Friday 31st May 2019

OPENING CALL: The Australian share market is expected to open higher. The SPI200 futures contract was up 19 points.

Crude prices rocketed higher during the first four months of the year as major producers including Saudi Arabia cut production to reduce supplies.

Federal Reserve Vice Chairman Richard Clarida said the U.S. economy remains in good shape but that the central bank would consider interest-rate cuts should data indicate a risk of a sharper slowdown than expected.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australian stocks were weak throughout the trading day on fresh commodity-price
declines as the country’s equities benchmark fell for the fifth day in six sessions after
a post-election run to late-2007 levels.
The ASX 200 fell 0.7% to 6392.1, leaving it 1.05% higher for May heading into the
month’s final day. Energy and materials sectors fell 1.4% and 1.7%, respectively, with
Rio Tinto retreating 3.3%.
REITs lost 1.9% more even as bond yields fell further overnight. Lower yields of late
had helped the income-generating sector reach heights not seen since 2008. Individually,
agribusiness firm Costa plunged 28% to early-2017 levels after slashing its FY profit
view, and saying earnings may barely rise. It had predicted growth of at least 30%.

US Markets

U.S. stocks flipped between small gains and losses intraday, weighed down by a decline
in energy stocks following several jittery days in markets over fears of a slowing global
economy.
The Dow Jones Industrial Average dipped 40 points, or 0.2%, to 25083, putting the index
on track for a third consecutive day of losses. The S&P 500 was little changed, while
drops in energy and financial shares led declines. The technology-heavy Nasdaq Composite
lost 0.2%. All three indexes are down at least 1.4% so far this week.
Stock markets moved lower in recent days on concerns about trade tensions between the
U.S. and China crimping growth around the world, pushing investors to seek safety in
bonds.
Some investors speculate that the Federal Reserve could be forced to cut rates to boost
growth, but economists have also said worries may be exaggerated, particularly regarding
how serious the U.S.-China spat may be.

Energy stocks in the S&P 500 shed 1.3%, with shares of Exxon Mobil losing 1.4%. U.S.
oil prices fell 3.8% to $56.59 a barrel, settling lower in five of the past seven
sessions. Gold prices, which tend to rise when investors are worried, ticked up 0.5% to
$1,287.10 per troy ounce.
Aaron Anderson, senior vice president of research at Fisher Investments, said investors
should consider President Trump’s likely willingness to resolve matters with China ahead
of the U.S. election campaign in 2020.

Traders were also sifting through data released Thursday that showed the U.S. economy
grew at a slightly slower rate in the first three months of 2019 than previously
estimated. Gross domestic product, a broad measure of the goods and services produced
across the U.S., rose at a 3.1% annual rate in the first quarter, adjusted for
seasonality and inflation, the Commerce Department said.

Commodities

Copper prices fell, dropping for the seventh time in nine sessions, as worries about a
global-growth slowdown continued to hurt the industrial metal.
Copper for July delivery, the most-active futures contract, fell 0.4% to $2.6540 a
pound on the Comex division of the New York Mercantile Exchange, hitting a fresh
four-month low. Prices have erased nearly all of their 2019 gains and are about 11% below
their April peaks, hurt by anxiety about escalating tariffs in the U.S.-China tariff
fight.
Reports Wednesday in Chinese media outlets that China could lower exports of rare-earth
metals critical for a range of products have hurt risk assets lately. Copper is
particularly sensitive to sentiment about Chinese economic growth because the world’s
second-largest economy accounts for about half of global demand.
A stable dollar has also hurt materials recently by making them more expensive for
overseas buyers.
Elsewhere among base metals Thursday, aluminum for delivery in three months fell 0.7%
to $1,782 a metric ton on the London Metal Exchange. Zinc added 0.8% to $2,561, tin
advanced 0.3% to $18,775, nickel rose 1% to $12,171, and lead slipped 1.6% to $1,804.
Among precious metals, most-active Comex gold futures edged up 0.5% to $1,292.40 a troy
ounce. Silver added 0.6% to $14.491, platinum rose 0.3% to $794.10, and palladium climbed
1.6% to $1,365.70.

Oil Futures

Oil prices fell to their lowest since March after data showed a very slight decline in
U.S. oil inventories that remain near a 22-month high.
West Texas Intermediate futures, the U.S. oil benchmark, ended 3.8% lower at $56.59 a
barrel on the New York Mercantile Exchange, marking the lowest closing price since March
8, and the fifth decline over the past seven sessions.
Brent crude, the global oil benchmark, ended down 3.7% at $66.87 a barrel on London’s
Intercontinental Exchange. That was its lowest closing price since March 12.

Forex

The currencies of some commodity exporting countries fell against the dollar Thursday,
pressured by a drop in prices for oil and base metals.
The Russian ruble was recently down 0.4%, echoing a nearly 4% drop in oil, a key
Russian export. The Norwegian krone was off around 0.2%, while the Chilean peso was off
around 0.7%. Chile is an exporter of copper.
A glut of crude has pressured oil prices, while copper and other metals have been hurt
by an escalating trade war between China and the U.S. China is the world’s top consumer
of copper and many other raw materials.
Looking ahead, investors are awaiting U.S. employment data set to be released next
Friday for a snapshot of how the economy is faring. A weaker-than-expected number could
bolster the case for the Federal Reserve to lower interest rates sooner, weighing on the
dollar.
The WSJ Dollar Index was down 0.1% at 91.13.

European Markets

European stocks rose and bond yields bounced higher, providing a sense of relief after
several jittery days in markets over fears of a slowing global economy. The Stoxx Europe
600 rose 0.4%.
German publishing group Axel Springer was the biggest gainer of the Stoxx Europe 600
after the company said late Wednesday that private-equity investor KKR & Co. and the
Springer family were considering a bid to take the company private.

Asian Markets

The Shanghai Stock Exchange was down 0.3% and Hong Kong’s Hang Seng Index dropped 0.4%.
Japan’s Nikkei was down 0.3%.
For days, markets have been dropping, threatening a possible end to their bullish run
as investors sold stocks and sought safety in bonds.
Some economists have said worries may be exaggerated, particularly regarding how
serious the U.S.-China spat may be.
Aaron Anderson, senior vice president of research at Fisher Investments, said investors
should consider President Trump’s likely willingness to resolve matters with China ahead
of the U.S. election campaign in 2020.
Indian shares rebounded strongly ahead of the swearing-in of the Narendra Modi-led
government. All eyes are on key ministerial portfolios including finance. The Sensex
closed 0.8% higher at 39831.97 as buyers found value in several stocks that were beaten
on Wednesday.

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