Next Investors logo grey

US War of words with China heats up

Published 16-JAN-2017 09:33 A.M.


2 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.

Click Here to View Latest Articles

Analysts are sitting on the fence in terms of determining whether it will be politics or the performance of the corporate sector that drive the market this week as President-elect Donald Trump’s inauguration takes place and the US reporting season kicks into gear.

Regards the latter, there was some promising newsflow on Friday with JP Morgan and Bank of America both delivering strong results. If this is replicated by Goldman Sachs, Morgan Stanley and Citi in the coming week Australian financials could receive support.

However, last Friday’s lead may be enough to trigger interest in the sector on Monday morning, particularly the likes of Macquarie Group and Magellan Financial Group which generate significant income from their overseas operations.

Mining stocks could also perform well on Monday after strong surges in base metals with copper pushing up towards the high of approximately US$2.70 per pound that it hit at the start of December, a level that it hadn’t traded at since 2015.

Warehouse stocks indicate the supply demand dynamics are pointing in the right direction. Zinc and nickel were also up with a strong rally by the former pushing it up to approximately US$1.26 per pound, close to a 30 day high, which in effect represented a long-term high which stretched back about nine years.

Gold had a mixed finish to the week but still pushed up above the psychological US$1200 per ounce level. Its fortunes this week could be driven more by the Trump factor and the war of words between the US and China where the issue of trade protectionism flared up following recent comments from China.

With regards to China, it released export data at the end of the week, the worst since 2009. If Australian markets are shaped by a combination of economic information and political rhetoric stemming from our largest trading partner, other positive leads could have little impact.

The significant increase in the Australian dollar from less than US$0.72 start of the week to US$0.75 on Friday could take some of the shine off the mining sector, particularly in relation to Australian-based producers across the iron ore, coal, gold and base metals sectors.

It is worth noting that the share prices of both Rio Tinto and BHP were relatively static in overseas markets. This could also relate to the fact that production reports are imminent, and investors may be fence sitting ahead of these events.

One production report to keep an eye on today is Whitehaven Coal. Its shares are up from circa $2.50 as the New Year ticked over to Friday’s closing price of $3.00, not too far shy of its 12 month high, and a push above this level would see it make a new four year high.

At 7:30 AM AEDT, the SPI futures was up 18 points or 0.3%, suggesting a relatively positive day’s trading.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.