Thursday 16th May 2019

OPENING CALL: The Australian market looks to open higher with SPI Futures up 14 points.

Aussie stocks steadily rose most of the day after a slow start, riding the regional rebound which began overnight in Europe. The ASX 200 rebounded from a five-week closing low in advancing 0.7% to 6284.2.
U.S. stocks climbed, advancing for a second consecutive session on hopes that thawing trade tensions will boost the outlook for the world economy.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Aussie stocks steadily rose most of the day after a slow start, riding the regional rebound which began overnight in Europe. The ASX 200 rebounded from a five-week closing low in advancing 0.7% to 6284.2. Energy stocks jumped 1.6% and materials 1.3% as commodities prices rebounded with broad risk aversion in global markets cooling on U.S.-China trade hopes. Health care and IT advanced 1.3% as well. But financials continued to struggle, climbing just 0.4%.

US Markets

U.S. stocks climbed, advancing for a second consecutive session on hopes that thawing trade tensions will boost the outlook for the world economy. The Dow Jones Industrial Average was up 173 points, or 0.7%, at 25705 intraday. The S&P 500 added 0.8%, moving 3% below its April 30 record. It remains up 14% for the year. The tech-laden Nasdaq Composite added 1.3%. Stocks erased declines from earlier in the day after Treasury Secretary Steven Mnuchin said U.S. negotiators are likely to travel to Beijing soon and reports emerged that the Trump administration is putting off a final decision on whether to impose broad tariffs on automobile and auto-part imports. Updates on global trade policy have swung markets in recent days, with stocks rising and falling on shifting bets about the U.S. and China eventually reaching an agreement. Many investors are broadly worried about higher tariffs crimping economic and profit growth, leading to an uptick in volatility so far this month. At the same time, signals that both sides are willing to continue discussions have fueled cautious optimism the past two days. “The China issue will likely resolve itself over the course of the next six months or so,” said Doug Cohen, managing director of portfolio management at Athena Capital Advisors. “If rationality prevails, there’s a strong incentive for both sides to make a deal.” Trade jitters have also increased focus on economic data points as analysts attempt to gauge whether a growth slowdown overseas will spread to the U.S. Data on Wednesday showed U.S. retail sales fell unexpectedly in April even before the U.S. raised tariffs on $200 billion of Chinese imports and Beijing said it would raise levies on $60 billion of U.S. goods in response. U.S. industrial production also fell in April, missing expectations. Figures also showed Chinese industrial production, retail sales and fixed-asset investment all slowed in April, the latest mixed data point concerning analysts who are uncertain how much stimulus measures will spur activity in the world’s second-largest economy. “There is more of a sluggish growth environment in the cards,” said Matt Miskin, market strategist at John Hancock Investments. “It looks like an inopportune time to have more trade-war headlines creep into the markets.”In one sign of heightened growth worries, bond yields slid with investors seeking safety in U.S. Treasurys. The yield on the benchmark 10-year U.S. Treasury note fell to 2.384%, according to Tradeweb, from 2.421% a day earlier. Bond yields fall as prices rise. “Bonds and cash are the beloved asset classes right now,” Mr. Miskin said. “That leaves equities in a position where they could have upside just because sentiment has come down.”Figures Wednesday also showed Germany’s economy expanded 0.4% in the first quarter, after Europe’s largest economy narrowly avoided a recession late last year. Some analysts remain wary that a slowdown in business confidence around the world following the latest tariffs will hurt growth more in the future. The Stoxx Europe 600 edged up 0.5%. Among individual stocks Wednesday, Macy’s swung between gains and losses and was recently down 1.3% after the retailer posted stronger-than-expected sales growth in its latest quarter. Investors will also parse coming earnings from Walmart and other sellers of consumer goods for possible clues about how the companies plan to handle 25% tariffs on more than $40 billion of goods that are imported from China and directly purchased by U.S. consumers. Internet stocks extended a recent rebound, with Google parent Alphabet rising more than 4% after Deutsche Bank increased its price target on the stock and Facebook and Netflix also climbing about 3%.

Commodities

Gold prices finished modestly higher, although remained below the psychologically significant price of $1,300, as benchmark U.S. stock indexes shook off earlier losses to move up by the time gold futures settled. The precious metal saw support “as tensions increased with Iran, worries persist in trade and tariff talks with China–with…Brexit still unresolved,” said George Gero, managing director at RBC Wealth Management. “Continuing global uncertainties support gold as a haven, from economic [to] political global woes.”June gold edged up $1.50, or 0.1%, to settle at $1,297.80 an ounce, though finished off the day’s high of $1,301.70. July silver ended unchanged at $14.812 an ounce, following Tuesday’s 0.2% rise. Elsewhere on Comex, July platinum fell $11.40, or 1.3%, to $847.70 an ounce following a climb of 0.5% Tuesday, while June palladium gave up a dime to $1,332.90 an ounce, after a 1.2% rise a day earlier. Meanwhile, July copper, which has been sensitive to the Sino-American trade tensions, edged up 1.8 cents, or 0.7%, to $2.743 a pound, held on to a week-to-date loss of around 1.3%. Trade jitters between the world’s largest economies has the potential to hurt demand for the industrial metal.

Iron Ore: 92.32s + 1.57 (Contract)

Oil Futures

Oil prices rose as geopolitical tensions and higher stock prices on Wall Street offset bearish data showing U.S. oil inventories are at a 20-month high. West Texas Intermediate futures, the U.S. oil benchmark, ended 0.4% higher at $62.02 a barrel on the New York Mercantile Exchange. Brent crude, the global oil benchmark, closed 0.7% higher at $71.77 a barrel on London’s Intercontinental Exchange. Oil prices have fallen in each of the past three weeks. They are showing some upside this week as investors inject a risk-premium into crude prices due to rising tensions between Iran and the U.S. and its allies that could disrupt global oil supplies.

Forex

The U.S. dollar was little changed intraday after the U.S. said it would delay imposing tariffs on auto imports. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, declined less than 0.1% to a recent 90.73. The U.S. dollar rose earlier amid investor concern about the impact of worsening trade tensions between the U.S. and China. Trade frictions are sending ripples throughout the global economy and have limited appetite for riskier assets in recent sessions. “Trump keeps moving the goal posts on trade and that’s creating some uncertainty,” said Mark McCormick, head of foreign exchange strategy at TD Securities. With the largest economies in Europe and Asia still struggling, “the U.S. is the default go-to,” he said. Chinese economic data showed industrial production and retail sales were both weaker than expected in April. Investment in fixed assets such as infrastructure and property also slowed during the first four months of the year. The euro weakened earlier amid efforts by Italian officials to win European Union approval to run budget deficits that exceed EU restrictions on debt.

European Markets

Figures showed Germany’s economy expanded 0.4% in the first quarter, after Europe’s largest economy narrowly avoided a recession late last year. Some analysts remain wary that a slowdown in business confidence around the world following the latest tariffs will hurt growth more in the future. The Stoxx Europe 600 edged up 0.5%.

Asian Markets

Asian stocks performed strongly despite Chinese economic data that showed industrial production, retail sales and fixed-asset investment all slowed in April. Shares in Shanghai were nearly 2% higher, Hong Kong’s Hang Seng Index was up 1% and Japan’s Nikkei gained 0.6%. Indian shares gave up early gains in the last 45 minutes to end as one of the laggards in Asia. The S&P BSE Sensex ended down 0.6% at 37,114.88, which was a fresh two-month closing low.

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