ASX 200 Breaks Through 6,000 Level

It was a flat close for the major US indices overnight as Saudi Arabia continues to dominate the news. The situation appears to be that the Crown Prince is attempting to consolidate his power and has successfully gained control of the top security institutions that were previously headed by different family factions. The price of oil has continued its upward momentum on the back of these headlines although it isn’t clear how the Saudi machinations will affect the supply of oil. WTI oil is currently trading at US$57.15 per barrel, the highest level since mid-2015.  

The ASX 200 moved through the 6,000 level yesterday for the first time since 2008. This represents an almost 10-year high although unfortunately it looks like the index will open lower this morning based on futures pricing. Yesterday’s 1% gain came despite a public holiday in Victoria that meant trading volumes were lower than usual. The energy sector was one of the big gainers on the back of the run up in oil prices.  

The Reserve Bank of Australia kept rates on hold yesterday as was widely anticipated and the statement was largely neutral with respect to future rate changes. The board’s economic forecasts were also unchanged with GDP growth expected to average 3% per annum over the next few years. The main red flag noted in the statement was the relatively weak retail sales data that has been coming out this year and the implication that this doesn’t bode well for household consumption. The Aussie dollar initially popped on the release of the statement but faded the move and was soon back to unchanged. Throughout the rest of the session it continued to decline and is now at a one-month low against the US dollar at $0.7644. This has helped gold priced in Aussie dollars reach a two-month high despite the metal being down in US dollars.

Data Releases:

–    China Trade Balance 12:00pm AEDT

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This article was written by William O’Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.