Monday 19th November 2018

OPENING CALL: The Australian market looks to open higher with SPI Futures up 17 points.

Australia’s stock benchmark faded late, giving up earlier gains as the energy sector sagged into the close despite a further rebound in Asian trading for crude prices.
The S&P 500 edged higher, but steep losses from earlier in the week pushed the broad index to its first weekly loss of November.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australia’s stock benchmark faded late, giving up earlier gains as the energy sector sagged into the close despite a further rebound in Asian trading for crude prices. The ASX 200 fell 0.1% to 5730.6, putting the week’s slide at 3.2%. That’s the third drop of at least that much in the past six weeks. Energy ended a touch lower today after earlier rising as much as 1.2%. While a number of other sectors also fell slightly, materials rose 0.7% to reverse a bit of its recent slide. Meanwhile, REITs lost 0.9%.

US Markets

The S&P 500 edged higher, but steep losses from earlier in the week pushed the broad index to its first weekly loss of November. Fears that business growth is slowing and the U.S. economy is headed for a rockier road in 2019 were heightened after several more companies, including chip maker Nvidia and retailer Nordstrom, reported disappointing earnings results. Fresh economic data darkened the picture, with U.S. industrial output for October coming in below analysts’ expectations and household indebtedness climbing, according to the Federal Reserve. Even a fresh bout of optimism that the U.S. and China may be showing signs of progress on a trade deal wasn’t enough to kickstart a significant rally, leaving the S&P 500 down 1.6% for the week, its first weekly loss since Oct. 26. Stifel and other investors have been paring their exposure to shares of technology companies to spread cash across companies that tend to be more durable in an economic slowdown-and that continued Friday with the S&P 500’s energy, consumer-staples, health-care and utility sectors all posting gains while the market’s growth corners, like tech and consumer discretionary, fell. But the loss of technology stocks as the market’s clear leader has sapped investors of their conviction that the S&P 500 will be able to end the year firmly higher. The latest bout of selling in tech shares, along with a sharp drop in oil prices and concerns around trade, contributed to a painful five-day stretch for the S&P 500 earlier this week that shaved 4% off the index. The index added 6.07 points, or 0.2%, to 2736.27 on Friday, while the Dow Jones Industrial Average added 123.95 points, or 0.5%, to 25413.22, finishing the week down 2.2%. The Nasdaq Composite declined 11.16 points, or 0.2%, to 7247.87, putting it deeper into correction territory, typically defined as a 10% fall from a recent high.

Commodities

Gold futures ended higher for a third consecutive session to book a weekly advance of more than 1%, with geopolitical turmoil and broader equity market weakness helping to underpin gains. The yellow metal found a haven-related lift from geopolitical worries surrounding Britain’s planned exit from the European Union. Gold for December delivery on Comex rose $8, or 0.7%, to settle at $1,223 an ounce, scoring a gain of roughly 1.2% for the week. December silver added 11.9 cents, or 0.8%, to $14.382 an ounce, with marking a 1.7% weekly rise. Palladium futures meanwhile, continued their advance to a new all-time high, with the December contract up 1.5% to finish at $1,154.60 an ounce, a day after logging a record close. Copper prices rose to their highest level in two weeks Friday, boosted by a weaker dollar and rebounding oil prices. Copper for December delivery was up 1.9% at $2.7985 a pound, the highest level since Nov. 2. A falling dollar tends to buoy prices for copper and other commodities, which are priced in the U.S. currency and become more affordable to foreign investors when the dollar declines. A rebound in oil prices, on track for their third straight day of gains, has also given copper a tailwind. Many investors trade oil and copper as part of a single basket of commodities, with a larger share devoted to crude. Prices for copper have also received a lift from hopes of progress in trade relations between the U.S. and China, after talks between top officials resumed earlier this week. China is the world’s largest copper consumer, accounting for nearly 50% of global demand.

IRON ORE: 71.94s + 0.56 (December contract)

Oil Futures

U.S. oil prices ended unchanged but sharply lower for the week, after worries of a global surplus and weaker demand triggered a dramatic selloff earlier in the week. Light, sweet crude for December delivery ended flat at $56.46 a barrel on the New York Mercantile Exchange. For the week, U.S. prices fell 6.2%, extending a losing streak to six weeks. Brent crude, the benchmark for global prices, rose 0.2% to $66.76 a barrel. A weekly report from Baker Hughes on Friday showed the number of active, oil-directed drilling rigs in the U.S. rose by two in the latest week to 888, the highest total since March 2015. The data reinforces the notion that U.S. drilling and production is likely to keep growing robustly even with U.S. oil production already at a record-high 11.7 million barrels a day, according to weekly data from the Energy Information Administration. Oil prices entered a bear market earlier this month after several factors–sanctions relief to select Iranian oil buyers, revisions upward to U.S. output and a weakening outlook for demand growth–fueled fears of excess supply. The Trump administration had announced in early November waivers for eight countries to temporarily continue importing some volumes of Iranian oil. Analysts now expect the Organization of the Petroleum Exporting Countries will agree to cut output at their meeting in December to stabilize the market.

Forex

The dollar fell as new comments from Federal Reserve officials signaled a possible shift toward a more cautious approach to raising interest rates. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was fell 0.6% to 90.03. Federal-funds futures, used by investors to place bets on the direction of interest rates, showed Friday afternoon a roughly 38% chance that the Fed will raise the benchmark fed-funds rate to a range of at least 2.5%-2.75% from its current 2%-2.25% range by its March policy meeting, according to CME Group data. That was down from 47% Thursday and 54% a week ago. The euro climbed 0.8% against the dollar t0 $1.1418, while the dollar fell 0.7% against the Japanese yen to 112.813 yen per dollar.

European Markets

The Stoxx Europe 600 dropped 0.2%, or 0.72 points, to 357.71 as investors continued to fret about politics in the U.K. and Italy. The DAX was down 0.1% and the CAC-40 retreated 0.2%. “Massive political uncertainty still hangs over Theresa May,” David Madden at CMC Markets said. “Political commentators are questioning Mrs. May’s ability to sell her EU withdrawal agreement to her own party and a failure to do so could lead to a no-deal scenario, which has spooked investors. The political fight between Italy and the EU is taking a backseat to Brexit right now, but make no mistake, another round of the eurozone debt crisis could be in the offing.”

Asian Markets

Asian equities were mixed Friday, capping an up-and-down week during which investors have struggled to stick to a direction even intraday. Japan’s Nikkei fell 0.5% amid concerns about trade tensions and demand for electronics parts. Hong Kong stocks overcame early weakness, with the Hang Seng up 0.3%. Chinese stock benchmarks rose modestly, with the Shanghai Composite up 0.4% and the smaller-cap Shenzhen Composite 0.8% higher. Preschool-related stocks slumped as the government unexpectedly banned the listing of kindergartens. South Korea’s Kospi pared early gains, but was still up 0.2%. Taiwan’s Taiex slipped 0.3%.

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