What's wiping out the ASX election gains?
Team Veye | 03-Jun-2019
ASX started sliding during the second half last week amid fears of a recession in the global economy. The S&P/ASX 200 Index was down 88 points by the end of the week wiping out all the post-election gains in the share market and after achieving a 12-year high.
The relentless buying of sovereign bonds overnight triggered the recession fears and what drove it further was the escalating US-China trade war into a more extensive, drawn-out attritional campaign. The fall in bond yields has accelerated, forcing global growth bastions of optimism such as stocks and oil to rethink their strategies.
The anticipation of expected rate cuts by the US Federal Reserve is resulting in the US stocks and bonds continuing to send mixed messages about the US economy. In parallel, the global risk-off tone hit copper prices on Wednesday, with the economic bellwether sliding more than 1%. Industrial metals sold off across the board, with reports that China may cut exports of rare earth metals resulting in the investors getting defensive.
On the sidelines, the Australian dollar rose on Thursday despite a turbulent day of economic data, events and announcements. Australia's ten-year bond yield fell to a record low of 1.48%, below the RBA's cash rate although the currency reaction was only muted. The dollar firmed slightly after the Fair Work Commission increased the new minimum hourly rate by 3% as of July 1 but ended up losing it sheen shortly after as private capital expenditure and dwelling approvals both came in below expectations. And, following their firm post-election rally over the past two weeks, experts now believe that the major banks are close to being fully valued.
So, is it time to press the panic button? Well, not really, as this uncertainty has been around for quite some time now but it is wise to be prepared for any surprises and take prompt action to save your investments from sudden mayhem.
Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.