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Versailles, mortgages and crypto: 8 things we learned this week

Lewis Jackson  |  28 Jan 2022Text size  Decrease  Increase  |  
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Versailles under lock and key

Asset manager Oaktree Capital seized a giant plot of land in Hong Kong where the chair of property developer Evergrande had once planned to build a Versailles-like mansion in the ongoing battle over the ailing developer’s debts. The investment company took control after Evergrande defaulted on a loan from the $157 billion asset manager. The valuable shorefront property was central to the developer’s plans to restructure its overseas debts and the move throws that process into turmoil.

A cash rate of 1%

Markets are betting the cash rate will hit 1% this year after a measure of consumer prices jumped to its highest level in eight years, ratcheting up pressure on the Reserve Bank to begin winding back stimulus. Trimmed mean inflation, which strips out the most volatile items and is the Reserve Bank’s preferred measure for policymaking, rose 2.6% year-on-year in the December quarter two years ahead of the bank’s own forecasts and comfortably in its 2%-3% target range.

Sezzle zips higher while Zip sizzles

Buy now pay later (BNPL) firm Zip is in talks to buy its US competitor Sezzle, the companies said Tuesday, as the industry battles competition from deep-pocketed entrants and scrutiny from regulators. Sezzle shareholders reacted positively, with shares leaping as much as 19% before ending the week 7.8% higher. Zip shareholders are decidedly less enthusiastic, and the stock is down 12% this week. The deal would give Zip a way to compete with players such as Swedish BNPL firm Klarna or payments giant Paypal. It follows the finalisation of US payment giant Block’s (formerly Square) acquisition of Afterpay.

Mortgage rates rise

Fixed rate mortgages are nearing pre-pandemic levels as the prospect of higher interest rates overseas raises funding costs for local banks. The average big four bank 4-year fixed rate mortgage is at 3.35% today, approaching levels last seen in January 2020, according to data from RateCity. Banks are paying more to source funding in overseas markets as the US Federal Reserve moves to tighten interest rates. The change has been rapid, in August the average 4-year fixed mortgage was 2.38%.

(Click to enlarge)

Source: RateCity

Trouble in Ukraine is boon to oil markets

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Families of diplomats are being evacuated from Ukraine as tensions with Russia increase. The US, Canada and Australia have all announced the withdrawal of diplomats' families as the standoff with Russia creates a regional war scare. Oil markets are feeling the impact, with the benchmark Brent crude oil up 14% this year. Higher energy prices are good news for local producers such as Woodside, with share prices up 9% year-to-date.

ASX corrects (briefly)

The S&P/ASX 200 joined the Nasdaq Composite in correction territory on Thursday after traders returned from the Australia Day break intent to sell. Shares on the benchmark index fell 1.7%, notching a decline of more than 10% from a previous high, known as a correction. A rebound of 2.2% on Friday lifted the benchmark index back out, for a year-to-date decline of 8%.

Apple revenue hits another record

Technology investors were treated to some good news on Thursday evening after Apple smashed analyst expectation with record quarter four revenue and profit. The iPhone and computer company posted revenue of US$123.9 billion. Profit jumped 20% to $34.6 billion, versus analyst forecasts of US31.1 billion. iPhones, the top five selling smartphones in the US and Australia, made up 58% of total revenues. Shares jumped 5% in aftermarket trading.

Crypto markets stabilise

Blockchain investors got some solace this week as the selloff in major coins Bitcoin and Ethereum steadied. A volatile week of trading saw Bitcoin oscillate between $46,000 and $53,000 before ending the week 4% higher at $52,000. Ethereum, which some argue has a greater number of technical applications, was down 2.5% on Friday, trading around $3,400. Both coins are down 20% or more this year.

ASX 200 closes down for a third week: Market recap

The S&P/ASX 200 closed 2.2% higher at 6988.1 on Friday, with all sectors finishing in the green.

Consumer discretionary stocks were the best performers, up 3.3%, with telecom services stocks also climbing 2.9%. Breville rose 6.8%, while Premier Investments gained 4.8% and Wesfarmers added 4.2%.

Newcrest Mining fell 6.4% even as it said it was on track to achieve annual guidance. BHP gained 2.7% while Ramelius Resources, which lost 8.0%, was the biggest loser for the day.

The ASX 200 lost 2.6% over the week, its third consecutive weekly finish in the red.

is a reporter and data journalist with Morningstar. Tweet him @lewjackk or get in touch via email

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