Tuesday 12 December 2018

OPENING CALL: The Australian market looks to open lower with SPI Futures down 85 points.

Australia’s stock benchmark nearly erased the remainder of December’s drop, with mining stocks driving gains.
U.S. stocks slumped intraday as investors looked ahead to this week’s Federal Reserve meeting amid mounting signs of slowing economic growth around the world.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australia’s stock benchmark nearly erased the remainder of December’s drop, with mining stocks driving gains. The ASX 200 rose 1% to 5658.3 as materials jumped 2.4%. Heavyweight BHP bounced 3.5% after its stock-repurchase offer was done at a 15% discount to Friday’s close. Meanwhile, financials continued to struggle. Westpac hit another six-year low this morning while ANZ notched a 2 1/2-year worst. Health care climbed 1.7% today and utilities advanced 1.6%.

US Markets

U.S. stocks slumped intraday as investors looked ahead to this week’s Federal Reserve meeting amid mounting signs of slowing economic growth around the world. The Dow Jones Industrial Average dropped 450 points, or 1.9%, to 23655. The S&P 500 declined 1.9%, while the Nasdaq Composite fell 2%, pulling the technology-heavy index into the red for the year. Meanwhile, the Russell 2000 index of small-capitalization stocks teetered on the edge of a bear market, or a fall of at least 20% from its Aug. 31 high. Shares of small U.S. companies have underperformed their larger peers in recent months, a shift from earlier in the year, when investors flocked to small-caps as a shelter from trade related tensions. The index slumped 1.3% to 1391. A close at or below 1392.6 would end the Russell’s bull run. The Fed will conclude its final policy meeting of the year Wednesday and while analysts widely expect the central bank to raise short-term interest rates, the focus will be on the Fed’s outlook for next year. Rising interest rates pose a challenge for small-cap firms, in particular, because they tend to have a much higher proportion of debt. As interest rates climb, so will the interest on loans that small businesses carry. President Trump tweeted Monday that it was “incredible” that central bank policy members were considering raising borrowing costs again, continuing his public campaign against tighter monetary policy. Softening economic data and falling oil prices have led many traders to price in a more gradual courseof rate increases for 2019. Remarks in November by Fed Chairman Jerome Powell, who said rates looked like they were “just below” neutral, a level that would neither speed nor hamper economic growth, also are guiding expectations. The uncertainty comes amid a rocky stretch for financial markets, as trade frictions, worries about slowing global growth and geopolitical tensions have curbed risk appetite among investors in recent months. The Dow industrials tumbled nearly 500 points Friday, putting all three major U.S. indexes in correction territory-typically defined as a drop of at least 10% from a recent high-for the first time since March 2016. U.S. stocks are off to their worst start to a December since 1980. The Nasdaq is off 15% from its August high, based on Friday’s close. The S&P 500 and the Dow industrials, meanwhile, are off 11% and 10%, respectively.

Commodities

Gold climbed, with declines in a leading dollar index, Treasury yields and the U.S. stock market, as well as comments from a well-known fund manager, prompting prices to settle at their highest in just over a week. The gains in gold come ahead of key central-bank policy decisions this week and uncertainty around concrete trade developments between the U.S. and China. Gold for February delivery on Comex added $10.40, or 0.8%, to settle at $1,251.80 an ounce. The contract settled at its highest since Dec. 7, according to FactSet data. On Friday, it had ended at the lowest since Dec. 3, down 0.9% for last week. The SPDR Gold Shares ETF traded up 0.7% in Monday dealings, lifting its month-to-date gain to 2.1%. In other metals trade, March silver rose 0.8% to $14.759 an ounce, with prices settling around 0.4% lower for last week. March palladium snapped back with a 0.9% rise to $1,182 an ounce. It had settled at a
record high as recently as Wednesday on expectations of higher demand from the automotive sector, but two sloppy session since meant it finished less than 0.1% higher for the week. January platinum added 1.4% to $795.90 an ounce, while March copper fell 0.3% to $2.755 a pound.

IRON ORE: 67.65s + 0.13 (December contract)

Oil Futures

Oil prices erased an early advance and closed lower Monday, with U.S. crude losing below $50 a barrel for the first time since October 2017. West Texas Intermediate futures, the U.S. oil standard, closed down $1.32, or 2.6%, at $49.88 a barrel on the New York Mercantile Exchange. Prices are now 35% below their Oct. 3 multiyear high and down 17% for the year. Brent crude, the global oil benchmark, fell 67 cents, or 1.1% to $59.61 a barrel on London’s Intercontinental Exchange. Lukewarm economic data across the world and a recent stock-market rout have caused anxiety that oil demand will come in weaker than anticipated. After oversupply fears started the recent oil-price rout, sending benchmarks down more than 30% from their multiyear highs, anxiety about consumption has now exacerbated recent swings in crude, analysts said.

Forex

The U.S. dollar slipped versus it major rivals as investors got ready for a flurry of monetary-policy decisions in a data-heavy week. The ICE U.S. Dollar Index , which measures the greenback against a basket of six rivals, was down 0.3% at 97.119. The euro holds the most weight in the gauge. The shared currency last bought $1.1349, up from $1.1309. Traditional haven currencies, Japan’s yen and Switzerland’s franc were both stronger against the dollar. The buck fetched Yen112.75 and 0.9926 franc, both down 0.6%. This week, market participants are focusing on an expected interest-rate increase by the Federal Reserve on Wednesday–the fourth and final one this year. Market expectations for 2019 rate increases have begun to wane of late on the back of dovish comments from Fed officials including Chairman Jerome Powell.

European Markets

The Stoxx Europe 600 index closed down 1.1% at 343.26 on global growth concerns and as markets turned cautious ahead of an expected U.S. interest rate hike this week. Retailers are the biggest fallers after U.K. online fashion group ASOS issued a profit warning, heightening concerns about a drop in consumer spending. German online fashion group Zalando is the Stoxx 600’s biggest faller, down 11.6%, while Sweden’s H&M loses 8.5%. Germany’s DAX index fell 0.9%, France’s CAC 40 and the U.K.’s FTSE 100 were both off by 1.1%, while Italy’s FTSE MIB shed 1.2% and Spain’s IBEX 35 ended down 0.8%.

Asian Markets

In China, investors are eyeing the Central Economic Work Conference amid expectations Beijing will take more potent measures to arrest an economic slowdown. The benchmark Shanghai Composite Index rose 0.2% on Monday. Rising expectations for further monetary loosening and more government spending to boost the economy are helping support already cheap-looking Chinese stocks, said Zhu Chaoping, a Shanghai-based economist at J.P. Morgan Asset Management. Japan’s Nikkei finished 0.6% higher while Hong Kong’s Hang Seng was flat.

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