Tuesday 23rd October 2018

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

Fresh political uncertainty in Australia likely caused stocks Down Under to underperform the rest of the Asia-Pacific region.
The S&P 500 fell intraday, resuming a stock-market selloff, after some lackluster earnings results and falling oil prices dragged down the broad index.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Fresh political uncertainty in Australia likely caused stocks Down Under to underperform the rest of the Asia Pacific region. The conservative government lost its one-seat majority in parliament following an election to fill former PM Michael Turnbull’s seat, making the political climate even dicier ahead of next year’s national elections. The S&P/ASX 200 fell 0.6% to 5904.9 after being one of the region’s few markets to rise last week. The health-care sector skidded 1.7% and consumer-discretionary stocks lost the same as travel agency Flight Centre Travel Group swooned a further 10% following muted FY guidance. It was the company’s biggest drop since mid-2015. But the materials sector rose 0.1% as Rio Tinto climbed 1.1%.

US Markets

The S&P 500 fell intraday, resuming a stock-market selloff, after some lackluster earnings results and falling oil prices dragged down the broad index. Energy stocks fell throughout Monday’s session, sapping the S&P 500 of an early gain before pulling the index lower. Investors soured on the sector after oil-field services company Halliburton offered investors a weak financial forecast for the remainder of the year that warned of a slowdown in activity, while oil prices briefly hit lows not seen in more than a year. Shares of banks also stumbled, as losses accelerated among regional lenders and bigger financial firms, reversing some of the gains those stocks enjoyed last week on the heel of some upbeat earnings results. Monday’s losses cast further doubt on whether another quarter of strong earnings are enough to get the S&P 500 back into record-setting territory, some money managers said. A combination of worries-from ongoing trade tensions to concerns about Italy and fresh geopolitical tensions between the U.S. and Saudi Arabia-have made October one of the most volatile months for stocks this year, knocking the S&P 500 off more than 5% from its late September record high. The S&P 500 fell 0.4% in recent trading, while the Dow Jones Industrial Average shed 0.5%. The Nasdaq Composite, however, added 0.3%, as technology and other growth companies fared better, putting the index on track to snap a three-session losing streak.

Commodities

IRON ORE: 72.85s + 1.16 (November contract)

Oil Futures

Oil prices bounced between losses and gains as investors weighed tightening global supplies due to U.S.-Iran sanctions versus increasing worries of an economic slowdown that could put a damper on oil demand worldwide. Light, sweet crude for November delivery ended five cents, or 0.1%, higher at $69.17 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, was 0.1% higher at $79.83 a barrel. Oil prices were lower for most of the New York trading session due to a combination of worries over the global economy, Italy’s financial health and U.S.-China trade tensions, all of which helped strengthen the dollar. Oil prices often move in the opposite direction of the dollar as barrels of oil are negotiated in greenbacks, and the WSJ Dollar Index rose 0.3% Monday. Energy analysts at Baird noted Monday’s trading actions showed oil prices have struggled to fully shake off a recent rise in risk aversion among investors.

Forex

Currency traders watched as recent themes, including Italy’s budget, Brexit and U.K. leadership, were heating up. Meanwhile, the greenback started the week stronger, with the ICE U.S. Dollar Index up 0.3% at 96.027 intraday, adding to a 0.5% weekly gain last week, according to FactSet data. In the U.K., traders were watching Prime Minister Theresa May updating members of parliament on Brexit after earlier saying 95% of the deal was done. The U.K. leader said the real sticking point remained Northern Ireland, and stressed with regards to a possible extension of the transition period that this wasn’t a desirable option and might not be necessary. Opposition leader Jeremy Corbyn called her administration incompetent in his response. May also touted the U.K.’s trade with Asia and the growth thereof, which was an opportunity for the U.K. post-Brexit. The British pound was weakening for most of Monday’s session, slipping to a three-week low of $1.2972, down from $1.3066 late Friday.

European Markets

The Stoxx Europe 600 closed down 0.4% at 359.74, paring earlier gains as concerns about tensions between Italy and the European Commission resurfaced. Falls in Dutch electronics group Koninklijke Philips and in Italian and Spanish banks offset gains for airlines and healthcare stocks. Shares in Philips were down 8.7% after it said third-quarter net profit fell due to costs associated with the separation of the lighting business. NMC Health was the pan-European index’s top riser, up 5.6% after the private hospital group increased its 2018 profit and revenue guidance. Ryanair gained 4.3% after its second-quarter results beat expectations, lifting its peers, with easyJet up 3.4%. Germany’s Dax index and France’s CAC-40 ended down 0.3% and 0.6% respectively, while the U.K.’s FTSE 100 fell by less due to a weak pound, closing down 0.1%. Italy’s FTSE MIB closed down 0.6% and Spain’s Ibex 35 ended down nearly 1%.

Asian Markets

The Shenzhen A Share index was up nearly 5% while the Shanghai Composite was up around 4%, continuing a rally in Chinese stocks that began at the end of last week. Japan’s Nikkei was up 0.4%. In China, the strong gains for stocks were fueled by a proposed cut in personal income tax Saturday, said Geoffrey Yu, head of the U.K. investment office at UBS Global Wealth Management. “When it comes to thinking about Chinese stimulus, the government is finally starting to get the message and is focusing on tax reform and away from investment,” Mr. Yu said. “If this can help the Chinese household it doesn’t just help China, it helps the world.” The measures could boost retails sales by about 1%, said Jim Reid, an analyst at Deutsche Bank, in a note to clients, adding that the bank believes they are part of a series of tax cuts. “These measures would help to offset the downside risks from the trade war, and keep growth in 2019 above 6%,” Mr. Reid said.

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