Australian shares rose for the first time in five weeks powered by iron miners on the back of firm iron prices. Bullish sentiment following the United States reaching a truce on debt ceiling also helped with stock optimism.
While the US effectively kicking their debt ceiling crisis down the road till December wasn’t the most positive news for investors, it was enough to lift the mood of global investors.
Also helping the mood for investors in Australia was news from New South Wales where Sydney reached its important milestone in loosening COVID-19 restrictions.
As per Kunal Sawhney, CEO of Kalkine Group “Stock market optimism appears to have returned ahead of easing of coronavirus restrictions starting Monday.” Stay-at-home orders in Sydney are due to be lifted after NSW hit the 70% target of fully vaccinated adults.
Firming of iron ore prices through the week, surging energy prices and coal prices meant that BHP and Rio were some of the best-performing stocks for the week. Energy sector which analysts believe is the only segment in the Australian equity market which is undervalued also benefited from rising energy prices.
Collins Food also rallied almost 10% after striking a deal to run KFC in the Netherlands. With a plan to open almost 130 new stores over the next 10 years the investors lapped up the shares.
On the downside, however, EML’s share fell sharply by almost 14% after Ireland’s central bank issued regulatory warnings related to its Irish business.
Moving forward this week investors in Australia will be keeping a close eye on the speech from Reserve Bank Deputy Governor Guy Debelle. On climate risks and the Australian Financial System.
September jobs data and business and consumer sentiment and inflation expectations may also impact the Australian equities market this week.
Looking overseas both US and China inflation numbers are out this week and will impact global risk sentiment. With China, Evergrande worries are also not settled yet the volatility may return on slight bad news.
In regards to gold, the precious metal gave up gains during the start of the week to end the week lower after US September employment results disappointed.
While the analysts were expecting the US economy to have created 500,000 jobs in September the data from US Labor Department revealed that the US economy created only 194,000 jobs. The news usually would mean that it would be harder for Fed to taper with interest rates and send the gold higher.
The gold investors however took into account that pricing pressure in the US is still elevated and it seems taper announcements is still happening in November. A rise in US Treasury yields rising to their highs not seen in months also made gold lose its appeal during the week.
A rising yield usually undercuts buying the gold because the strength in the currency can make gold more expensive for overseas buyers. After US employment data the Treasury yields strengthened thus sending the precious metals lower.
Oil rallied for a seventh consecutive week, gaining nearly 5% for the week after touching highs of US $80 per barrel in almost seven years while natural gas also touched a 13 year high.
Even though Russian President Putin announced on Wednesday that Gazprom would increase natural gas exports to Europe, sending oil prices lower, US officials however indicating no intention to release crude oil from the Strategic Petroleum Reserve, Marshal Steves sent oil prices back up.
Natural gas also rallied to the highest close since 2008 last week with European inventory levels standing at historical lows ahead of winter heating season. With the energy crunch also in China, India and Europe analysts understand that global crude and natural gas inventories are running tight and the production growth may not be able to meet the growth in demand.
More importantly, there are three reasons why prices in oil look like will continue to keep growing.
First, the oil production from OPEC countries is still restrained. The oil-producing nations continue to be extremely conservative in adding to oil production for fear of another COVID related slowdown.
Second, the economies in the US and Europe continue to recover and open. The consumption in the US is back to pre-pandemic levels with Europe also catching up the demand is back to pre-pandemic levels.
Finally, the production growth in US shale is still not fast enough to reach the 2019 levels as investments in the new well is significantly lower.
All in all, given the increasing demand for oil, the winter season in Northern Hemisphere, plus restrictive OPEC+ production policy means the oil prices may continue to rally until years end. Having said that rising oil prices may prompt the US authorities to release some of the strategic oil reserves.
In regards to the local currency, the Australian Dollar rallied for a second consecutive week as investors moved towards risk assets following the news that US Senate has agreed on the debt limit.
The Reserve Bank of Australia also had a monetary policy meeting on Tuesday. While the interest rate in Australia remained at a historic low of 0.1% the accompanying statement showed the policymakers remain committed to maintaining highly supportive monetary conditions.
The central bank also expressed views that the economy will bounce back in the final quarter of the year on the back of higher vaccination rates. The statement was quite encouraging and provided further support to the Aussie.
Technically speaking the daily AUD/USD chart offers a bullish stance for the local currency as the pair moves above 20 SMA. The longer-term trends, however still maintain a bearish slope.
With AUD trading between 38.2% and 50% Fibonacci retracement levels, measured between 0.7477 and 0.7169 the traders would need to capture the 0.7360 levels for bulls to take control. A failure for bulls to take control may result in bears taking the Australian currency back to falls below 0.7250.
The week, however, was not so positive for the Indian Rupee, as rising oil prices weighed on investor sentiment to take the Indian currency below 75.00 level against the US Dollar.
Handsome gains in domestic equities were also not enough to boost the falling Rupee. A rise for the seventh consecutive week in oil prices and US policymakers refusing to release strategic oil reserves weighed heavily on Rupee which registered its worst weekly loss since April 09. The Reserve Bank of India also had their meeting on Friday and decided to keep the benchmark interest rate unchanged at 4%.
In the world of Cryptocurrencies, it was a green week across all crypto land as positive sentiment and big gains returned to the market. Leading the scene was Bitcoin which surged 25% to reclaim the mid-May highs.
Bitcoin reached the high of US $56,000, the mark we have not seen since the middle of May, shortly after the all-time high and right before the huge 50% crash. Many analysts believe that this marks the end of the bear trap and validates the continuation of this year’s bull market.
The rally in crypto land mainly happened on the back of positive news from the United States where The Chairman of the Securities and Exchange Commission, Gary Gensler, confirmed that they have no plans of following China in banning Bitcoin.
The positivity managed to spread across the entire cryptocurrency market. The most impressive performer however was Shiba Inu which rallied 290% and topped the US $18 billion in trading volumes.
Bitcoin also managed to reclaim the $1 trillion market cap and will be testing resistance between the $56,000 and $58,000 mark. Once that mark is broken there is not any considerable resistance until the previous all-time high of $65,000. A rise in Bitcoin is expected to flow across to other crypto assets.
Given the meme coins were first to break out of the bearish cycle we are relatively confident in Shiba Inu continuing the rally and should be a good addition for investors looking to diversify their coin holdings. Algorand is another coin we have a positive bias towards.
Algoand has traded between the range of $0.10 and $3.56 during the past 52 weeks and with it reclaiming mid-year high of $2.38 on the back of news that it has made a strategic partnership with El Salvador to build a blockchain infrastructure for the remittance dependant Latin American nation, it seems Algorand is likely to recapture its previous highs.
Having said that when it comes to the crypto world there is nothing guaranteed and it has historically been known to catch investors unawares especially when everything seems great.
In agricultural products prices of wheat reached a seven-week high on global demand. Tightness in the supply of food grains and speculation that Russia, the world’s largest wheat exporter could add further curbs on exports as it battles domestic inflation further sent wheat prices higher.
The tightness of the food supply also flew into other edible grains and soy and corn also followed wheat higher. Moving forward traders will be keeping an eye on harvest reports from the US where weather has been favourable for production in the Corn Belt and as such may help reduce some of the supply concerns.
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 on how to trade. He can be contacted at adang@glowtrades.com.au.
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