Tokyo Stock Exchange
A man stands next to a stock quotation board displaying Japan's Nikkei Average (top) and the exchange rates between the Japanese yen and the U.S. dollar at the Tokyo Stock Exchange in Tokyo March 13, 2015. Reuters/Yuya Shino

Calm restored

The ASX logged its best week since 2 February on Friday and price action is currently very positive.

The 2 February week saw the RBA cut rates for the first time since August 2013 and triggered a huge rally in the ASX.

What’s spiking my interest

· Markets are back in a strange sweet spot of:

o Low inflation

o High levels of monetary accommodation

o Low growth (meaning accommodation will stay on for the foreseeable future)

o US corporates continue to power ahead despite low growth

o Treasuries remain attractive with a rate rise looming in the US

o China has shown its hand with its own form of ‘whatever it takes’

· These factors have gold in focus: gold has just logged its fourth consecutive weekly loss. It has only logged five consecutive weekly losses twice since mid-2008. The first was on 15 August 2008; the second was October last year.

· Friday’s close was the lowest level in gold since 2 April 2010 – a full 276 weeks ago. It has lost over US$53 in value year-to-date despite the Greek crisis and the crash in China’s confidence.

· The USD last week had its best week against the risk currencies in over a month. EUR and CAD were down over 2% for the week; NZD and AUD 0.7% or more. However, investment was the order of the week as well, with JPY losing 1%. The US remains the bright spot despite the headlines.

· Who will be first to raise rates? The Bank of England clearly signalled rate rises are coming. The question now is whether the BOE will beat the Fed to raise rates. GBP/USD was up 0.8% for the week; the market is suggesting Mark Carney might just be in pole position here.

· Australian earnings season begins on Monday . Estimates for the ASX include:

o EPS to grow by 2.5%

o Revenue estimates between 2% and 6%

o Cashflow to have rapidly declined

o CAPEX and net debt to have plummeted – declining 63% in FY14

Ahead of the Australian open

We are currently calling the ASX up a few points to 5672. This week is likely to be much calmer than the previous nine.

Interestingly, CSI 300 futures closed up 7% on Friday . China many yet provide that swinging influence once more.

EVAN LUCAS
Market Strategist

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