Iron ore fell 3.4 per cent to $US73.23 a tonne according to Metal Bulletin.
Japan’s central bank kept monetary settings unchanged on Friday and stuck to its upbeat view on the economy, underscoring its conviction that its massive stimulus program is helping drive inflation toward its elusive target. In a widely expected move, the BOJ maintained its pledge of guiding short-term interest rates at minus 0.1 percent and the 10-year government bond yields around zero percent.
S&P Dow Jones Indices released the results of its March quarterly rebalance, which takes effect as of March 19. Promoted into the ASX 200 are Ausdrill, Bellamy’s Australia, Smartgroup and Xero at the expense of Australian Agricultural Company, HT&E and Myer, which fell 4.4 per cent to 43.5¢.
On Thursday on Wall Street, the S&P 500 advanced for the fourth time in five days as investors found relief in the president’s decision to exclude Canada and Mexico while giving other countries wiggle room from levies on imports of steel and aluminum. The Dow Jones Industrial Average and S&P 500 rose 0.4 per cent.
What moved the market:
The slump in the national productivity growth rate to a 22-year low of negative 1 per cent in the fourth-quarter suggests Australians aren’t working very hard, according to Capital Economics. If true, that would damage prosperity in the long-run. “But while we believe that economic growth will fall short of most people’s expectations this year and next, we are fairly optimistic on the outlook over the next decade.” Economist Paul Dales suspects that smaller rises in employment and hours worked will mean that productivity growth rises in the first-quarter. “More importantly, we still believe that the digital revolution is a truly fungible general purpose technology and will eventually drive a second wave of innovation.”
Shares of graphite interest Magnis Resources were flying on Friday, up 11 per cent to 46.5¢. The company reached an agreement with the government of Tanzania on amendments to the special economic zone (SEZ) licence, granted to its own Magnis Technologies Tanzania. The SEZ is not subject to changes in mining legislation last year. “The amendments are significant and a major value catalyst for Magnis and underpins the development of the company’s Nachu graphite project which includes the processing facility,” a company statement said. Magnis Technologies will produce graphite products for the lithium-ion battery market.
Barrel on a roll
Crude oil futures rose on Friday as Asian stock markets gained. Brent crude futures were at $US63.95 a barrel, up US34 cents, or 0.5 per cent, from their previous close. US West Texas Intermediate crude futures were at $US60.39 a barrel, up US27 cents, or 0.45 per cent. WTI also fell by more than 2 per cent the previous session. Beyond geopolitics, oil markets were mainly concerned with soaring output from the United States, which has risen by 23 per cent since mid-2016, to 10.37 million barrels per day (bpd). That’s more than top exporter Saudi Arabia produces. Only Russia pumps more, at almost 11 million bpd. “It seems only a matter of time before the US becomes the biggest oil producer in the world,” Hans van Cleef, senior energy economist at Dutch bank ABN Amro, said.
ANZ research has reviewed a big week of data for the economy, including the Reserve Bank of Australia statement on Tuesday and the disappointing growth update. “The Reserve Bank told us, indirectly, this week that it had lowered its forecast for economic growth,” the economics team finds. “A previous comment – that GDP would average ‘a bit above 3 per cent over the next couple of years’ – was changed to the Australian economy growing ‘faster in 2018 than it did in 2017’.” Still, ANZ does not see any policy implications and forecasts the RBA is on hold until 2019, but it does believe 2018 growth is likely to be faster than last year’s. The Australian dollar was fetching US77.83¢.
Stock watch: REA Group (REA)
Citigroup has upgraded its REA Group recommendation to a “buy” from “neutral” and has a $90 price target on the stock. Analyst David Kaynes sees “rapid growth” in Australian revenue which the broker forecasts to increase by 50 per cent over the next three years. That equals compound annual growth in earnings per share of 22 per cent. Citi also estimates that REA’s pricing structure is “supportive of pushing agents to continue to move up the product curve”. That is enough to warrant earnings upgrades of 1 per cent to 3 per cent from 2017-18 to 2019-20. Investors should be prepared for a soft third-quarter result because of costs and timing, so the broker advises long-term investors to buy the dip. Shares of REA were trading at $80.33 on Friday.
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