ASX Momentum Continues

The Dow Jones finished just below 23,000 last night, closing at 22,997 and making a new record high. The healthcare sector was one of the biggest gainers with a 1.3% rise. The ASX is also continuing its rise with the ASX 200 having another strong day yesterday with a 0.7% gain. The index is now just 1% away from making a new year-to-date high after an extremely strong October so far.

Australia released the minutes from the most recent monetary policy meeting which broadly echoed prior statements but had a few key takeaways. The board commented that the fact the other central banks around the world were either raising rates or thinking about raising rates does not automatically mean the RBA will follow suit and that our interest rate policy will be based on domestic economic conditions. It also commented that recent strength in the Aussie dollar will contribute to lower inflation which is already relatively subdued, thus reducing the need for any rate hikes. On the other hand, the board is concerned about household indebtedness which it considers to be high and that households are therefore vulnerable to any increase in borrowing costs.  

WTI oil prices continue to hover around US$52 per barrel as Iran has indicated its support for an extension to the output cuts that began at the beginning of this year. The cuts are scheduled to expire in March, and although inventory levels have been declining for several months now, OPEC is concerned that inventories will resume growing once the output cuts expire. The latest US oil inventory report indicates that oil stockpiles are currently at two-year lows although they are still above the five-year average.

Iron ore prices have had a relief rally after declines throughout September, currently trading at $62.72 per tonne. This may halt the share price declines in iron ore miner Fortescue Metals (FMG) which has been trending down since early September.  

Data Releases:

–    ECB President Draghi Speaks 7:10pm AEDT

–    UK Unemployment Rate 7:30pm 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.