Investment Ideas From the Edge of the Bell Curve
Good morning. Charlie here,
Overnight markets shifted up, then down again as the Fed announced a mammoth double-cut overnight.
This was the first time interest rates were cut in the US since March 2020, and markets sold on the news after a week of running up in anticipation.
Double cuts (50 basis points) like this are fairly rare. The last two times the Fed cut rates by 50bp was in January 2001, just before the dot-com bubble burst and in September 2007, in the early phase of the GFC.
This isn’t necessarily a sign that things are going to crash from here. The Fed very much attempted to paint the cut as ‘not an emergency cut,’ which 50bp cuts are usually framed as. Instead, J Powell signalled that it was instead a pre-emptive strike rather than playing catch-up to save the US labour market.
‘We, don’t think we’re behind,’ Powell said last night, ‘You can take this as a sign of our commitment not to get behind.’
Wall St seemed visibly confused about the move, with major benchmarks climbing up and then selling on the news and closing down.
Similar moves are expected on the ASX today, with ASX 200 Futures swapping to higher in the last minutes before open.
However, expect a fairly choppy day on the market as investors absorb the news and quiet commodity markets.
Name | Value | % Chg | |
---|---|---|---|
Major Indices | |||
S&P 500 | 5,618 | -0.29% | |
Dow Jones | 41,503 | -0.25% | |
NASDAQ Comp | 17,573 | +0.84% | |
Russell 2000 | 2,206 | -0.02% | |
Country Indices | |||
UK | 8,253 | -0.68% | |
Germany | 18,711 | -0.08% | |
Euro | 4,835 | -0.53% | |
Japan | 36,380 | +0.49% | |
Hong Kong | 17,660 | +1.37% |
Name | Value | % Chg | |
---|---|---|---|
Commodities (USD) | |||
Gold | 2,558 | -0.59% | |
Silver | 30.13 | -1.93% | |
Iron Ore | 91.20 | +0.53% | |
Copper | 4.2090 | -0.11% | |
WTI Oil | 70.34 | -1.19% | |
Currency | |||
![]() | AUD/USD | 67.60¢ | -0.01% |
Cryptocurrency | |||
![]() | Bitcoin (USD) | 61,796 | +2.52% |
Ethereum (USD) | 2,376 | +1.51% |
Losses in the banking sector hindered the Australian sharemarket’s chances of closing at a record high today as the ASX 200 closed up +0.3% to 8,099.9.
The morning started with the ASX 200 just 10 points shy of its August all-time high of 8,148.7.
Regardless, the strong moves over yesterday and gains today meant the major benchmark closed 1.5% higher for the week.
Shares pared gains as bank losses arose in afternoon trading. National Australia Bank lost -1.3%, ANZ shaved off -0.3%, Westpac -0. 6% and Commonwealth Bank lost -1%.
Five out of the 11 sectors of the ASX closed higher today, with mining the standout sector gaining +2.25%.
Spot gold prices reached a new record high of $US2,567.93 an ounce amidst dovish signals from Central Banks.
The European Central Bank cut rates overnight and traders upped their bets of a double cut from the Fed at its next FOMC meeting next week.
As a response, gold miners were the standout gainers today, with West African Resources soaring +10.5%. Evolution Mining jumped +7.2%, and Perseus Mining leapt +10.7%.
Index heavyweights BHP rose 2.1%, while Rio Tino gained +1.2%, and Fortescue climbed 4.6% higher.
Stronger oil prices, on expectations of supply disruptions due to Hurricane Francine in the US Gulf of Mexico, boosted energy producers with Santos up +0.6%. Woodside added +1.2% with its US oil production facility remaining shut due to the storm.
A recent analysis of APRA data by Canstar, a prominent mortgage comparison website, has shown a persistent rise in mortgage arrears.
The study, based on the latest APRA quarterly property statistics, reveals that the value of mortgages unpaid for 90 days or more has reached $23 billion.
While this represents only 1.03% of all mortgages, this marks the sixth consecutive quarterly increase in arrears as a proportion of total mortgages.
Notably, this rate now significantly exceeds the pre-COVID 2019 average of 0.91%, indicating a growing trend of financial stress among homeowners.
The APRA June quarter data paints a concerning picture, particularly for owner-occupiers.
Non-performing owner-occupier loans now account for 1.07% of all owner-occupier loans held by Authorized Deposit-taking Institutions (ADIs).
Although this percentage remains relatively low, it surpasses the rate of non-performing investor loans, which stands at 0.86% of all investor loans.
This disparity suggests that owner-occupiers face greater challenges in meeting their mortgage obligations than property investors.
While the overall delinquency rates are not alarmingly high, the consistent upward trajectory implies an increasing financial strain on homeowners, warranting close attention from the RBA and investors alike.
The federal government has given the green light to a massive project for Melbourne Airport.
The project would involve building a third runway, although certain ‘noise conditions’ will be imposed on the project.
Federal Infrastructure Minister Catherine King approved the major development plan for the $3 billion project, saying the needs of the local community had been ‘front of mind.’
Melbourne Airport CEO Lorie Argus said today:
‘Australia’s vast distances and Melbourne’s position on the globe mean demand for air access will continue to grow as our population increases.’
‘The runway project will secure 51,000 jobs in Victoria’s tourism, agriculture, education and other export industries, and will help add an additional $6 billion a year to the state economy.’
The New South Wales Independent Casino Commission (NICC) has requested Star Entertainment [ASX:SGR] for additional information about its operations.
The regulatory body has asked the company to submit details regarding its eligibility to retain the casino license for The Star Sydney and update on the progress of its remediation plan.
Star’s shares have remained suspended by the ASX as it has yet to publish its FY24 earnings. In an update to shareholders on Wednesday this week, the company said:
‘it was not yet in a position to finalise its preliminary financial report for the fiscal year,’ as it awaits the impact of the casino license to determine its outlook.
In an update today, Star Entertainment stated:
‘The NICC has also sought information about the company’s current financial standing and its proposed strategies to address these matters on an ongoing basis. This will enable the commission to make informed decisions about the financial suitability of both the company and The Star Sydney.’
The company anticipates responding to the NICC’s request by September 27.
Shares in Star have fallen by -45% in the past 12 months as it struggles to shake off the impact of its regulatory scrutiny.
Australian shares have eased from earlier gains near midday as energy and mining climbed higher on rising commodity prices.
This came as gold prices struck a fresh all-time high and oil climbed nearly 3%.
The benchmark ASX 200 is up 0.2.1% to 8,092.9. Shares were as high as 8,135 points earlier in the session, briefly on course to test last month’s all-time high of 8,148.7.
Five out of the 11 sectors of the ASX are in the green after the benchmark climbed 1.1% yesterday in the best session since mid-August.
Prices of gold, considered a more attractive investment ahead of US Federal Reserve rate cuts expected next week, hit a new high of US$2,567.93 an ounce.
Gold miners have then led the charge on the ASX, with West African Resources soaring nearly 9%. Evolution Mining jumped 8.4%, and Perseus Mining nearly 8%.
Index heavyweights BHP and Rio Tinto each rose 1.8% and Fortescue powered 5.7% higher.
Stronger oil prices, on expectations of supply disruptions due to Hurricane Francine in the US Gulf of Mexico, boosted energy producers.
Santos is up 1.4%. Woodside added 1.7% with its US oil production facility remaining shut due to the storm. Brent crude rose to US$72.41 per barrel on in the session today.
Here’s the latest from the new Fat Tail Daily video series.
Publisher James ‘Woody’ Woodburn is away, so this week, Fat Tail Daily editor Nick Hubble is sitting down with Editor Brian Chu.
Today they are talking all things, Net Zero.When will the changes occur, and is there is going to be a blowback?
Net zero requires an impossible amount of resources.
But that doesn’t mean it won’t be tried. As governments crack down on carbon, mining could be the only industry left to invest in.
Are you positioned to benefit?
Rising oil and gold prices are the big things lifting the market today. While the ASX has dropped back slightly, energy and gold stocks remain the high flyers today.
Let’s explore the oil and gold trends that are moving markets.
Oil Market Dynamics
Crude oil prices have seen a significant uptick, with US WTI Crude closing up 2.72% at $69.14 per barrel and Brent crude rising 2.21% to $72.17 per barrel.
This surge has been primarily attributed to supply risks as disruptions from storm Francine have forced the shutdown of around 670,000 barrels a day in the Gulf of Mexico.
The potential impact of Hurricane Francine on production in the US Gulf of Mexico is not yet fully known.
Oil producers have reported curtailing output, although some export ports have begun to reopen. However, the oil market is also grappling with conflicting demand forecasts.
The International Energy Agency (IEA) has warned of sharply slowing oil demand, which contrasts with OPEC’s more optimistic outlook released earlier this week. The IEA specifically noted that demand growth is decelerating as China’s economy cools.
Gold Market Trends
Gold prices have reached record highs overnight, driven by market expectations of an imminent Federal Reserve interest rate cut and the ECB’s decision to cut rates to 3.5% overnight.
This anticipation has solidified, leading to a substantial jump in gold’s value.
Alex Ebkarian, Chief Operating Officer at Allegiance Gold, remarked on this trend, saying:
‘We are headed towards a lower interest rate environment, so gold is becoming a lot more attractive… I think we could potentially have a lot more frequent cuts as opposed to a bigger magnitude.’
The bullish sentiment was seen overnight with spot gold adding 1.85% to reach $2,558 an ounce, while US gold futures gained 1.79% to hit $2,557 an ounce.
Singapore-based Olam Agri has lifted its bid for Namoi Cotton [ASX:NAM] to 75 cents a share from 70 today.
In the announcement, it highlighted that its offer is nearly 12% more than the 67 cents offered by the Louis Dreyfus Company.
Olam Agri said it is in discussion with the Australian competition regulator and is ‘confident of a positive outcome’.
‘Our proposed acquisition will not substantially lessen competition in the Australian cotton industry,’ said Ashish Govil, Australia head for Olam Agri.
‘We have submitted remedies, including a gin divestment and ProClass share divestment, and now await ACCC’s feedback on these proposals.’
Good morning. Charlie here.
The ASX 200 opened up 0.78% to 8,138.5 after a strong day on Wall St lifted hopes in global markets as traders bet on more dovish central banks.
The Australian share market is now within just 10 points of its all-time high of 8,148.7 set in August and will likely challenge that throughout today.
The S&P 500 and Nasdaq have been the primary drivers of this rally, with both gaining 3.5% and 5.4% so far this week on the back of tech.
Overnight bets for a ‘double cut’ (50bp cut) again climbed from 28% to 43% as US producer price data raised more questions.
Last Friday, Fed governor Christopher Waller said he was ‘open-minded about the size and pace of cuts’ and would back a larger cut ‘if the data suggests the need’. But he said he expected any move would be ‘done carefully’.
Other Fed leaders shared similar sentiments, so next week’s FOMC meeting will remain a big question mark for markets.
Meanwhile, overnight, the European Central Bank (ECB) broke its promise to keep rates steady and instead cut them by 25bps to 3.5% amid weak Eurozone growth.
Name | Value | % Chg | |
---|---|---|---|
Major Indices | |||
S&P 500 | 5,595 | +0.75% | |
Dow Jones | 41,096 | +0.58% | |
NASDAQ Comp | 17,569 | +1.00% | |
Russell 2000 | 2,129 | +1.22% | |
Country Indices | |||
UK | 8,240 | +0.57% | |
Germany | 18,518 | +1.03% | |
Euro | 4,814 | +1.06% | |
Japan | 36,723 | -0.30% | |
Hong Kong | 17,240 | +0.77% |
Name | Value | % Chg | |
---|---|---|---|
Commodities (USD) | |||
Gold | 2,559 | +1.88% | |
Silver | 29.95 | +4.42% | |
Iron Ore | 94.65 | -0.12% | |
Copper | 4.150 | +1.00% | |
WTI Oil | 69.36 | +0.57% | |
Currency | |||
![]() | AUD/USD | 67.29¢ | +0.74% |
Cryptocurrency | |||
![]() | Bitcoin (USD) | 58,105 | +0.47% |
Ethereum (USD) | 2,360 | -0.04% |
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Investment ideas from the edge of the bell curve.
Go beyond conventional investing strategies with unique ideas and actionable opportunities. Our expert editors deliver conviction-led insights to guide your financial journey.
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