Monday 5th August 2019

OPENING CALL: The Australian share market is expected to open flat.

In separate statements Friday, the two Federal Reserve officials who opposed Wednesday’s interest-rate cut by the central bank justified their views based on the current state of the economy.

Trump’s announcement, through a series of tweets Thursday afternoon, ramped up tensions surrounding the trade war and stoked fears about global energy demand.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

A third straight day of losses for Australian shares pulled the benchmark index back
from a new all-time high and snapped two straight weekly advances. Holding up slightly
better than most regional markets amid heightened fears of escalating U.S.-China trade
tensions, the S&P/ASX 200 settled 0.3% lower at 6768.6.
That left it down 0.4% this week. Mining companies led declines for the day as
resources prices pulled back amid trade fears, with Fortescue losing 6.1% and BHP and Rio
Tinto each down more than 3.0%. Gold-mining companies bucked the trend, rallying as
prices for the precious metal rose overnight after President Trump’s tariff threats, and
property trusts collectively added 2.1%.

US Markets

U.S. stocks capped their worst week in months with another decline, as investors
overlooked an in-line jobs report and focused on threats by President Trump to extend
tariffs to essentially all Chinese imports.
The escalation in trade tensions sent major stock indexes around the world tumbling and
sparked the worst one-day drop in oil prices since 2015 on Thursday. As investors sold
stocks, they flocked to assets viewed as safe, such as government bonds, the U.S. dollar
and gold.
On Friday, the S&P 500 fell 21.51 points, or 0.7%, to 2932.05 while the Dow Jones
Industrial Average lost 98.41 points, or 0.4%, to 26485.01. The S&P 500 ended the week
down 3.1%, its worst performance since December, while the blue-chip index finished 2.6%
lower, its worst week since May. Shares of trade-exposed companies, such as chip-makers,
were among the biggest losers, and the tech-heavy Nasdaq Composite lost 107.05 points, or
1.3%, to 8004.07 and ended the week 3.9% lower.

Some analysts and traders are bracing for even more mayhem in markets.
John Brady, managing director at futures brokerage R.J. O’Brien & Associates, said that
although he closely follows the monthly reading on the U.S. labor market, it’s less
important for traders on a day like Friday.
U.S. employers added 164,000 jobs in July, the Labor Department said Friday, and the
jobless rate held steady at 3.7%. Economists surveyed by The Wall Street Journal had
anticipated 166,000 jobs added and an unemployment rate of 3.6%. Stock futures barely
reacted to the data.

Commodities

Copper sank to a two-year low, as renewed trade hostilities between the U.S. and China
reinforced fears about the world economy.
The metal dropped 2.9% on the London Metal Exchange on Friday, the steepest one-day
drop in a year, after President Trump earlier in the week threatened to impose tariffs of
10% on an additional $300 billion worth of imports from China. The decline dragged
three-month futures prices down to $5,729.50 a ton, its lowest level since June 2017.
Copper, considered a bellwether for global growth, lost 3.9% for the week. Such a
decline would be the market’s biggest since August 2018, a sign of how the Federal
Reserve’s rate cut this week failed to alleviate worries about slowing global growth.
In another sign of anxiety, gold prices rallied in tandem with other perceived havens
on Friday. The precious metal surged 1.9% to $1,445.60 a troy ounce in New York, the
highest settle since May 2013.

Oil Futures

Oil futures climbed, marking a partial bounce back from a plunge that saw the U.S.
benchmark suffer its biggest one-day fall in more than four years after President Donald
Trump moved to impose additional import tariffs on Chinese goods.

Global oil prices rebounded on Friday after falling 7-8% on Thursday in response to the US tariff news. Supporting prices was data showing that the number of oil rigs in operation in the US fell by 6 to 770 in the latest week. Data also showed that China resumed purchases of US oil. The Brent crude price rose by US$1.39 or 2.3% to US$61.89 a barrel. And the US Nymex price rose by US$1.71 or 3.2% to US$55.66 a barrel. Over the week Brent fell by 2.5% and Nymex lost 1.0%.

Forex

In the foreign-exchange markets, the Japanese yen gained 0.7% against the U.S. dollar
after rising 1.3% overnight, its biggest single-day gain in more than two years.
The Chinese yuan also touched its weakest level as versus the dollar since November. A
weaker yuan makes it cheaper for U.S. buyers to purchase Chinese goods, helping offset
the impact of higher tariffs. But China also doesn’t want a weaker currency to prompt an
exodus of capital, which could prompt further currency depreciation.

European Markets

In Europe, the Stoxx Europe 600 fell 2.6%, its biggest drop since December 2018, led by
losses in the basic resources and autos sectors, which were both down by more than 3%.

Trade exposed sectors such as chip makers, miners and automakers fared worst. Shares in Royal Bank of Scotland fell 6.5% after a profit warning. The pan-European STOXX600 index fell by 2.5%, the German Dax fell by 3.1% and the UK FTSE lost 2.3%. In London trade, shares of Rio Tinto fell by 3.4% and BHP lost 4.8%.

Asian Markets

Most regional Asian stock markets declined after President Trump threatened to extend
tariffs to essentially all Chinese imports. Benchmarks in Japan and Hong Kong retreated
more than 2%. In mainland China, the Shanghai Composite dropped 1.4%.
The tariff move, if imposed, would mark another escalation in the U.S.-China trade
conflict and could prompt retaliation from Beijing. The new tariffs would take effect
Sept. 1 and cover $300 billion in Chinese goods — including smartphones, clothes, toys
and other consumer products. They would come on top of tariffs already imposed on $250
billion in imports from China.
Exporters and other trade-sensitive stocks led the decline in Asia. Japan’s Sony and
Panasonic retreated more than 3%. BHP, the world’s largest listed miner, fell more than
3%.

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