Shares ended the week on a sour note but remained comfortably above the 6000-point threshold reached on Tuesday to hover around post-GFC highs.
After spearheading the Australian stockmarket's recent push higher, miners and energy stocks reversed course on Friday, dragging the S&P/ASX 200 down 20 points, or 0.3 per cent, lower to 6029.
That still left the benchmark index up 69 points or 1.2 per cent for the week, while the All Ordinaries added 73 points or 1.2 per cent to 6104.
News of a potentially lengthy delay to US tax cuts took the wind out of Wall Street on Thursday night and made for a poor lead for the local market, and profit-taking in resources sent the bourse lower.
Rio Tinto eased 0.2 per cent. Energy shares performed well over the week as oil prices pushed firmly higher. Woodside Petroleum climbed 2.4 per cent and Origin Energy rose 2.7 per cent.
The best corner of the market over the week was listed real estate thanks to a 8.5 per cent jump in Westfield shares amid fevered talk in the US of dealmaking in the struggling mall sector.
Orica was the worst performing stock this week, shedding 13.2 per cent after a profit result on Monday came in below expectations. Investors were particularly concerned about a soft outlook update from boss Alberto Calderon.
NAB and Macquarie traded ex-dividend during the week, with the bluechips weighing as a result. Westpac's annual earnings on Monday were initially poorly received, but a string of upbeat analyst reports buoyed the stock, which ended the week off just 0.1 per cent. In contrast, investors were immediately taken by CBA's quarterly sales update this week, and the big bank finished the week 3.9 per cent higher.
There was plenty for central bank watchers this week. An uneventful Melbourne Cup day RBA monetary policy meeting - at which rates were held steady at 1.5 per cent - was followed on Friday by sharp reductions in the RBA's inflation estimates. Updated forecasts in the Statement on Monetary Policy showed the central bank now expects inflation will only reach 2 per cent, the bottom of the RBA's target range, in 2019. "This is a significant departure from the forecasts in August," Westpac chief economist Bill Evans wrote. "Forget near-term rate hikes," summed up UBS economists.
Bond markets were unmoved, however, with market pricing for a May hike is now at around 20 per cent, TD Securities analysts said.
Shopping mall owner Westfield climbed another 3 per cent on Friday, extending this week's gains to around 9 per cent. The move for Westfield this week followed a broad rally for US mall owners, with GGP, Macerich, Simon Property all climbing sharply in New York as deal speculation gripped the sector. Reports from Bloomberg that Brookfield Asset Management may have held talks with Chicago-based GGP to buy the rest of the mall owner it doesn't already own and that Third Point has reportedly taken a stake in Macerich were the triggers for that takeover speculation. Westfield operates 33 malls across the US. It also reported 2.2 per cent specialty retail sales growth in the third quarter.
This week saw the Australian benchmark climbed back over the 6000 level for the first time in almost a decade on Tuesday, with resources and banks lifting the index to post GFC-highs. "For anyone who thinks 6000 is just a number???you're absolutely right," said Credit Suisse equity strategist Hasan Tevfik. He noted that, while the ASX 200 index closed above the much watched level on Tuesday, that was also his target for the end of the year. The level marks a 26 per cent increase in the current bull run, he said. "While Aussie equities are due a pause in the short-term, we think there is more bull to come and we're targeting an index level of 6500 by end 2018," Mr Tevfik added.
The dollar ended the week at around US76.85 cents, ticking up from US76.49 cents at the start of the week. The currency took RBA cuts to its inflation forecasts on Friday in its stride. The central bank said that it expected underlying inflation to remain steady at around 1.75 per cent until early 2019, before increasing to 2 per cent. "Nothing cited in the inflation forecasts and commentary points to any tightening in monetary policy over the next 12 months. The very least the RBA would need to have signalled in the SMP was some upgrade in its core inflation forecast to bring a potential rate hike into focus. But the RBA actually lowered its core CPI forecasts," said CBA economist John Peters.
Nickel slumped the most in almost seven weeks in regular trading on Thursday on speculation that China's top producer of stainless steel has cut its prices. The London Metal Exchange nickel contract for delivery in three months fell 3.2 per cent to settle at $US12,300 a metric tonne. The day's losses almost wiped out this month's gains for the metal used to make stainless steel. Nickel has been a top performer among metals this quarter on bets that long-term demand from electric vehicles will lift prices. But China's steel industry, the world's biggest, holds the key to prices in the near-term and the market for cold-rolled stainless steel has moderated in recent weeks.
Volatility spiked (albeit from a very low base) this week, with investors apparently growing pessimistic about the prospects for meaningful US fiscal reform, as lawmakers struggle to find a compromise that could pass both houses of Congress. The CBOE VIX Index recorded its biggest surge since August during the week. "Whether a short-term trader or long-term investor, seeing the VIX Volatility Index rise back above 10 should be a welcome development," said IG's Chris Weston. "When there is an assumption of no return, no enthusiasm and no consequence; something is wrong."