Wednesday 6th February 2019

OPENING CALL: The Australian market looks to open higher with SPI Futures up 24 points.

A relief rally by Australia’s biggest banks helped drive the equity market to its strongest one-day jump in more than two years, outpacing the rest of the Asia-Pacific region and taking the S&P/ASX 200 to its highest close since mid-October.
The S&P 500 rose intraday, on pace for its fifth consecutive session of gains, as stronger-than-expected earnings reports from some consumer discretionary companies further aided the broad index’s recovery.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

A relief rally by Australia’s biggest banks helped drive the equity market to its
strongest one-day jump in more than two years, outpacing the rest of the Asia-Pacific region and taking the S&P/ASX 200 to its highest close since mid-October. The index settled 114.7 points, or 2%, higher at 6005.9. The four biggest banks collectively added more than 63 points as investors turned to the beaten-down sector after the final report from a year-long probe of financial-industry misconduct brought no fresh concerns. Miners also added to broad gains for the market, collectively rising 1.4% after a court forbid Brazilian iron-ore miner Vale from the continued use of some of its mine-waste dams, cutting into production. The banks will again be in focus Wednesday, when Commonwealth Bank turns in its first-half results before the bell.

US Markets

The S&P 500 rose intraday, on pace for its fifth consecutive session of gains, as stronger-than-expected earnings reports from some consumer discretionary companies further aided the broad index’s recovery. Beauty products maker Estee Lauder and fashion house Ralph Lauren were the latest companies to impress investors with their profit reports. Both stocks rose more than 8% to lead the S&P 500 up 0.4% in recent trading. The gains underscore how earnings have played a major role in the index’s turnaround this year. The S&P 500 is up 9% since Jan. 1 after suffering its biggest annual loss in a decade last year. Investors had weak expectations for fourth-quarter earnings season after fears of slowing U.S. growth, trade tariffs and interest rates sparked broad concerns that corporate profits would fall and a recession loomed on the horizon. By the end of the first week of 2019, analysts had cut fourth-quarter earnings growth forecasts down to 11% from 16% in October.

Commodities

Gold futures struggled for direction after posting losses in the past two trading
sessions, with investors looking to the dollar, Treasury yields and the upcoming U.S.
State of the Union Address for directional cues. Gold for April delivery on Comex fell by a dime to settle at $1,319.20 an ounce after posting losses in each of the past two sessions. March silver lost 5 cents, or 0.3%, to $15.836 an ounce. “Residual strength in the dollar gives off the impression of a near term dollar uptrend and that could keep the bias in both gold and silver pointing downward,” analysts at Zaner Precious Metals wrote in a note. “Clearly, the gold and silver markets damaged their charts Monday by extending a recent pattern of lower lows and lower highs.”

Iron Ore: 86.03 + 0.23 (March Contract)

Oil Futures

Oil prices swung between gains and losses before finishing lower, hurt by a stronger
dollar as traders looked ahead to weekly U.S. inventory data. West Texas Intermediate futures, the U.S. oil standard, fell 90 cents, or 1.6%, to $53.66 a barrel on the New York Mercantile Exchange. U.S. crude is up 18% for the year but still roughly 30% off its multiyear highs from early October. Brent crude, the global oil benchmark, fell 53 cents, or 0.8%, to $61.98 a barrel on London’s Intercontinental Exchange. Analysts were looking ahead to weekly government data on U.S. stockpiles, slated for Wednesday. Inventories have risen in the last two weeks through Jan. 25, though they climbed in the most recent week less than traders had projected. Investors are closely monitoring stockpiles amid ongoing worries that record U.S. output and steady production from Saudi Arabia and Russia will keep a lid on prices as demand weakens.

Forex

The U.S. dollar rose along with U.S. stocks and government bonds intraday, as gains following the Federal Reserve meeting last week attracted investors to the currency. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, rose 0.2% to 89.23. The currency rose 0.2% against the euro and 0.7% versus the British pound. The dollar rose as investors bet the Fed’s statement last week – affirming it would take a more patient approach to any further changes to interest rates – would be good for both stocks and bonds, analysts said. The decision gave investors renewed confidence that policy makers would take care to avoid pulling the economy into a contraction. Government bond yields remain significantly higher in the U.S. than other developed economies – even after last year’s rally in the debt pulled yields lower – as the outlook for growth and inflation remains more robust after the Fed indicated it would take a pause from its plan to gradually raise rates. Yields fall as bond prices rise. Risk assets have also gained as investors see a lower probability that the Fed rate increases will tip the economy into recession.

European Markets

The Stoxx Europe 600 rose 1.4%, or 5.07 point, to 364.99 after an upbeat start to
trading on Wall Street and better-than-expected eurozone service-sector data. Danish jeweler Pandora climbed 18% after fourth-quarter net profit topped forecasts. Austrian semi-conductor maker AMS fell 6.9% after fourth-quarter adjusted net profit fell sharply. The DAX and CAC-40 both rose about 1.7%. “The continuation of the bounce back in U.S. equity markets has dragged European stocks higher and there’s a growing sense the negative sentiment of December is being replaced by a more optimistic outlook,” David Madden at CMC Markets says.

Asian Markets

Amid thin trading due to the Lunar New Year holidays in many Asian markets, Japan’s
Nikkei ended 0.2% lower at 20844.45. This with the dollar at Y109.86 versus Y109.89 in late New York trade. Indian shares were little changed amid mixed cues from global markets. The S&P BSE Sensex closed 0.1% higher at 36,616.81. Investors will likely take fresh cues from the central bank’s monetary policy on Thursday with the earnings season almost over. Most analysts polled by The Wall Street Journal expect the RBI to keep rates steady.

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