Monday 22nd October 2018

OPENING CALL: The Australian market looks to open lower with SPI futures down 12 points.

Australian stocks again rebounded steadily, following a strong early decline, allowing the ASX 200 to finish higher for the week.
Strong quarterly earnings reports helped the Dow Jones Industrial Average eke out slight gains for the week, despite days of turbulence for U.S. stocks.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australian stocks again rebounded steadily, following a strong early decline, allowing the ASX 200 to finish higher for the week. It was down 0.05% to 5939.5, outpacing the fresh selling seen across Asia Pacific today. The index rose 0.7% this week, its first increase of the month. Health care, mining and consumer stocks declined. But financials and utilities rose and energy names edge higher despite oil’s latest drop overnight.

US Markets

Strong quarterly earnings reports helped the Dow Jones Industrial Average eke out slight gains for the week, despite days of turbulence for U.S. stocks. Stocks have swung sharply in recent trading sessions. The Dow industrials rose more than 2% on Tuesday after encouraging economic data and better-than-expected earnings from Goldman Sachs before reversing course Thursday amid geopolitical tensions and ending 1.3% lower in a bruising trading session. On Friday, Procter and Gamble’s best quarterly sales growth in five years boosted shares of the consumer products giant and helped lift the blue-chip index into positive territory. The Dow industrials ended the day up 64.89 points, or 0.3%, at 25444.34, putting its weekly gain at 0.4%, its first after three weeks of declines. The S&P 500 slipped one point, or less than 0.1%, to 2767.78 on Friday, while the Nasdaq Composite fell 36.11 points, or 0.5%, to 7449.03, its third consecutive session of losses. The S&P 500 ended the week up a fraction of a percent, while the Nasdaq lost 0.6%. Losses among consumer-discretionary stocks offset some of those gains and contributed to the underperformance of the S&P 500 on Friday. EBay led the sector lower, shedding $2.80, or 8.9%, to $28.75 after an analyst cut the online marketplace’s price target, citing PayPal’s mention of slowing merchandise-sales volumes at its former parent. Other quarterly results were more positive, with shares of PayPal rising after the company boosted its outlook for the fourth quarter. The financial sector rose after a round of encouraging earnings from regional banks, with shares of Citizens Financial Group, Synchrony Financial and SunTrust Banks all rose.

Commodities

IRON ORE: 71.69s – 0.38 (November contract)

Oil Futures

Oil prices closed higher, as a recovery in U.S. stocks boosted prices from a five-week low. Light, sweet crude for November delivery rose 0.7% to $69.12 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 0.6% to $79.78 a barrel. U.S. prices fell 3.1% for the week, hurt by climbing supplies and weakness in major U.S. stock indexes off disappointing economic data from China. However, a Friday rebound helped the crude market stabilize, traders said. Oil has recently come under pressure from data showing that inventories are on the rise. On Wednesday, the U.S. Energy Information Administration reported that stockpiles of crude oil rose by 6.5 million barrels in the week ended Oct. 12 to their highest level since late June.

Forex

The dollar edged lower, weighed down by weaker-than-expected U.S. economic data and a renewed appetite for risk among some emerging market investors. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.17% to 89.89. Sales of previously owned U.S. homes fell 3.4% in September from the previous month, the National Association of Realtors said Friday, extending a weak stretch for the housing market in a period of otherwise strong U.S. growth. Shortfalls in U.S. data undercut the case for the Federal Reserve to keep raising rates at its current pace and tend to weigh on the dollar, which becomes more attractive to foreign investors when borrowing costs rise. Most investors believe the Fed will raise rates for a fourth time this year in December. Some money managers sought out emerging market currencies Friday, after Chinese officials rushed to reassure investors that the country’s economic fundmanetals are solid, despite slowing growth and recent stock market declines.

European Markets

European stocks slipped Friday, with Italian assets under pressure, dragged down by a simmering confrontation between Italy and the European Union over the nation’s proposed budget. The Stoxx Europe 600 fell 0.1%, dragged lower by European tire manufacturers who were hit hard after Michelin lowered its outlook for the year and warned that a decline in European and Chinese sales was set to continue into the fourth quarter. Shares in the French tire-maker fell, while shares in its German counterpart Continental were also dragged down by the warning. Overvalued equity markets coupled with trade war fears, rising oil prices and concerns over future U.S. monetary policy were prompting a selloff, said Peter Dixon, global financial economist at Commerzbank. In Europe, the clash between Italy’s populist coalition government and the European Commission continued to spook investors. The two parties are at odds over Italy’s proposed budget. In a letter published Thursday, the European Commission said Italy’s spending plans were “unprecedented” and a “serious concern.” The Italian FTSE MIB was down 0.83%. The yield on the Italian 10-year note was up around 0.1% at 3.75%, according to Tradeweb. Yields move inversely to prices.

Asian Markets

In Asia, the Shenzhen A Share and the Shanghai Composite were both up 2.6% after disappointing Chinese economic data that initially rattled markets. The Nikkei fell 0.6%. A rebound in Chinese stocks Friday came after an intervention from regulators that calmed investors despite disappointing economic data. China’s central bank governor and banking and securities regulators said recent volatility in Chinese stocks didn’t reflect the nation’s economic fundamentals and “stable financial system.” That reassurance boosted Chinese assets, despite data released Friday that showed China’s third-quarter GDP had slowed to 6.5% from the previous quarter’s 6.7%. Growth in industrial output and consumption also slowed, but exports held. Investors in Asia are still nervous of the brewing trade war between the U.S. and China and the yuan’s steady depreciation, said Sophie Huynh, cross-asset strategist at Société Générale, but she added that looking ahead, Chinese equities still have something to offer. “We think that China is a medium-term bullish story and we would keep Chinese assets in portfolios,” Ms. Huynh said. “The gradual integration of China equities and bonds in global benchmarks acts as a support, while we also believe that China could play a role of anchor for emerging markets.”

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