Trading week preview

Australian financial markets are looking at a busy week to start the new financial year. The ASX 200 is trading at a relatively healthy level, as it continues to buck the bearish sentiment that has infected global markets over the last several weeks. The index currently sits around 40 points, shy of the 10-year highs it achieved a fortnight ago, with a challenge to this level remaining a reasonable possibility. The gains in local shares are still closely pinned to a general recovery in bank shares, along with an oil driven rally in energy and material stocks. As a dense week of data looms, which includes an RBA meeting, search for a play by the ASX towards 6260, before it eyes the significant psychological level of 6300.

The winners and losers

Given we’ve come to the end of the 2017/18 Financial Year, it may be beneficial to quickly reflect on what drove the ASX in the year just gone. In what can be considered a solid year when it comes to the index’s returns, the ASX managed to fight through the turmoil that gripped global markets in the final weeks of June to deliver a respectable ~8% to investors.

It was the late-cycle sectors that carried the load last year, with energy stocks yielding 38% and materials yielding just below 30%. This contrasts with defensive utilities and telecommunications sector stocks (the latter of which was weighed by a tough year for Telstra), which contracted 5.5% and 35%, respectively. Finally, financials were kneecapped by a series of regulatory and PR disasters for the Big Banks, combined with rapidly climbing global interest rates. The situation resulted in a flat return from financials, although recent trading suggests this tide may turn in the new financial year.