Tuesday 30th October 2018

OPENING CALL: The Australian market looks to open lower with SPI futures down 51 points.

Australian shares outperformed today, snapping a six-session run lower by the benchmark to a decade low. With gains across each sector of the market, the S&P/ASX 200 climbed 1.1% to 5728.2
U.S. stocks slumped intraday, sending the Dow Jones Industrial Average tumbling more than 300 points, as a slide in technology shares and worries about global trade chipped away at investors’ appetite for risk.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australian shares outperformed today, snapping a six-session run lower by the benchmark to a decade low. With gains across each sector of the market, the S&P/ASX 200 climbed 1.1% to 5728.2. Still, after last week’s slump it is still on track for a loss of more than 7% this month. The heavily weighted banks and resources stocks underpinned the day’s advance, with the Big Four lenders each up at least 1% and BHP Billiton 1.4% higher. Beach Energy rallied 3.6% with its first-quarter production report and word it will be debt-free within a year. For the day, 2.81 billion shares were traded with a value of A$5.35 billion ($3.79 billion), Commonwealth Securities says.

US Markets

U.S. stocks slumped intraday, sending the Dow Jones Industrial Average tumbling more than 300 points, as a slide in technology shares and worries about global trade chipped away at investors’ appetite for risk. Stocks jumped right out of the opening bell, then pared their gains heading into afternoon trading as shares of technology-driven companies such as Amazon.com, Netflix and Alphabet tumbled anew. Major indexes then erased all of their gains for the day after Bloomberg reported the U.S. would plan its next wave of tariffs on Chinese goods if talks between the two countries fall through. The Dow Jones Industrial Average, which had risen as many as 352 points earlier in the session, was recently down 283 points, or 1.1%, at 24414. The S&P 500 shed 0.8%, while the Nasdaq Composite slid 1.8%. The shaky trading extended what has been a volatile stretch for the stock market. Major indexes are on course to end October with their biggest one-month loss in years, hurt by growing worries about the health of the global economy, as well as broader concerns about tightening monetary policy.On one hand, many investors say the U.S. economy remains on strong footing. Data Monday showed Americans’ personal spending and incomes picked up in September, and a report Friday showed the U.S. economy grew faster than economists had expected in the third quarter. But some remain anxious about how long the gains can continue, especially with interest rates on the rise and tailwinds from tax cuts passed in late 2017 expected to fade in the coming years. Shares of fast-growing companies in the technology and communication-services sectors slid again Monday, capping major indexes’ gains.

Commodities

Gold prices dipped, hurt by a stronger dollar and higher Treasury yields. Front-month gold for October delivery fell 0.6% to $1,224.50 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have trimmed some of their year-to-date losses lately with stocks wobbling and investors favoring the haven metal. But a stronger dollar and expectations for higher Treasury yields that make gold less attractive continue to hang over precious metals markets, analysts say. Stocks around the world also largely stabilized following last week’s violent selloff, pushing some analysts back toward riskier assets. Elsewhere in precious metals, most-active silver futures dropped 1.8% to $14.442 a troy ounce. Platinum added 0.3% to $836.90, while palladium was down 0.6% at $1,079.30. Among base metals, copper for December delivery edged down less than 0.1% to $2.7405 a pound. Prices have tumbled from their June four year highs on worries about a slowing global economy lowering demand for materials widely used in construction and manufacturing. On the London Metal Exchange, aluminum for delivery in three months fell 0.7% to $1,984 a metric ton. Zinc dipped 1.1% to $2,622, tin was down 0.9% at $19,125, nickel shed 1.2% to $11,755 and lead dropped 2% to $1,958.

IRON ORE: 74.58s – 0.56 (November contract)

Oil Futures

U.S. sanctions on Iran’s oil industry are set to take effect at the start of next week. “As compared with the high Iranian exports in the spring, the market could thus be stripped of over 1.5 million barrels per day in total. The supply situation is therefore likely to tighten further if anything in the short term, with it being up to OPEC’s willingness to make up the shortfall,” analysts at Commerzbank wrote in a note Monday, predicting that Brent would again rise above $80 a barrel this year. President Trump in May pulled the U.S. out of a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of sanctions on the OPEC member. Sunday’s presidential election in Brazil saw far-right candidate Jair Bolsonaro swept to victory. He has promised to give private investment more access to Brazil’s resources, and some analysts said Brazil could eventually see a large increase in oil production. “Brazil oil production might grow to more than five million barrels a day in a few years, making Brazil the fourth-largest oil producer in the world,” Dallas-based energy economist Anas Alhajji said on Twitter after Bolsonaro won. Brazil produced 2.7 million barrels a day last year.

Forex

The dollar rose intraday, after strong U.S. economic data bolstered the case for the Federal Reserve to continue raising interest rates at its current pace. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently up 0.3% to 90.53. Personal- consumption expenditures increased a seasonally adjusted 0.4% in September from the prior month, the Commerce Department said Monday. Economists surveyed by The Wall Street Journal had forecast a 0.4% rise in spending. Expectations of a strong economy and higher interest rates tend to boost the dollar by making it more attractive to yield-seeking investors. Most market participants believe the Fed will raise rates a fourth time this year and continue boosting rates in 2019. In emerging markets, the Mexican peso fell to its lowest level since July after Mexican President-elect Andrés Manuel López Obrador said his government will cancel Mexico City’s $13.3 billion airport construction project following a controversial four-day public consultation. Some fear the government’s decision to cancel the project bodes ill for Mexico’s business climate. The dollar was recently up 2.6% against the Mexican peso to 19.86.

European Markets

Europe shares ended in positive territory as the euro fell against the dollar and Wall Street rose in early trading. The Stoxx Europe 600 lifted 0.9%, or 3.17 points to 355.51 as the DAX gained 1.2% and the CAC-40 advanced 0.4%. “European markets are in a more optimistic mood today and early U.S. gains are also making an impression,” said Josh Mahony at IG. “European political uncertainty remains one of the key drags on the euro, with an ongoing deadlock between the EU and Italy being joined by a new leadership race in Germany. Angela Merkel’s decision to leave her role as the CDU leader in December raises a big question over who will take this on.”

Asian Markets

HSBC Holdings said it reined in costs and beat profit estimates for the third quarter. The report also helped lift markets in Hong Kong, where the Hang Seng advanced by 0.4%. Japan’s Nikkei edged down 0.2% and mainland Chinese markets moved sharply lower after weekend official data showed China’s large industrial firms reported much slower profit growth last month. The Shanghai Composite Index fell 2.2%, led by declines in liquor stocks after downbeat quarterly sales and earnings from Kweichow Moutai, China’s biggest liquor maker.

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