After a strong open to the week, hotter than expected retail sales did not do much to lift US markets overnight, as the S&P 500, Nasdaq and Dow Jones were all slightly off. September’s retail sales grew stronger than expected at 0.7%, compared to the forecast consensus of 0.3%.

After tech led indices lower, investors are now focusing on incoming earnings reports from banks. JP Morgan recently recorded a US$13.15 billion profit for the third quarter of 2023, a 35% jump from a year ago, which was largely attributed to net interest income and credit costs that will shortly normalise.

JP Morgan and Wells Fargo were in the market selling US$13 billion of bonds after reporting their earnings, which was surprising given that big banks are well funded for the short term and borrowing costs remain high. The spread on financial institution bonds currently comes at a 21 basis point premium compared to broader high grade bond index, settling at 145 basis points. 

Oil prices have continued to rise, while the VanEck Rare Earth/Strategic Metals ETF was slightly up yesterday. The VIX put on almost 4% overnight.  

Back in Australia, consolidation activity in the aged care sector is continuing to heat up, with Bain Capital appearing to be interested in Melbourne-based residential aged care provider BlueCross Aged Care.

Bain seems to be very eager to enter the aged care sector and build up a dominant position. The private equity giant recently closed its $838 million takeover of Estia Health and will likely be looking for technological solutions to boost margins while still upholding a high degree of compliance with newer, stricter regulations.

With US$175 billion in assets under management, Bain is capable of bravely entering sectors when they are in distress, while holding a positive outlook for the longer term. They did it with Virgin during covid, when airlines around the world were grounded to a halt, and they seem to be planning the same thing with the aged care sector, which is forecast to receive more government funding than ever before.

The XJO mange to pack on some gains this week, and it is today trading around just above 7,050. It is still well above both its 52 week low of 6,664, and is above its 13 week low of 6,871. 

The XJO was sitting around 7,055 just before 12pm – noticeably lower than both its 200 day weighted moving average of 7,198 and  its 50 day weighted moving average of 7,096. The index’s 52 week high currently stands just over 7567.

Rare earth prices have seen an encouraging recovery over the past few weeks, which could be the start of a two year uptrend that is predominantly based on supply and demand factors.

In the coming weeks, we will be running a two-part The Insider: Rare Earths Summit, where an expert panel of fund managers, analysts and industry veterans will provide insights on market trends and how to identify potential opportunities. Click here to register your interest.

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