hold and trade Bitcoin. In 2010, 1 Bitcoin was worth less than one hundredth of an Australian cent. Now 1 Bitcoin is $10,000.
  • Chinese iron ore futures hit their highest point in nearly six weeks on Tuesday, extending recent gains. According to Metal Bulletin, prices have hit $63.36 a tonne.
  • Morgan Stanley has upgraded its oil forecasts by 17% and now expects Brent crude to be at $US63/barrel by the middle of 2018 up from US$54. Oil has changed course and is ticking higher as OPEC remains constrained. This means the world will have to rely on the US shale frackers for supply.
  • REITS are bouncing back despite retail headwinds and the launch of Amazon. The listed property sector has outperformed the market during the 3Q. Yields are attractive and most are expecting support to enter the sector by years end.
  • NAB is looking to speed up plans to reshape its workforce. But in order to do so it needs to employ 13 technology specialists every day until Christmas.

What we didn’t like

  • On Friday the Dow Jones lost over 200 points after a member of the Senate Finance Committee Bill Cassidy said that the Senate tax proposal will delay a corporate tax cut by one year to 2019. The market was gearing up to see tax cuts either this year or most definitely next. This is negative news.
  • Weak retail sales numbers last week not only disappointed but have severely reduced the chances of a RBA rate rise anytime soon. The 10 year Australian Government bond yield has fallen quite significantly as a result. No growth in retail is troubling. It could be that the bond market had got ahead of itself in anticipation of an RBA rate hike next year. The Aussie 10 year bond yield has dropped to 2.57%.
  • Saudi Arabia has arrested of the most prominent men in the country, billionaire investor Prince Alwaleed bin Talal, plus at least 10 other princes, four ministers and tens of former ministers. It sent shock waves through kingdom and the world’s major financial centres. He controls the investment firm Kingdom Holding and is one of the world’s richest men. He has major stakes in 21st Century Fox, Citigroup, Apple, Twitter and many other well-known companies. The Government is looking to crackdown on corruption and is targeting up to US$800bn in assets.
  • Saudi Arabia is also edging closer to war with Iran after it blamed the country for direct military aggression. Houthi rebels in Yemen have fired a ballistic missile at Saudi’s capital Riyadh which was intercepted. It could be considered an act of war.
  • Trump has issued another warning to North Korea. He told the rogue nation that the nuclear weapons being developed are not making the country safer but are putting the country in greater danger. Trump said “Do not underestimate us and do not try us”.
  • Bitcoin is now valued at $165 billion which some say is the value of commercial real estate. It’s 1.4 times the total market cap of Australia’s listed property market. Is Bitcoin really worth that much? It’s worrying.
  • Housing finance data came in well below expectations. Investor loans fell 6.2% in September and loans to owner occupiers down 2%. JP Morgan says the lending picture is turning gloomy.

Market Indicators