Thursday 20 December 2018

OPENING CALL: The Australian market looks to open lower with SPI Futures fown 35 points.

Energy stocks kept Australia’s stock benchmark in negative territory today while many other markets in Asia Pacific gained.
The Dow Jones Industrial Average swung nearly 900 points, slumping after the Federal Reserve raised interest rates for the fourth time this year and signaled a milder path of increases over the next year.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Energy stocks kept Australia’s stock benchmark in negative territory today while many other markets in Asia Pacific gained. The ASX 200 fell 0.2% to 5580.6, though it rebounded from the session’s low. The energy sector slid 2.7% to fresh 14-month lows after crude prices crashed again overnight. Health care lost 1.4%. But the heavily weighted financial sector rebounded 0.35% after nearly setting a five-year low yesterday and materials added 0.25%.

US Markets

The Dow Jones Industrial Average swung nearly 900 points, slumping after the Federal Reserve raised interest rates for the fourth time this year and signaled a milder path of increases over the next year. Major indexes turned negative following the Fed’s decision and projections then tumbled anew during Fed Chairman Jerome Powell’s remarks, falling alongside long-term Treasury yields with investors worried about the outlook for the economy. The Dow industrials were down more than 1.5%. The S&P 500 fell 1.5% following the central bank’s announcement after rising 1.1% earlier in the day. The tech heavy Nasdaq Composite dropped 2.1%. Worries about higher interest rates and slowing economic growth have pushed all three indexes down more than 12% for the quarter and more than 9% this month. The S&P 500 is at its lowest level September 2017. Eleven of 17 central-bank officials expect the Fed will need to raise rates no more than twice next year, Wednesday’s projections show, potentially easing some analyst worries about aggressive rate increases ahead. The targets could also quell fears about rising borrowing costs and threats to corporate profitability. Yet even anticipation that the Fed might be more cautious with rate increases next year has made some investors worry that growth is cooling more quickly than anticipated, buffeting stocks in recent weeks. In one sign of investor angst about the outlook for growth, short-term Treasury yields have closed the gap on longer-dated yields, prompting worries that the so-called yield curve could invert and send an ominous signal about the health of the economy.

Commodities

Gold prices climbed, holding ground at their highest finish since July, then pulled back in the wake of the Federal Reserve’s decision to lift a key interest rate, as had been expected. The Federal Reserve on Wednesday, after gold futures settled, said it decided to hike its target for the federal-funds rate by a quarter point to a range between 2.25% and 2.5%. The central bank also said, however, that it has now penciled in two rate hikes in 2019, not the three moves seen in September, and it still forecasts just one more hike for 2020. Ahead of the Fed news, bullion for February delivery on Comex rose $2.80, or 0.2%, to settle at $1,256.40 an ounce. That was the highest finish for a front-month contract since July 10, according to Dow Jones Market Data. Prices have gained about 2.4% month to date. In electronic trading shortly after the Fed news, February gold traded lower at $1,247 an ounce.

Oil Futures

Oil prices increased, recouping some of their huge losses from a day earlier as U.S. oil inventories declined for a third week and a Saudi official said recent OPEC production cuts were sure to be renewed in April. West Texas Intermediate futures, the U.S. standard, ended 2.1% higher at $47.20 a
barrel on the New York Mercantile Exchange. Wednesday’s increase follows three straight sessions of declines, including a 7% drop Tuesday that left prices at $46.24 a barrel, the lowest close since August 30, 2017. Brent crude, the global benchmark, ended 1.7% higher at $57.24 a barrel on London’s Intercontinental Exchange. Saudi Arabia Energy Minister Khalid al-Falih reportedly said in Riyadh that the Organization of the Petroleum Exporting Countries, as well as Russia and other producers will almost certainly extend a recent deal to cut production to reduce supply. The U.S. Energy Information Administration said Wednesday that U.S. oil inventories declined by 497,000 barrels last week, to 441.5 million barrels. That decrease was less than the 3.1-million-barrel decline analysts were expecting, but it nonetheless marked a third straight weekly decline. What’s more, inventories of distillates unexpectedly dropped by 4.2 million barrels and are now 11% below the five-year average.

Forex

The U.S. dollar reversed earlier losses after the conclusion of the Federal Reserve’s two-day policy meeting. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, rose 0.1% to to 90.54 after being down 0.3% in earlier trading. The policy announcement led major U.S. stock indices to reverse gains from earlier in the session and sent investors into assets like Treasurys and the U.S. dollar. The Fed said it would raise short-term interest rates by a quarter percentage point, its ninth such move since late 2015. Officials also signaled a milder path of rate increases over the next year in new projections released Wednesday. The projections showed that 11 out of 17 officials expect the Fed will need to raise rates no more than two more times next year, a higher number than in September. The euro was recently up 0.1% versus the dollar to $1.14. The dollar fell less than 0.1% against the yen to ¥112.42.

European Markets

The Stoxx Europe 600 index closed up 0.3% at 341.52, with Italian stocks outperforming after Italy and the European Commission reached a compromise on Italy’s budget proposal, boosting risk appetite and causing Italian bond yields to fall. Italy’s FTSE MIB outperformed, rising 1.6%, Germany’s DAX ended up 0.2% and France’s CAC 40 up 0.5%. The U.K.’s FTSE 100 rose 1%, helped by a 3.8% rise in pharma giant GlaxoSmithKline, which announced a deal with Pfizer, while were also gains for oil and mining stocks. Equities rose before a U.S. interest-rate decision later. Most expect a rate increase but policy makers may scale back expectations for future rate increases.

Asian Markets

Stocks were mixed in Asian trading, with Hong Kong’s Hang Seng inching 0.2% higher while Japan’s Nikkei Stock Average fell 0.6% and stocks in Shanghai and Shenzhen fell over Energy companies were among the biggest decliners in the region, catching up with steep oil price declines late Tuesday. Oil prices showed signed of stabilizing Wednesday but remained down sharply this quarter amid mounting worries over global demand and growing supplies.

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