Friday 07 December 2018

OPENING CALL: The Australian market looks to open unchanged.

Like New Zealand, equities in Australia shrugged off the latest round of U.S.-China trade worries, set off this time by the arrest of the CFO at tech heavyweight Huawei.
U.S. stocks fell sharply intraday as the arrest of a top Chinese technology executive and a decline in oil prices exacerbated the concerns about global growth that have rattled markets in recent weeks.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

AUSTRALIA STOCKS:
Like New Zealand, equities in Australia shrugged off the latest round of U.S.-China trade worries, set off this time by the arrest of the CFO at tech heavyweight Huawei. Down Under markets have for months outperformed on days that trade fears have sent global stock markets sliding. The ASX 200 fell 0.2% to 5657.6. The materials sector fell 1.2% on metals-price declines. But utilities rose a further 1.1% and REITs jumped 2.5%.

NEW ZEALAND STOCKS:
After being a regional underperformer Wednesday, New Zealand stocks held up better than most in the region as trade concerns helped fuel more selling across Asia-Pacific. The NZX 50 fell 0.3% to 8758.22, moving into negative territory at mid-afternoon as other markets opened to sharp declines. A2 Milk dropped a further 2.7%. But Auckland International Airport climbed 1.55% and retirement-village operator Metlifecare gained 0.9%.

US Markets

U.S. stocks fell sharply intraday as the arrest of a top Chinese technology executive and a decline in oil prices exacerbated the concerns about global growth that have rattled markets in recent weeks. The Dow Jones Industrial Average slid 438 points, or 1.8%, to 24585, after earlier tumbling as much as 785 points, and the S&P 500 lost 1.6%. Both indexes slid back into the red for the year. The Nasdaq Composite declined 0.8%, cutting the technology-heavy index’s gains for 2018 to 2.8%. Nine of the 11 sectors in the S&P 500 traded lower on the day. Caterpillar and Apple, which are sensitive to trade-related headlines, fell at least 1.5%. And Chevron and Exxon slumped more than 2% as U.S. crude oil prices resumed their slide, falling 2.6%. The losses put the major indexes on course for their largest two-day point and percentage declines since Oct. 11.

Commodities

Gold futures notched a gain, with the precious metal finding some haven demand alongside a weaker dollar index and sharp tumble in stock trading. Prices, however, only managed to edge up for the session as traders awaited cues on the Federal Reserve’s pace of interest rate hikes from the U.S. jobs data Friday. Gold for February delivery rose $1, or less than 0.1%, to settle at $1,243.60 an ounce. It had touched a high of $1,249.90, teasing the highest for a most-active contract since the first half of July, FactSet data show. Meanwhile, December wheat fell 9 1/4 cents to $5.05 1/4.

IRON ORE: 63.90s – 2.01 (December contract)

Oil Futures

Oil futures settled lower amid ongoing uncertainty surrounding the Organization of the Petroleum Exporting Countries’ decision on production cuts, which the group has postponed until Friday, when it meets with non-member producers. Oil prices were under pressure, “somewhat reflecting the selloff in stocks, some reflecting skepticism OPEC will come through with sufficient production cuts to support prices,” said Rob Haworth, senior investment strategist at U.S. Bank. “U.S. production remains robust, although if prices remain close to these low levels production growth could falter. For now we believe prices remain under pressure, even if OPEC can come through with production cuts,” he said. January West Texas Intermediate oil lost $1.40, or 2.7%, to settle at $51.49 a barrel on the New York Mercantile Exchange.

Forex

The U.S. dollar weakened further as risk appetite continued to wane during intraday trading after the arrest of an executive of Chinese telecommunications firm Huawei Technologies, at the request of the U.S., sparked new worries about U.S.-China relations. Huawei CFO Meng Wanzhou was arrested in Vancouver, Canada, for allegedly violating sanctions against Iran. Chinese authorities have demanded her release, saying she didn’t violate U.S. or Canadian law. While the U.S. and China seemed to approach a resolution of their trade spat following the G-20 summit last weekend, market hopes are now shaken. Most recently, market participants had also grown cautious of the fact that few details of a potential deal were known after President Donald Trump and Chinese Premier Xi Jinping met at the G 20. “The latest wave of risk-off attack began at the open of futures [late Sunday] amid the announcement of Canada’s arrest of Huawei’s chief financial officer on behalf of the U.S.,” wrote Adam Button, currency analyst at Intermarket Strategy, adding that it undid the work of any trade deal being done between China and the U.S., which was now reflected in the markets. The ICE U.S. Dollar Index was down 0.5% at 96.580. The buck’s main rival, the EURUSD strengthened in lock step, last up 0.6% at $1.1408.

European Markets

The Stoxx Europe 600 index closed down 3.1% at 343.31, dropping to a two-year low on heightened fears of U.S.-China trade tensions. Concerns have been exacerbated by the arrest of Meng Wanzhou, the CFO of Huawei, in Canada, which sparked protests from China. “The rapidly dwindling good-feeling towards the U.S. and China’s vague trade-war ceasefire turned actively hostile on Thursday,” said Connor Campbell at Spreadex. Key equity indexes in Germany, France and the U.K. all fell to two-year lows, dropping 3.5%, 3.3% and 3.2%, respectively. Financial, auto maker, construction, mining and oil stocks all tumbled, with the latter hit by sharp falls in crude oil prices as OPEC ministers discuss a production cut. Precious metal miners were among the few risers as gold prices rose. Italy’s FTSE MIB fell 3.5% and Spain’s Ibex 35 by 2.75%.

Asian Markets

Asian stocks fared worse than during the initial reaction to Tuesday’s U.S. slump, with action driven by concerns over the U.S. prompted arrest of Huawei’s CFO. The Chinese telecom-equipment giant has long been in Washington’s crosshairs, and the latest development raised fresh doubts about whether the world’s two biggest economies will be able to reach a trade deal following their truce. Taiwan’s benchmark index slid more than 2% as several tech names fell by the 10% daily limit. China’s indexes were down by the same level. Japan’s Nikkei fell nearly 2% and declines of more than 1% were recorded in South Korea, the Philippines and Singapore. Like New Zealand, equities in Australia shrugged off the latest round of U.S.-China trade worries, set off this time by the arrest of the CFO at tech heavyweight Huawei. Down Under markets have for months outperformed on days that trade fears have sent global stock markets sliding. The ASX 200 fell 0.2% to 5657.6. The materials sector fell 1.2% on metals-price declines. But utilities rose a further 1.1% and REITs jumped 2.5%.

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