Australian market expected to open lower 06/08/19

Australian market expected to open lower 06/08/19

OPENING CALL: The Australian share market is expected to open lower. SPI Futures is expected down 110 points.

 

 

 

Beijing’s move to devalue its currency escalated the U.S.-China trade fight yet again and raised the potential of another retaliatory round from Washington.

 

 

 

HSBC plans to cut up to 2% of its 237,685 employees, as the bank flagged a worsening outlook for the global economy in its second-quarter results.


 

Overnight Summary

 

 


Each Market in Focus

 

 

Australian shares marked their sharpest fall in almost eight months, dented along with markets across the region by worries about global trade amid heightened tensions between the U.S. and China. The S&P/ASX 200 closed 1.9% weaker at 6640.3, near the day’s low.
Since logging an all-time closing high last Tuesday, the index has declined the last four-straight sessions and has now pulled back 3%. Losses were broad, led by a 5.2% drop in the technology subindex. The heavily-weighted biggest four banks were down by 0.8%-1.7% and the miners saw heavy selling as BHP and Rio Tinto each lost more than 3%
and Fortescue dropped 7.2% with a sharp decline in Chinese iron-ore futures. 

Stocks were pummeled by selling, pushing indexes from New York to Shanghai lower, as the yuan reeled and fresh trade threats between Beijing and Washington raised fears of an economic slowdown.
The Dow Jones Industrial Average fell 856 points, or 3.2%, to 25628. The S&P 500 shed 3.3% and the Nasdaq Composite declined 3.8%.
Stocks elsewhere retreated, with benchmark indexes in Europe, Japan, and Hong Kong falling at least 1% apiece.
The latest wave of selling started, investors and analysts said, after reports showed Chinese and U.S. officials ratcheting up pressure on each other in their prolonged trade fight. The Chinese yuan sank below 7 per dollar and hit an all-time low in offshore trading Monday, with local officials blaming the depreciation on President Trump’s decision last week to extend tariffs to almost all Chinese imports. Mr. Trump responded on Twitter, accusing China of engaging in currency manipulation.
The back-and-forth dealt a blow to some investors’ hopes that the two countries would ultimately reach a trade agreement. Worries about the conflict have weighed on global growth this year. The trade fight has also had an impact on the U.S., where growth and consumer spending remain strong: The Federal Reserve last week cut interest rates for the first time since 2008, in part to cushion the economy against what it sees as rising financial risks.
The S&P 500 is up 13%, about 6% off its July 26 record and outperforming the Stoxx Europe 600, Nikkei Stock Average, Shanghai Composite and Hong Kong’s Hang Seng Index for the year.
But fears about the trade fight intensifying have nevertheless cast uncertainty on the market’s trajectory. 

Gold’s haven appeal boosted the metal to a more than six-year high, as an escalating U.S.-China trade fight sparked a selloff in assets perceived as risky.
Gold, now up about 15% from its low of 2019, has surged over recent sessions after President Donald Trump intensified a trade fight with China by announcing additional tariffs on Chinese goods and China pledged retaliation.
China’s yuan currency on Monday fell to its lowest level in more than a decade, breaching the key 7-to-the-dollar level. Investors took that as a sign Beijing could allow further weakness, with the potential to further intensify trade tensions.
Gold for December delivery on Comex rose $19, or 1.3%, to $1,464.60 an ounce. That was the highest most-active contract finish since May 9, 2013, according to Dow Jones market data. Prices ended about 2.7% higher for last week. September silver — which because of its industrial use in addition to haven status can be negatively impacted by the trade news — added 12 cents, or 0.8%, to $16.34 an ounce
Monday. It posted a loss of 0.8% for last week, however.
Meanwhile, industrial metals traded mixed. October platinum gained $7.50, or 0.8%, to $860.50 an ounce, after a weekly decline of around 1.7% through Friday. September palladium lost $14.30, or 1%, at $1,418.50 an ounce. Palladium logged at an 8.3% drop for last week.
September copper fell nearly 2 cents, or 0.6%, to $2.555 a pound, ending 4.2% lower for last week.

Oil futures resumed their drop, tracking losses ripping through broader financial markets as concern for a prolonged trade war and its risk to global crude demand was rekindled.
Last week, the U.S. oil benchmark suffered its biggest one-day fall in more than four years and ended lower for the week after President Donald Trump moved to impose additional import tariffs on Chinese goods and China pledged retaliation on other goods.
West Texas Intermediate crude for September delivery settled down 97 cents, or 1.7%, to $54.69 a barrel on the New York Mercantile Exchange.
Friday’s rebound recovered a portion of the 7.9% drop from Thursday. But the front-month contract still suffered a 1% weekly loss last week, according to Dow Jones Market Data, as WTI’s drop on Thursday marked the biggest percentage fall for a front-month contract since Feb. 4, 2015, and the settlement at $53.95 that day was the
lowest since June 19, according to Dow Jones Market Data. WTI remains off 17% from its 2019 settle high of $66.30 hit April 23.
Global benchmark October Brent crude settled at $59.81 a barrel on ICE Europe, down slightly on the day. With its loss fattened by Thursday’s 7% slide, the contract ended 2.3% lower for last week.

China’s currency broke through the psychologically important level of 7 yuan to the dollar, prompting President Trump to accuse Beijing of manipulating its currency in a way that would backfire.
The depreciation sent the currency to a record low for offshore trading, and came days after Mr. Trump threatened to broaden U.S. tariffs to cover essentially all Chinese imports. He and many other U.S. officials have long accused China of weakening the yuan to make its exports cheaper and gain an unfair advantage in trade. Beijing has denied doing so.
Even so, China’s central bank suggested that the depreciation was in response to Mr. Trump’s decision last week to extend punitive tariffs to almost all Chinese goods.
The currency’s slump was “due to the effects of unilateralist and trade-protectionist measures and the expectations for tariffs against China,” the People’s Bank of China said in a statement.
In a tweet about 12 hours after the yuan crossed the 7 threshold, Mr. Trump described the move as “currency manipulation.” He said: “China dropped the price of their currency to an almost a historic low. It’s called “currency manipulation.” Are you listening Federal Reserve? This is a major violation which will greatly weaken China, over time!”
The yuan slid as much as 1.9% to a record offshore low of 7.1087 to the dollar in Hong Kong on Monday, according to data from Refinitiv. That put it on course for the biggest single-day loss since August 2015, when Beijing allowed a sudden depreciation of the currency. China has let the yuan trade offshore, in locations such as Hong Kong, since 2010. 

European markets end the first session of the week firmly in the red as rising trade tensions between the US and China spook investors. The Stoxx Europe 600 drops 2.3%, with the FTSE 100 down nearly 2.5%, the DAX off 1.8% and the CAC-40 falling 2.2%.
China irritated Washington by allowing the yuan to decline against the dollar and reportedly instructing state-controlled firms not to buy US agricultural goods. 

Japan’s Nikkei fell 1.7% and Korea’s Kospi dropped 2.6%, while the yuan weakened beyond the psychologically important 7-per-dollar level, falling as much as 1.9% to 7.1087 per dollar in Hong Kong in early trading.
China’s central bank said Monday the yuan’s decline was a result of trade protectionism and higher tariffs on Chinese goods. The People’s Bank of China said the yuan remains stable and strong against a trade-weighted basket of currencies and that the bank has the ability to keep it at a “reasonable equilibrium.” It also said it would crack down on short-term speculation in the yuan.
In a tweet Monday morning reacting to the yuan’s drop, Mr. Trump said: “China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.”
Hong Kong’s Hang Seng Index fell nearly 3%, as a citywide strike disrupted the airport and subway services. It followed a ninth weekend of protests against a controversial extradition bill and China’s growing influence on the city. In a speech Monday, Hong Kong’s leader Carrie Lam said society has become dangerous and unstable. The city’s stock market has fallen 9% in the past few weeks as the protests dent business sentiment and weigh on economic growth.


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