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Another week of smoke and mirrors has left markets generally sitting pretty to end the week.
The ASX slid a little on Friday, largely on retreating copper and aluminium prices as the world’s biggest miner BHP shed nearly 4 per cent.
However, US markets were pushing new all-time highs on “nothing to see here” US inflation data, taking some heat out of the interest-rate hawks.
The biggest winner of the week was Japan, with its Nikkei enjoying a strong run as investors digested the prospect of further US support for the beleaguered yen. Behind those green numbers sits a rather fascinating piece of financial theatre. While the Yen has been collapsing towards 40-year lows and threatening to make Japan’s already enormous pile of US Treasuries increasingly uncomfortable, it was the US to the rescue after a photograph of US Treasury Secretary Scott Bessent’s notepad at a Cabinet meeting revealed a rather extraordinary item on his to-do list: “Buy Japanese Yen $5 to $10 billion.”
The US subsequently coordinated with Japan to support the currency, with Trump cheerfully explaining that Japan “wanted a little bit of help” and the money printing American machine was there to provide it – how charitable.
A permanently collapsing yen makes Japanese exports cheaper and US goods more expensive, widening America’s trade deficit and more importantly, Japan is one of the world’s biggest holders of US government debt.
If Tokyo needed to sell a mountain of Treasuries to defend the yen, it could send US bond prices lower, yields higher and American interest rates through the roof.
In other words, Washington wasn’t necessarily rescuing Japan. It was protecting its self-interests.
The yen bailout also gave gold a fresh kick. Normally gold and oil don’t party together, but both have been rising as investors question the strength of the US dollar and the stability of the global financial system. Renewed Chinese buying has added more fuel to gold, while America’s decision to help prop up the yen has only highlighted how fragile the world’s currency and debt architecture has become.
Back home in Australia and our inflation maestros – the Labor government – have again been recklessly spending your hard-earned cash.
Albanese put his cape on to announce a $2.5 billion taxpayer-funded rescue package for Rio Tinto’s Tomago aluminium smelter which is struggling under surging electricity prices. The fake herioics were looking decidedly smoke screenish as the Japanese “melongate” saga threatened to swallow him whole.
Bailouts aside it was a promising week for the Bulls N’ Bears Runners cavalcade, as the small caps index continued to surge and junior resources were the biggest beneficiaries. It was four-from-four for resources on the list this week, with some curious trading funny buggers rather than substance creating a clear winner.
The Bulls N’ Bears Runner of the Week and now a serious contender for Runner of the Year is the extraordinary case of Accent Resources.
While the company did release an update on independent beneficiation test work at its wholly-owned Magnetite Range project in Western Australia, the subsequent surge in its share price had little to do with the announcement and everything to do with how much speculative heat could be pumped into a stock with a ridiculously tight share register.
