Metal prices help keep market afloat
Increased uncertainty about when the US Federal Reserve will start trimming its $85 billion-a-month stimulus and a disappointing growth outlook from ANZ weighed heavily on the market on Friday, pushing it down 0.8 per cent.
But for the week, the benchmark S&P/ASX 200 Index finished 58.6 points, or 1.2 higher at 5100.12 points, while the broader All Ordinaries firmed 61.36 points, or 1.2 per cent, to 5100.12.
Monday and Tuesday set up the gains, with Commonwealth Bank and blood product maker CSL nudging the market almost 2 per cent higher on the expectation of strong earnings reports.
But by Wednesday things soured slightly. CBA may have announced a $2 dividend, but was missing a special dividend that analysts were hoping for. Its net increase for the week was 0.6 per cent to $73.30.
CSL forecast slower profit growth in the year ahead, driving it down 4 per cent to $63.35.
The gold miners were the big winners, with the metal surging to a two-month high at $US1372.51 on Thursday night.
St George Bank chief economist Besa Deda said investors appeared to be treating gold as a traditional haven, with geopolitical tensions flaring again in Egypt and fears of the unrest spreading to other middle-eastern countries. Ms Deda said the metal was also being used as a hedge against inflation as talk of the Fed tapering continued to roar.
The number of Americans looking for jobs plummeted to its lowest since 2007, cementing beliefs that the Fed will start winding back its stimulus next month.
"That suggests that growth might be stronger in the future and so will inflation pressures," Ms Deda said.
The increased speculation hit the Australian dollar, which first snuck above US92¢ and then to as low as US90.58¢ on Thursday night. It managed to regain support, and rally almost a cent by Friday's close.
NAB economist Tom Kelly said while US Fed was expected to start reeling in its stimulus, he expected the central bank to merely announce its intention to do so next month and start actually cutting back before the end of the year.
Gold explorer Perseus was the best performer on the ASX, rising 48.1 per cent to 78.5¢, while OceanaGold advanced 26.7 per cent to $2.05. The world's fifth biggest gold producer, Newcrest, rallied 9.5 per cent to $12.57, despite reporting an annual net loss of $5.78 billion for the 12 months to June 30.
A 14-day rally in the price of iron ore ended on Friday with the metal shedding 1.1 per cent to $US141.2 a tonne in Thursday night trade. But analysts remained bullish on the back of strong economic data from our biggest export market China.
RBS Morgans analyst Violeta Todorova expected August to be a big month for iron ore, following strong demand in July.
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A better-than-expected start to earnings season and a rise in metal prices helped offset several down days. The benchmark S&P/ASX 200 finished the week up 58.6 points (around 1.2%) at 5100.12, and the All Ordinaries also firmed about 1.2% to the same level reported in the article.
Gold surged to about US$1,372.51 (a two-month high), which boosted gold miners on the ASX. The article notes gold's appeal as a traditional haven and an inflation hedge, helping stocks such as Perseus, OceanaGold and Newcrest post strong gains during the week.
Speculation over when the US Federal Reserve would start trimming its US$85 billion-a-month stimulus increased volatility. US job-seeking numbers fell to their lowest since 2007, reinforcing expectations the Fed may begin winding back stimulus soon — a factor that weighed on Friday’s market and contributed to currency swings.
The Australian dollar first climbed above US92¢, then fell as low as US90.58¢ on Thursday night amid the uncertainty, before recovering and rallying almost a cent by Friday's close, reflecting sensitivity to Fed timing and risk sentiment.
Commonwealth Bank announced a $2 dividend but did not include the special dividend some analysts had hoped for. Its shares still rose over the week, ending up about 0.6% to $73.30.
CSL forecast slower profit growth in the year ahead, which drove its share price down about 4% to $63.35 after the company's update.
Perseus was the best performer, up 48.1% to 78.5¢, OceanaGold rose 26.7% to $2.05, and Newcrest rallied 9.5% to $12.57 despite reporting an annual net loss of US$5.78 billion for the year to June 30. The gains were linked to the broader rise in gold prices and investor demand for commodity exposure.
A 14-day iron ore rally ended on Friday with the metal down 1.1% to US$141.2 a tonne in Thursday night trade. Analysts remained bullish because of strong economic data from China, and some expect August to be an important month for iron ore demand — a key input for investors watching commodity-exposed stocks.
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