Tuesday 5th February 2019

OPENING CALL: The Australian market looks to open higher with SPI Futures up 38 points.

Australia’s stock benchmark climbed to session highs ahead of the close as investors did late positioning ahead of a long-awaited report on alleged financial-sector wrongdoing.
U.S. stocks flipped between small gains and losses intraday, as a rise in technology shares was offset by declines in health-care and energy companies.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australia’s stock benchmark climbed to session highs ahead of the close as investors
did late positioning ahead of a long-awaited report on alleged financial-sector
wrongdoing. The review has helped pressure bank and insurance stocks for much of the past year. But financials rose 1%, moving back into positive territory for 2019. Combined with a 1.3% gain for energy stocks after oil’s 3% jump in Friday’s global session, the ASX 200 rose 0.5% to 5891.2, currently the biggest gain in holiday-impacted Asia Pacific trading. But materials eased 0.3% on an end-of-week cooldown in metals prices.

US Markets

U.S. stocks flipped between small gains and losses intraday, as a rise in technology
shares was offset by declines in health-care and energy companies. The Dow Jones Industrial Average rose 36 points, or 0.1%, to 25100. The S&P 500 climbed 0.3%, on course to rise for the fourth consecutive session. The technology-heavy Nasdaq Composite added 0.9%. A decline in U.S. oil prices dragged down energy shares in the S&P 500, keeping gains in check. Dow components Exxon Mobil and Chevron were among the biggest decliners in the index, shedding 1.9% and 1.6%, respectively. Health-care stocks also fell, with UnitedHealth and Johnson & Johnson losing more than 1%. Ben Barzideh, wealth adviser at Piershale Financial Group, which has $250 million in assets under management, said he has been advising clients to add exposure to energy and emerging-market stocks-two areas he said would benefit from a drop in the U.S. dollar. Earnings season has largely been better than feared. With results in from 47% of the companies in the S&P 500, profits are on pace to rise 12% in the fourth quarter, according to FactSet, continuing a streak of double-digit growth.

Commodities

Gold futures posted a second straight session decline, in part as a leading dollar index gained, though bullish analysts considered the metal’s action to be only a pause in its recent uptrend. “Higher Chinese demand for gold and silver have been factored in by the markets,” said Chintan Karnani, chief market analyst at Insignia Consultants, but Chinese consumer buying will still “be closely watched” with the Lunar New Year celebration this week, a holiday that boosts gold purchases for gift giving. “Gold prices are not dictated by Chinese demand only,” Karnani said. “Central bank buying and host of noneconomic factors like developments in Venezuela, Brexit among others are supporting gold prices.” Karnani said he’s bullish on bullion and advises traders to “use sharp corrections to invest in gold.”

Iron Ore: 85.80 + 1.39 (February Contract)

Oil Futures

Oil prices fell from two-month highs due to a stronger dollar and as speculative traders decided to book profits after prices rose 18% in January. West Texas Intermediate futures, the U.S. oil standard, ended 1.3% lower at at $54.56 a barrel on the New York Mercantile Exchange. On Friday, prices ended at $55.26, the highest since Nov. 19. Brent crude, the global oil benchmark, ended 0.4% lower at $62.51 a barrel on London’s Intercontinental Exchange. The decline was partly the result of speculative investors getting “a little antsy, jittery” after January’s price surge in which WTI had its best month since April 2015, said Bob Yawger, director of the futures division at Mizuho Securities USA. “There was such an extended upside in prices — January was a great run with very healthy profits — that they decided not to roll the dice any longer, or at least not for now,” Mr. Yawger said. “They’ll step back, re-assess the situation.”

Forex

The dollar rose intraday, extending its gains from the end of last week following
Friday’s strong jobs report. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently up 0.3% at 89.12. After several sessions in which it barely moved, the dollar fell Wednesday when the Federal Reserve signaled it would take an extended pause before it considered raising interest rates again. The currency, though, drifted higher Thursday and got a boost Friday from the better-than-expected jobs data. Though investors still don’t expect the Fed to raise rates this year, the jobs numbers helped lower expectations for a rate cut from the central bank. Fed-funds futures, used by traders to place bets on future interest rates, showed an 11% chance of a rate cut by the end of the year, down from 21% Thursday, according to CME Group data. Expectations for higher interest rates tend to bolster the dollar by making it more attractive to yield-seeking investors. The euro was recently down 0.1% against the dollar at $1.1439, while the dollar was up 0.5% against the Japanese yen at Y110.050 per dollar.

European Markets

The Stoxx Europe 600 rose 0.06%, or 0.2 point, to 359.92 as traders adopted a cautious
mood amid economic and political jitters. The DAX fell 0.04% and the CAC 40 was off 0.4%. “The U.S.-China trade spat, the Italian recession and the uncertainty hanging over Brexit are all bubbling away in the background,” said David Madden at CMC Markets. “Volatility has been low as there has been little in the way of news to trigger excitement.” Wirecard rose 14% after the German payment-processing firm said an independent investigation had failed to find any evidence of alleged accounting misconduct.

Asian Markets

Asian markets were mixed, with Japan’s Nikkei up 0.5% and Hong Kong’s Hang Seng Index gaining 0.2% after a half-day of trading ahead of Lunar New Year’s Eve. Investors will be watching closely as trade talks between the U.S. and China continue this week with just weeks to go until tariffs are supposed to rise once more. Many investors now say that reaching a deal is in the interest of both parties — particularly Beijing, given concerns around an economic slowdown in China. Meanwhile, Indian shares erased early losses to end higher, but investors remained cautious ahead of the central bank’s monetary policy meeting. The S&P BSE Sensex closed 0.3% higher at 36,582.74, after falling as much as 0.7% in early trade. Analysts say the populist budget proposals have raised fiscal concerns and it could prompt Reserve Bank of India to keep its rate unchanged later this week. The Philippines’ benchmark was down 0.9%, while Indonesia’s main index was 0.8% lower. Both markets will be closed Tuesday. Markets in Singapore and Malaysia will be dark both Tuesday and Wednesday. Indexes there finished little changed after a half-day’s trade. Markets in China and Taiwan are closed for the full week.

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