The Reawakening of Animal Spirits




In the UK the FTSE 100 closed 0.34% higher at 7,449 with airlines and travel companies rallying.  Precious metal price weakness led to a decline in silver miner Fresnillo and gold producer Randgold Resources. On the political front, the UK government has reached a “confidence and supply” deal with Northern Ireland’s Democratic Unionist Party.  Northern Ireland will receive £1bn in extra funding as part of the deal.

In Australia, the market had a fairly quiet day with the ASX200 edging up 4 points to close at 5720. The financials were fairly flat, with a mixed performance by the banks. CBA and ANZ were both higher, as was Bank of Queensland. Sentiment clearly remains polarised, and the politicians are clearly not helping the situation, but we remain of the view that there is value to be had in the sector for those with a medium to longer term perspective. It remains a given that the banks will pass the (federal and state) levies on, and higher interest rates down the track will inevitably boost margins.

The flattening of the yield curve currently is not helping QBE Insurance either, although clearly there are company specific reasons for investors leaving the stock. While there may very well be a sense of Deja-vu with last week’s profit warning, some context should still be taken. Core businesses are performing well, and the outlook for premium strength is also encouraging. Clearly though it will take time for the company to win back the market’s trust, yet again.

Disclosure: The Fat Prophets Contrarian Fund declares a holding in Fresnillo, QBE Insurance and Sony.

Carpe Diem!

CEO | Fat Prophets
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