The Week in Stocks

The week was dominated by events in the United States and a tendency to take risk off the table.

For the week, the ASX 200 closed flat only gaining a mere 22 points. Given the US government is closing in on its second week in shutdown and the debt ceiling is fast approaching, markets were relatively calm.

Yellen nomination

Barack Obama nominated Janet Yellen, current vice chair to be the next chair of the Federal Reserve. Investors rejoiced the nomination on the view she is a dove and will be inclined to continue feeding markets with the current form of monetary stimulus.

Yellen’s nomination is not a win for all involved. The continuation of quantitative easing in its current form only adds support to the Australian dollar, causing the Reserve Bank of Australia difficulties as they endeavour to target a lower currency. As it stands, another rate cut looks to be the only option to take some heat out of the currency.

Risk-off

Investors lost interest in investments with a tilt to consumer discretionary, sending the sector down 0.36 per cent. It is a classic reflection of risk-off trading as investments with cash flows independent of the business cycle were preferred.

The rationale for sending consumer discretionary stocks lower was based on fear of the consequences of the US government shutdown and uncertainty circling the impending US debt ceiling.

In addition to this the IMF downgraded global growth forecasts for the year ahead and China was in their sights. Domestically, markets have largely already considered a slowing growth in China and the IMF report confirmed what was already widely thought.

Worley Parsons

Worley Parson’s used its annual general meeting on Thursday as a platform to announce the company expects earnings  for the first half of this financial year to be less than the same period last year.

Investors getting tired with being consistently disappointed by Worley sent the stock down 1.16 per cent on Friday. Last year Worley promised better earnings in the second half but didn’t deliver – understandably the memory is still fresh for investors.

The future for Worley is promising if they can continue to gain contracts in North America across the lucrative oil and gas market. Turning contract wins into increasing earnings per share would be the ideal outcome.

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