Wednesday 14th November 2018

OPENING CALL: The Australian market looks to open lower with SPI futures down 6 points.

A fresh overnight skid in commodities prices prevented Australia’s stock index from shaking off sharp early declines, making it the worst-performing market in Asia-Pacific.
Stocks failed to take advantage of early gains and turned wobbly intraday as oil prices cratered, dragging the energy sector sharply lower, and a resolution of the U.S.-China trade war remained elusive.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

A fresh overnight skid in commodities prices prevented Australia’s stock index from shaking off sharp early declines, making it the worst-performing market in Asia-Pacific. As some others rebounded from their initial drops, the ASX 200 finished down 1.8% at 5834.2 as the energy and materials sectors lost about 2%. But there were worse performers as healthcare skidded 2.6% in the wake of Cochlear’s 4.2% drop. And financials slid 2.2%. But yield plays in the REIT and utilities industries rose modestly.

New Zealand equities didn’t see the rebound that was logged by many Asian markets after sharp early declines, leaving the country’s stocks among the weakest performers following the U.S. slide Monday. The NZX 50 saw a week-long winning streak end with a 1.1% drop to 8861.52. Retirement-village operator Ryman slid 4.4% and Fisher & Paykel Healthcare lost 2.5% while milk firms a2 and Synlait fell similarly. And even though oil prices have slid anew, Air New Zealand declined 0.8%.

US Markets

Stocks failed to take advantage of early gains and turned wobbly intraday as oil prices cratered, dragging the energy sector sharply lower, and a resolution of the U.S.-China trade war remained elusive. Stocks had bounced back in the morning as large capitalization technology and internet-related names appeared to have regained their footing after the Dow and the Nasdaq suffered triple-digit losses in the previous session. The Dow Jones Industrial Average slid 102 points, or 0.4%, to 25,284, the S&P 500 fell 3 points, or 0.1%, to 2,722, while the Nasdaq Composite Index gained 6 points to 7,207. December West Texas Intermediate oil tumbled 7.1% to settle at $55.69 a barrel, finishing at the lowest for a front-month contract in almost a year and falling for a record 12th session, according to FactSet data. Some investors are viewing the weakness in oil as a sign of sluggish global economic expansion.

Commodities

IRON ORE: 70.90 – 1.30 (December contract)

Oil Futures

U.S. oil prices sank deeper into a bear market, posting their steepest fall in more than three years and a record 12 consecutive days of losses, as fears of oversupply and weakening demand gripped the market. West Texas Intermediate for December delivery settled 7.1% lower at $55.69 a barrel on the New York Mercantile Exchange, its sharpest one-day fall since September 2015. Brent crude was down 6.6% at $65.47, entering a bear market — defined as a 20% drop from a recent peak. The tumble in prices is a reversal from earlier this year when anticipation that Iranian sanctions would shrink global supply sent oil prices soaring. That quickly reversed last month as worries about lower demand amid rising production from Saudi Arabia, Russia and the U.S. propelled crude prices lower.

Forex

The dollar edged lower intraday as the reopening of high-level talks between the U.S. and Beijing heightened investors’ risk appetite. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.3% to 90.87 a day after hitting its highest level since March 2017. Treasury Secretary Steven Mnuchin has resumed discussions with his Chinese counterpart, Vice Premier Liu He, about a deal that would ease trade tension ahead of a meeting between leaders of the two countries later this month, The Wall Street Journal reported on Monday. Heightened appetite for risk pushed some investors out of the dollar, which has been a popular destination for nervous market participants in recent months. Some investors are betting that a rally that has lifted the dollar by nearly 6% against a basket of currencies this year is unlikely to continue for long. Fiscal concerns and political gridlock in the U.S. are two key factors that could weigh on the currency in coming months, analysts at Bank of America Merrill Lynch wrote in a note to clients.

European Markets

European stocks rose, ending the session in positive territory across the board following global stock market gains. However, advances were kept in check by weakness for major oil companies as crude prices fell. The Stoxx Europe 600 finished 0.7% higher at 364.44, clawing back much of Monday’s loss of 1%, a day that saw stocks fall across the board and regions. Germany’s DAX 30 closed 1.3% higher at 11,472.22, while France’s CAC 40 climbed 0.9% to end at 5,101.85. The U.K.’s FTSE 100 finished flat at 7,053.76, held back by a buoyant British pound.

Asian Markets

Asian stocks saw noted improvement from the start of trade, with wide early 1%-plus declines resulting in just Japan and the Philippines. Meanwhile, Chinese equities rose again and some in Southeast Asia were higher after Monday’s broad underperformance. Chinese stocks shined for a second day, and again were led by small caps as indexes rose 1% or more. But the Nikkei skidded 2% on the tech-led U.S. declines overnight. That weighed on other markets in the region, but not enough to completely overwhelm strength in some parts of the market in locales like South Korea and Taiwan. However, fresh oil-price weakness did weigh across the region. Taiwan’s tech dominated benchmark was down 0.6% and the South Korean Kospi index was down 0.4%. The downbeat trade was sparked by Apple’s 5% tumble Monday, after two of its suppliers slashed their earnings outlooks, raising concerns about demand for the iPhone. Japan Display, which supplies screens for the iPhone XR, cut its earnings estimates, saying orders for its latest LCD panels would be much lower than its initial expectations. Indian shares rebounded after the country’s inflation fell more-than-expected, strengthening expectations that the central bank will stand pat on rates next month. The S&P BSE Sensex closed 1% higher at 35144.49, reversing the previous session’s losses.

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