Friday 2nd August 2019

OPENING CALL: The Australian share market is expected to open lower. The SPI200 futures contract expected to open down 15 points.

U.S. government-bond prices extended early gains after President Trump said he would impose new tariffs on China.

The Federal Trade Commission is examining Facebook Inc.’s acquisitions as part of its antitrust investigation into the social-media giant-to determine if they were part of a campaign to snap up potential rivals before they could become a threat.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australian shares were down a second day running, tracking most markets in the region
as investors digested the U.S. central bank’s first rate cut in a decade.
With red across most sectors, the S&P/ASX 200 declined 0.4% to 6788.9.
The index has now pulled back 0.8% from the fresh all-time closing high hit Tuesday.
The miners led, dragged down by weaker iron ore futures and gold prices.
Rio Tinto was off 1.1% as the market awaited its first-half result. With analysts
forecasting a weak full-year result next week, Commonwealth Bank underperformed the other
major banks with drop of 0.5%. Industrial stocks and property trusts rose.

US Markets

Stocks, bond yields and oil prices dropped intraday after President Donald Trump said
that the U.S. will impose additional tariffs on China next month, highlighting how trade
worries continue to rattle investors.
The Dow Jones Industrial Average erased a rebound of more than 300 points, oil dropped
6% and the yield on the benchmark 10-year U.S. Treasury note plumbed fresh 2019 lows. The
blue-chip index dropped 60 points, or 0.2%, to 26800. The S&P 500 fell 0.4% and the
technology-heavy Nasdaq Composite slid 0.4%.
President Trump said the U.S. would impose an additional 10% tariff on $300 billion in
Chinese imports beginning Sept. 1, reviving investor concerns over trade tensions between
the world’s two biggest economies.
Stocks were lower on the day after rebounding earlier in the session, as traders had
grown more confident that the Federal Reserve would cut rates again in September.
Federal-funds futures showed the market was pricing in a 70% chance of another
quarter-point rate cut in September. That is up from around 49% on Wednesday, according
to CME Group.

Commodities

Gold futures settled with loss after a Federal Reserve rate cut failed to stem strength
in the U.S. dollar
Prices for the metal, however, climbed in electronic trading in the afternoon, as U.S.
President Donald Trump’s latest threat of additional tariffs on Chinese goods lifted
demand for the haven metal.
In a tweet, Trump said that “trade talks are continuing, and during talks the U.S. will
start, on September 1st, putting a small additional Tariff of 10% on the remaining 300
billion dollars of goods and products coming from China into our Country.”
Gold had already recovered much of the losses from Wednesday, but “the acceleration
towards $1450 was due to the President’s tweet regarding the 10% tariff on September
1st,” said Jeff Wright, executive vice president of GoldMining.

Oil Futures

Oil prices sank almost 8%, their biggest drop since February 2015, after President
Trump announced new tariffs on Chinese imports, stoking fears that the trade dispute
between the two countries will drag on, crimping global growth.
West Texas Intermediate, the U.S. benchmark for crude prices, settled 7.9% lower at
$53.95 a barrel on the New York Mercantile Exchange. The last time prices fell by roughly
this much was more than four years ago, when waves of new production from U.S. shale
drillers flooded the market. Brent, the global reference price, tumbled 7% to $60.50.
Mr. Trump said on Twitter in the afternoon that tariffs of 10% would be applied on an
additional $300 billion of Chinese goods and products starting Sept. 1. Oil prices had
been down earlier in the day as the U.S. dollar strengthened after the Federal Reserve
disappointed investors Wednesday by failing to explicitly confirm expectations of
additional stimulus in the months ahead.

Forex

The U.S. dollar rose intraday as the Federal Reserve’s decision to reduce interest
rates Wednesday is seen as a move to fine-tune the economy rather than a signal of a
prolonged cycle of rate cuts, analysts said.
Federal funds futures show that investors are putting odds of less than 50% that the
Fed will lower rates two more times this year.
The dollar rose against the euro as investors look ahead to September’s meeting of the
European Central Bank, where policy makers are expected to cut rates and resume asset
purchases. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16
others, rose 0.2% to a recent 91.40.

European Markets

The Stoxx Europe 600 Index closed up 1.91 points, or 0.50%, to 387.6.
The FTSE 100 closed lower, led by Mondi and Royal Dutch Shell. The two companies closed
down 5.4% and 5%, respectively, after posting earnings for the first half and second
quarter. At the other end of the scale, British American Tobacco shares closed up 6.9%
after reporting encouraging performances from its new categories portfolio.
Meanwhile, the German DAX was up 64.11 points, or 0.53%, to 12253.15, while the French
CAC Index was up 38.51 points, or 0.70%, to 5557.41.

Asian Markets

In Asia, China’s benchmark Shanghai Composite Index fell 0.8% and Hong Kong’s Hang Seng
ticked down 0.9%.
The People’s Bank of China has often adjusted interest rates in response to Fed policy
moves, but that didn’t happen following Wednesday’s cut, said Julian Evans-Pritchard, a
senior China economist for Capital Economics.
“I think the fact that they didn’t follow the Fed with a cut is a disappointment to
some,” he said.
Elsewhere, the Nikkei Stock Average edged higher at 21540.99, recovering from early
trade losses. Investors were left disappointed by Fed Chairman Powell’s comments
suggesting that Wednesday’s rate cut wasn’t the beginning of a long easing cycle, cutting
hopes of further Fed stimulus.
South Korea’s benchmark Kospi closed 0.4% lower at 2017.34, as waning hopes for more
U.S. rate cuts and weaker-than-expected Korean trade and inflation data dampened
sentiment. Tech and construction shares led the main index to lose for the second
straight day. Hong Kong’s benchmark stock index closed 0.8% lower at 27565.70, as the
city’s 2Q GDP data flagged weakness in investment expenditure and external demand.
Investors across Asia were also left disappointed by Fed Chairman Powell’s comments that
cut hopes of further Fed stimulus. Property shares were among the worst performing stocks
in Hong Kong.
Malaysia shares are among the few gainers in Asia, led by banking, infrastructure and
telecoms companies. The FTSE Bursa Malaysia KLCI Index closed up 0.3% at 1639.07,
starting the month on a positive note to trim year-to-date losses to 3.1%. Singapore
shares close lower, weighed by local banks, as Asian shares were broadly lower after the
Fed was less dovish than the market expected. The Straits Times index closed 0.3% lower
at 3291.75.
And Indian shares were among the worst performers in Asia despite cutting some losses
in the last hour of trading. After being a rare gainer Wednesday, the BSE Sensex closed
1.2% lower at 37018.32.

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