Thursday 1st August 2019

OPENING CALL: The Australian share market is expected to open lower. The SPI200 futures contract expected to open down 29 points.

The Federal Reserve cut interest rates by a quarter-percentage point-the first reduction since 2008-in a preemptive strike to cushion the economy from a global slowdown and escalating trade tensions.

The tech giant’s shares were up 4.3% at about midday Wednesday after a better-than-expected earnings report, putting it on track to be worth more than $1
trillion again.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Despite closing out July on a weak note and pulling back from a fresh all-time high,
Australia’s stock benchmark still managed a seventh straight monthly advance, the longest
run for the index since 2009. The S&P/ASX 200 declined 0.5% to 6812.6, finishing at the
session low. That left it up 2.9% for July.
Losses today were broad, led by a 1.1% drop by the utilities subindex and a 1.0%
weakening by the consumer discretionary subindex. Heavily weighted Commonwealth Bank and
Westpac each shed more than 1%, while U.K. lender CYBG sank 13% after the release of its
3Q update. Energy stocks bucked the trend.

US Markets

Major U.S. stock indexes’ losses steepened after the Federal Reserve said it would cut
interest rates for the first time in a decade, as hopes for further rate cuts were
dampened.
Some investors are betting on more than one rate cut this year, and while the Fed’s
policy statement left open the door for the central bank to cut rates again, Federal
Reserve Chairman Jerome Powell suggested this cut wasn’t the beginning of a long easing
cycle. He also reiterated the Fed would continue monitoring incoming economic data. Those
statements could pare investors’ outlook on further rate cuts.
The S&P 500 fell 1.1% in recent trading as Mr. Powell spoke. The Nasdaq Composite
dropped 1.2%. The Dow Jones Industrial Average lost more than 300 points, or 1.2%.
Major stock indexes have rallied this year, fueled by the prospect of the first rate
cut. The end of the meeting marks a pivotal moment for stocks, bonds and currency markets
because of potential clues about what comes next, especially with interest rates already
historically low. This cut marks just the fifth time in the past 25 years that the Fed
moved to trimming rates from increasing them.
The Fed’s policy statement showed that the global economy cast a shadow over the
central bank’s outlook. Mr. Powell also cited trade tensions as having a significant
effect on the economy in his press conference.

Commodities

Gold futures finished lower, then extended their decline in to the electronic trading
session after the Federal Reserve reduced its key interest rate by a quarter point, as
expected.
The yellow metal sold off shortly after the Fed news, but Jeff Wright, executive vice
president of GoldMining Inc., said he does not expect prices to dip below $1,400 as “the
FOMC cuts 25 basis points and almost acts as [a] ‘cheerleader’ for the economy.”
The most-active December gold contract was trading at $1,439 an ounce in electronic
trading about half an hour after the Fed announcement. It had settled down by $4, or
0.3%, at $1,437.80 before the news. For the month, the yellow metal gained about 1.7%,
based on the most-active August contract finish of $1,413.70 on June 28. It notched a
third consecutive monthly rise, according to FactSet data.

Oil Futures

Oil futures finished higher, with U.S. prices up a fifth consecutive session as
government data showed that domestic crude inventories dropped for a seventh week in a
row, the longest stretch of declines in a year and a half.
Prices had also climbed in the wake of the Federal Reserve’s decision Wednesday
afternoon to cut its key interest rate by a quarter percentage point.
West Texas Intermediate crude for September delivery on the New York Mercantile
Exchange gained 53 cents, or 0.9%, to settle at $58.58 a barrel, for a fifth straight
session rise. For the month, U.S. benchmark prices ended about 0.2% higher, according to
Dow Jones Market Data. That was their sixth monthly rise of the year.
Meanwhile, global benchmark September Brent crude , which expired at the end of the
session, added 45 cents, or 0.7%, to $65.17 a barrel on ICE Futures Europe–settling
roughly 2.1% lower for the month. October Brent crude, which is now the front-month
contract, tacked on 42 cents, or 0.7%, to $65.05 a barrel.
The Energy Information Administration on Wednesday reported that U.S. crude supplies
declined by 8.5 million barrels for the week ended July 26. Analysts polled by S&P Global
Platts, on average, expected a decline of 3.9 million barrels, while the American
Petroleum Institute on Tuesday reported a 6 million-barrel drop.

Forex

The ICE Dollar Index rose to its highest level in more than two years, after the
Federal Reserve accompanied its rate cut with a favorable description of the US economy.
While lower rates typically make the dollar less attractive to yield-seeking investors,
the central bank’s optimistic tone may have undercut the case for those who believe the
Fed is about to embark on a long cutting cycle.
The Fed’s statement noted that the job market remains strong and growth is continuing
at a moderate pace while consumers continue to spend. The Index was recently up 0.6% at
98.68, its highest level since May 2017.

European Markets

The Stoxx Europe 600 climbed about 0.2%. European bank stocks rose on Wednesday amid a
set of strong earnings reports. Credit Suisse climbed 2.4% and BNP Paribas gained 1.6%.
Deutsche Bank’s stock rose 2.1%.
The European Sentiment Index, a barometer of optimism, dropped to a low not seen in
more than three years within the euro area. Prolonged weakness in the manufacturing
sector, particularly in the eurozone’s largest economy, Germany, weighed on confidence.

Asian Markets

Asian stocks were rattled after tweets from President Trump dampened expectations for a
breakthrough in U.S.-China trade talks.

Hong Kong’s Hang Seng was down by 1.3% and the Shanghai Composite Index fell by 0.7%.
Shares of Chinese property developers fell after the country’s leadership vowed not to
use the real-estate market as a tool to arrest an economic slowdown.

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