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Protrader – April 2019 Market Wrap

//Protrader – April 2019 Market Wrap

April saw the ASX200 rise by 151 points. Although there are some concerns hanging over the market, the lowest closing level was the first of the month, with a rally from the 8th of April reaching a high of 6388, before falling off the last two trading days of the month, to close at 6331.

Unexpected positive Chinese data sparked a rally, helping the market to lift to a 6 month high, with BHP hitting their highest level since 2011. The resource stock momentum helped to lift the market to the second highest closing level in 12 months on the 16th. The positive move was further enhanced by a Brazillian court judgment, reversing a lower courts decision, and thus suspending Iron Ore exports by SA Vale again, contributing to pushing the market through the 6300 barrier on the 23rd, with the ASX 200 hitting its highest level in 11 yrs on the 24th.
KEY ECONOMIC DATA

  • ASX Closed up 2.3% for the month.
    Inflation for the QTR 0% -Completely flat
    Melbournes Property Market -Official worst Peak (Nov 2017) to trough in recorded history

DOW JONES IND AVG 26,075 – 26,592: UP 517.

DJI 12 MONTH CHART

There were three core themes for the US Market for the month of April:

  • US/China TRADE TALKS
    Dovish Fed
    Upbeat earnings/ Economic Data

Despite the negative sentiment over the market emanating from the US/China trade talks, it’s phenomenally important to understand the conflicting opinions which have resulted in such a contorted market over the last 6 months.

The ramifications of this conflicting view was the market drifting up 500 points throughout the month of April, despite the Dow almost giving up all the gains on the 11th, we then saw a 350 point + day on the 12th.

There is no better example of this conflicting data than the Present US Employment figures, as seen below.

US First Time Jobless Claims

As can be seen from the above chart, US jobless claims have continued to go lower, with Jobless claims now the lowest ever in Peacetime, and in absolute numbers the lowest level since November 1969.

In addition, it is important to be mindful that for African American and Hispanics the unemployment rate is now at the lowest level in History.

What is more surprising is that two states now have the lowest unemployment level ever, even during WW2, which has not occurred in any other market economy.

We are now seeing the benefit of this low unemployment as retail sales and company earnings continue to defy expectations.

However, until the US/China trade war is resolved it will be hard for the market to maintain any longterm trend and is expected to remain choppy until the trade situation is resolved.

Key Market Indicators and Events for April

  • US GDP beat Expectations for the first QTR: 3.2% v 2.15% Expected
  • US Durable Goods Orders beat Market Expectations
  • Facebook/Microsoft/Amazon: Earnings Beat Market Expectations
  • US New home sales Beat market expectations
  • Retail Sales Beat Market Expectations
  • 80% of S&P BEAT market Expectations V 65% 1994
  • US Unemployment rate held @ 3.8%
  • China Manufacturing Data unexpectedly grew first time in 4 months

OIL PRICE UPDATES: Rallying From Support

WTI Crude – Gained $3.84. $60.07 – $63.91

Building on from the $2.86 gain in the month of March, and supported by a perfect storm of geopolitical factors, Oil rallied a further $3.84 in the month of April.

Iranian Sanctions
The biggest factor at play as outlined for several months has been the pending imminent expiration of sanction waivers by the US against Iranian Oil exports.

The eight countries to receive a waiver:

  • China
  • India
    Japan
    South Korea
    Turkey
    Italy
    Greece
    Taiwan

What is important to understand is that all bar 1 have agreed to seek alternate sources, and collectively the US has now removed a further 1mbpd of Iranian Oil from the International market. The response from Iran and counter-response from the US propelled Oil to the highest level in 2019.

The planned extension of sanctions by the US provided price support throughout the month, the result is the game now moving to threats of naval exercise and sabotage by Iran: after all when the capacity for Iran to sell their oil is limited, the only tool left is to increase the price in order to gain increased revenue from what you are still able to sell.

The Iranian situation coupled with a plethora of other international issues contributed to an overall tight supply situation. and hence more price pressure.

It should be noted that it was only a tweet from Trump completely from left field that sent the price down 2.7% in one day on the 27th, otherwise one would have expected the momentum to have continued.

Key Oil Price Influences
Venezuela continued to be affected by power blackouts.
Zero records of legitimate Oil exports from Iran.
US Crude production up 12.2 mbpd.
Algerian Oil production impacted by social unrest, and civil uprising.
Airstrikes and break out of War in Libya: Haftar’s forces begin an attack on Tripoli.