Australian market expected to open lower 26/08/19

Australian market expected to open lower 26/08/19

OPENING CALL: The Australian share market is expected to open lower. The SPI Futures is expected to be down 86 points.

 

President Trump said he was ordering U.S. companies doing business in China to explore relocating their operations after Beijing unveiled new tariffs on U.S. goods, the latest twists in a trade war that showed anew its potency to rattle investors, confound central bankers and cloud the global economy.

 

Amazon has signed an agreement that would give it the option to take a significant stake in one of India’s largest retailers.

 

Overnight Summary

 

 

Each Market in Focus

 

 

Another day of modest gains as earnings season in Australia helped the local market to its first weekly gain in four weeks. Settling at 6523.1, the S&P/ASX 200 was up 0.3% today and 1.8% over the week.
Well-received full-year results and guidance saw Goodman Group advance 4.4% and Mayne Pharma rally 11%, while Coles built on yesterday’s post-result push with a gain of 2.4%.
Despite a mixed picture today, the heavily-weighted financial sector added 1.7% this week and energy stocks climbed 5.5%, to more than offset a fifth straight weekly fall for the materials subindex. 

U.S. stocks slumped after China said it would impose retaliatory tariffs on additional U.S. products and President Trump vowed to respond.
The Dow Jones Industrial Average dropped more than 600 points, or 2.4%, putting a halt to a relatively quiet week for markets. Yields on U.S. government bonds also tumbled, as did commodities markets, such as oil and copper, that are sensitive to the two countries’ trade battle.
The losses accelerated after President Trump fired off a series of Tweets in response to China’s plan to impose tariffs on $75 billion more in U.S. goods.
“We don’t need China and, frankly, would be far better off without them,” he said on Twitter, while ordering U.S. companies to start looking for alternatives to producing in China.
The developments Friday marked an escalation of trade tensions between two of the biggest global economies, stoking waves of selling in the stock market. The S&P 500 dropped 2.6%, giving up its gains for the week, while the Nasdaq Composite declined 3%.
The developments overshadowed a highly anticipated speech from Federal Reserve Chairman Jerome Powell in Jackson Hole, Wyo., about the future of interest-rate policy.
Ahead of the speech, many investors suggested his comments had the potential to spark big moves across bond, currency and stock markets. Instead, the reaction was muted.
Stocks briefly rose after the speech and took a dive following Mr. Trump’s comments on Twitter.

Gold futures rallied after China announced a round of retaliatory tariffs against the U.S. products, prompting the precious metal to move up for the week and post a fourth consecutive weekly climb.
China said it was preparing to raise tariffs in two batches on $75 billion in the U.S. imports on Sept. 1 and Dec. 15, which would coincide with the dates that Washington is slated to increase import duties on some $300 billion of Beijing goods. President Donald Trump responded with a series of tweets, in which he said he “hereby ordered” U.S.
companies to begin looking for alternatives to China and said further measures would be announced later.
December gold climbed by $29.10, or 1.9%, to settle at $1,537.60 an ounce, flipping its weekly performance away from a loss to a rise of 0.9%, based on last Friday’s settlement for the most-active contract, FactSet data show. The settlement was the highest since April 2013.
Among other metals, September silver rose 3.73 cents, or 2.2%, to $17.413 an ounce, tacking on around 1.7% from a week ago. September copper lost 2.75 cents, or 1.1%, to $2.53 a pound, down 2.5% for the week. October platinum shed $6.60, or 0.8%, to $855.30 an ounce, for a weekly rise of 0.5%, while September palladium settled at $1,454.30 an ounce, down $30.90, or 2.1% in Friday dealings, with prices still up about 0.9% from a week ago.

Oil prices fell after China said it would impose tariffs on $75 billion worth of additional U.S. products including crude imports and President Trump said he would respond, the latest trade developments that investors fear could crimp fuel consumption.
U.S. crude futures fell 2.1% to $54.17 a barrel on the New York Mercantile Exchange following the announcement, the newest salvo in the U.S.-China trade spat that has swung markets in recent months. Oil is about 18% below its April peak with analysts wary that softening demand and steady supply will result in a glut.
Brent crude, the global gauge of prices, declined 1% to $59.34 a barrel on the Intercontinental Exchange.
U.S. crude is among the many products affected by new Chinese duties in the coming months, and some analysts are wary that the latest tariffs will further slow the global economy and weaken commodity demand broadly. Chinese imports of U.S. oil have generally fallen in recent months as the drawn-out trade spat between the world’s two largest economies continues.

Currency markets reacted wildly after Federal Reserve Chairman Jerome Powell calmed investors just before U.S.-China trade tensions reached another heightened plateau.
Friday’s currency moves again demonstrate that tariffs — the primary weapon in this modern war — are a blunt, somewhat ineffective, instrument.


Maybe market participants should have been ready for volatility because Friday started out chaotically. First, China announced new tariffs on U.S. imports — sending stock markets lower at the open of trading. Stocks clawed back early losses after the Fed hinted more interest rate cuts were likely. The Chinese tariffs, however, prompted an angry reaction from President Trump who, among other things, ordered U.S. companies to come back to America from their overseas production locales.


The U.S. dollar opened higher against a basket of global currencies and then swung to a loss after Powell spoke. The dollar continued tumbling after the Trump tweet, falling about 0.6% from its highs. That may not sound like a huge move, but 0.6% is about three times an average daily move for the dollar against other global currencies.


And still, the Chinese yuan continued to weaken against the U.S. dollar Friday, hitting almost 7.1 to the dollar. The Yuan has fallen about 3% to the dollar so far in August.
Again, 3% doesn’t seem like a lot, but it’s about 10 times greater than the average monthly move for the yuan. Breaking through 7 to 1, don’t forget, sent the stock market down more than 767 points on August 5.
The trade situation and its tertiary effects are becoming increasingly complex.


Tariffs, for instance, have been the preferred weapon in the China-U.S. trade war, but the currency moves are blunting intended impacts. That’s because a weaker yuan makes Chinese imports cheaper for U.S. companies, offsetting some of the impact of threatened tariffs.


Of course, the U.S. dollar is now falling because expectations for lower U.S. interest rates are growing. Lower interest rates make U.S. dollar assets relatively less attractive to other global assets.


With the U.S. dollar and yuan falling, other currencies are gaining. On Friday, the euro is up 0.6% against the U.S. dollar and 0.7% against the Chinese yuan. Europe is trying to stimulate its economy and higher currency values will hurt exports. Germany, for instance, is the second-largest exporting economy in the world, exporting more than $1.3 trillion of goods in 2018. Higher euro values could prompt European central bankers to pursue more stimulus.

In Europe, stocks traded mostly lower, after starting the day modestly higher, with the Stoxx Europe 600 losing 0.8%.

Stocks in Asia traded mixed overnight, as China’s CSI 300 rose 0.7% and Japan’s Nikkei 225 climbed 0.4%.
Hong Kong’s Hang Seng Index closes 0.5% higher at 26179.33, led by pharmaceutical companies. CSPC Pharmaceutical Group, the biggest index gainer of the day, climbs 3.4% and Sino Biopharmaceutical was up 2.1%. The negative impact of a new centralized procurement policy in China is moderating and the regulators’ recent audits of major pharma firms have not signaled any aggressive action, brokerage China Galaxy International says. Insurers were also among prominent gainers, with AIA Group up 2.0% and China Life adding 3.2% after both posted upbeat 1H earnings this week.


India’s BSE Sensex closed higher amid market expectations that the government may announce steps to boost economic growth. The BSE Sensex closed 0.6% higher at 36701.16, with most of its constituents showing gains. Still, the benchmark finished the week 1.6% lower, the second consecutive week of declines, amid growing worries of an economic slowdown.


Malaysia’s benchmark share index rose for the second consecutive session, as institutional investors bought into several blue-chip stocks to take advantage of declines this year. The FTSE Bursa Malaysia KLCI closed 0.4% higher at 1609.33, bringing this week’s gain to 0.6%.


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