Thursday 30th May 2019

OPENING CALL: The Australian share market is expected to open lower. The SPI200 futures contract was down 31 points.

The 10-year Australian government bond yield dropped to a record low as officials are assessing measures to protect its 27-year-long expansion from the effects of reduced Chinese demand for its commodity exports.

Now investors are increasingly betting that the Federal Reserve could cut interest rates later this year to try to prolong the expansion, and to revive inflation expectations, which have declined in the past month.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australia’s stock index was among Asia Pacific’s weaker-performing markets today,
adding to the recent pullback seen after fresh decade highs following the country’s
election mid-month.
The S&P/ASX 200 dropped 0.7% to 6440, cutting May’s gain to 1.8% as the country’s
stocks remain in the minority of those globally which are poised to log an increase for
this month.
Roughly 1% declines were seen in consumer stocks, health care and yield plays. But
financials eased 0.3% and telecom edged higher.

US Markets

Stocks and commodities around the world declined again intraday, as worries about
slowing economic growth spurred a fresh retreat from riskier investments.
The Dow Jones Industrial Average fell 272 points, or 1.1%, to 25076, after earlier
falling more than 400 points. The S&P 500 dropped 0.8%, with each of its 11 sectors
declining. The broad equity gauge was on track for its lowest close since mid-March and
was about 5.5% below its April 30 record. The tech-laden Nasdaq Composite declined 0.7%.

Fears that a drawn-out U.S.-China tariff dispute will add pressure on an already
slowing world economy have stung markets lately. President Trump indicated Monday that a
near-term deal between the two sides is unlikely, and economic data pointing to weakness
around the globe has added to growth concerns in recent days.
Reports in Chinese media outlets Wednesday that China could cut exports of rare-earth
metals critical to everything from electronics to military equipment were the latest
trigger for trade-related volatility, investors said.

Analysts were looking ahead to a second reading of first-quarter U.S. economy growth,
scheduled for Thursday. The first reading showed gross domestic product rose at a 3.2%
annual rate, even with growth in consumer and business spending slowing.
Friday consumer-spending figures from April could also shift expectations for the U.S.
economy, after industrial production and retail sales for that month were weaker than
expected.
Despite strength in the U.S. labor market, some analysts expect weakness overseas to
eventually spread as tariffs escalate, threatening the nearly 10-year old economic
expansion.

Commodities
Oil Futures

Oil prices fell as investors’ risk appetite was hampered by worries that trade tensions
could limit demand, with the U.S.-China dispute appearing to move further from
resolution.

Forex

The U.S. dollar rose intraday as investors sought safe currencies amid signs that trade
tensions between the U.S. and China are deepening.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others,
rose 0.1% to 91.19. The dollar rose relative to emerging-market currencies including
gains of 0.2% versus the Chinese yuan and the Australian dollar and 0.6% against the
South Korea won.
The dollar rose after an unnamed Chinese official Wednesday suggested in a media report
that the government could consider restricting exports of rare earth minerals, which are
essential for products such as smartphones, as a countermeasure to higher U.S. tariffs.
While trade tensions are contributing to slower growth around the world, the U.S. and
its currency have been less affected because the U.S. economy is less dependent on trade
than many other countries, analysts said.
The Australian dollar declined and government bond yields fell to a record low as
officials are assessing measures to protect its 27-year-long expansion from the effects
of reduced Chinese demand for its commodity exports. Some investors expect the Reserve
Bank of Australia to cut interest rates. Higher interest rates tend to attract investors
to a currency because they offer higher rates of return.

European Markets

European shares dropped as trade tensions and concerns around economic growth continued
to dampen risk appetite.
the yield on German 10-year bonds hovered around all-time lows as concerns over Italy’s
budget spat with the European Union drove demand for the haven debt. The yield was at
minus 0.174%.
Unemployment in Germany rose unexpectedly in May, according to data from the Federal
Employment Agency. The surprise jump is concerning as the strength of Germany’s labor
market had been seen as a major support to sentiment, underpinning hopes for a recovery
in the second half, said Marc Chandler, chief market strategist at Bannockburn Global
Forex, in a note to clients.
The Stoxx Europe 600 fell 1.5%.

Asian Markets

Asian indexes had a largely gloomy session. Korea’s Kospi closed 1.3% lower, hitting a
near five-month closing low, while Japan’s Nikkei fell 1.2%. However, China’s Shanghai
Stock Exchange gained 0.2%.
An afternoon push to session highs didn’t last for Hong Kong’s stocks, which ultimately
finished lower amid a fresh bout of global risk aversion. The Hang Seng dropped 0.6% to
27235.71 and the China Enterprises Index eased 0.25%, both notching new four-month
closing lows.
Indian shares fell Wednesday amid losses in most Asian markets. The Sensex closed 0.6%
lower at 39502, dragged mainly by bank and auto stocks.

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