Tuesday 2nd July 2019

OPENING CALL: The Australian share market is expected to open lower. The SPI200 futures contract expected to open up 21 points.

The U.S. factory sector lost momentum again last month, the latest sign that anemic global growth and trade tensions are contributing to a domestic slowdown.

Iran’s foreign minister said the country has breached the 2015 nuclear deal’s limits on enriched uranium, a step that marks its first intentional violation of the accord and could lead to the unraveling of the pact.

Overnight Summary

Market Quotes by TradingView

Each Market In Focus

Australian Market

Australian shares began the new financial year on a positive note, though gains lagged
many other markets in the region ahead of a central bank policy meeting tomorrow that
could see the cash rate cut to a fresh low.
The S&P/ASX 200 settled 0.4% higher at 6648.1, with energy stocks helping drive the
gains thanks to a strong lift in Brent crude.
Only the consumer discretionary and staples sectors faltered, though gold miners also
retreated as the precious metal declined after the thaw in trade tensions between Beijing
and Washington.

US Markets

U.S. stocks headed toward fresh records intraday after a thaw in trade relations
between the U.S. and China sparked a rally in shares of chip makers.
Indexes from New York to Shanghai rose after Beijing and Washington agreed to resume
trade talks, easing fears among investors that the two countries could be headed toward
further discord.
But as the day progressed, the market’s momentum petered out, pulling the Dow Jones
Industrial Average away from the October record that it briefly topped.
To many investors, the weekend’s developments had helped them put aside some but not
all of their fears. The U.S. and China had managed to avoid what many had described as a
worst-case scenario-a collapse of trade talks and a fresh round of tariffs. But frictions
around commerce between the world’s two largest economies are likely to be long-lasting,
investors said, meaning stocks will likely run into further waves of volatility in the
coming months.
Investors are still unsure whether the talks will affect the Federal Reserve, which has
signaled it may cut interest rates in the coming months if the economy weakens further. A
series of reports Monday showed that in June, U.S. factory activity lost some momentum,
the U.K. manufacturing sector had its weakest month in more than six years and Chinese
manufacturing activity contracted for the first time in four months.

The S&P 500 gained 0.6%, on track to post its sixth record close of the year, while the
Nasdaq Composite added 0.9% and edged closer to its closing high hit in May. The Dow
industrials rose 103 points, or 0.4%, to 26702.
Shares of technology firms, many of whom have been seen as vulnerable to tariffs,
soared, with Apple, Amazon.com , Netflix and Advanced Micro Devices rising more than 1%
Industrial stocks came under pressure following a streak of soft manufacturing reports
Monday, with Caterpillar falling 0.6% and FedEx down 1.4%.


Base metals on the London Metal Exchange, as well as precious metals on other
exchanges, have largely declined in trading today. On the LME, the 3-month nickel
contract led the way lower with a 2.8% decline.
Driving the price down was both an exchange-wide reaction to a lower Chinese
manufacturing PMI as well as reports of higher stainless steel inventories–with nickel
being a key ingredient in stainless steel.

Oil Futures

U.S. benchmark oil prices ended the session 1.1% higher at $59.09 a barrel, fueled
mostly by a decision by OPEC and Russia to extend by nine months an agreement to curb
production to reduce oversupply.

Oil prices have now risen six of the past eight sessions, and are 30% higher so far
this year.


The dollar rose against a broad range of currencies as investors reacted to an ebb in
the trade conflict between the U.S. and China. Easing tensions especially weighed on
haven currencies, with the dollar recently up 1% against the Swiss franc and rising 0.5%
against the yen.
The euro, which had enjoyed a small rally as trade tensions peaked in June, was down
0.6%. Gold, another popular destination for nervous investors, was recently down 1.5%
after hitting a near six-year high last month. The WSJ Dollar Index was up 0.4% to 89.92.

European Markets

The Stoxx Europe 600 gained 0.8% as investors took heart from an easing in trade
tensions between the U.S. and China. The DAX rose 1.0% and the CAC-40 finished 0.5%
higher after Asian markets mostly made strong advances following Washington’s moves to
re-start trade talks with Beijing.

Asian Markets

In China, the benchmark Shanghai Composite Index gained 2.2% on the diminished tensions
between the U.S. and China, despite a set of disappointing readings for Chinese economic
activity. Weekend data showed factory activity in China contracted for the second
straight month in June.

Japan’s Nikkei 225 Index rose 2.1%.
India shares ended higher Monday, helped by automobile as well as banking and financial
stocks. The BSE Sensex closed up 0.7% at 39686.50.
Malaysian stocks rose to a fresh high in more than three months amid a broadly-positive
Asian market as risk appetite returned following the easing of U.S.-China trade tensions.
The Kuala Lumpur Composite Index closed 0.7% higher at 1,683.62, its highest since March
Singapore’s benchmark share index closes sharply higher, outperforming several of its
peers. The FTSE Straits Times Index closes 1.6% higher at 3375.01.

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