Friday 9th November 2018

OPENING CALL: The Australian market looks to open lower with SPI futures down 9 points.

Despite utilities stocks logging their steepest drop in a decade, Australia’s equities benchmark was steady much of the day and notched its ninth gain in 10 sessions as Asian indexes broadly followed the post-election rally on Wall Street.
U.S. stocks flipped between small gains and losses intraday as the Federal Reserve held interest rates steady and investors continued to digest the results of the midterm elections that on Wednesday triggered the largest postelection gain for the S&P 500 since 1982.

Overnight Summary


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Each Market In Focus

Australian Market

Despite utilities stocks logging their steepest drop in a decade, Australia’s equities benchmark was steady much of the day and notched its ninth gain in 10 sessions as Asian indexes broadly followed the post-election rally on Wall Street. The ASX 200 closed up 0.5% at 5928.1, a three-week high, as financials climbed an additional 1%. That more than offset a 4.5% slump to two-year lows for utility stocks after regulators announced plans to fight a consortium’s planned purchase of pipeline owner APA, which skidded 9.9%. Meanwhile, building materials supplier James Hardie skidded 15% following its first half report, which included soft guidance on U.S. home construction.

US Markets

U.S. stocks flipped between small gains and losses intraday as the Federal Reserve held interest rates steady and investors continued to digest the results of the midterm elections that on Wednesday triggered the largest postelection gain for the S&P 500 since 1982. The broad stock-market index slipped 0.2%, a day after the index rose 2.1%, the third largest percentage gain following an Election Day on record. The technology-heavy Nasdaq Composite shed 0.4%, while the Dow Jones Industrial Average rose 27 points, or 0.1%, to 26206. After a turbulent period for stocks, the S&P 500 had climbed in six of the past seven sessions through Wednesday. The index fell nearly 7% in October, its steepest monthly decline in more than seven years, despite most U.S. companies reporting robust earnings growth. Concerns over rising interest rates, slumping oil prices, the longevity of the U.S. expansion and the heady valuations of large technology companies caused many investors to pull back.

Commodities

Gold prices suffered a fourth loss in five sessions, then struggled for direction in electronic trading with the U.S. dollar extending earlier gains as the latest policy update from the Federal Reserve yielded no surprises. The U.S. central bank held interest rates steady — in a 2% to 2.25% range — and signaled that it will stay the course and move rates up at a gradual pace in coming months. In electronic trading, December gold was at $1,224.90 an ounce, seesawing between modest gains and losses shortly after the Fed statement. The contract had settled at $1,225.10, down $3.60, or 0.3%, for the session. It gained 0.2% Wednesday and trades roughly 0.7% lower for the week. Meanwhile, December wheat was 2 1/2 cents lower to $5.07 3/4.

IRON ORE: 73.00s + 1.11 (December contract)

Oil Futures

A five-week rout for oil prices turned into a bear market for the U.S. crude benchmark, ending the longest bull run since 2015. West Texas Intermediate crude for December delivery on the New York Mercantile Exchange fell $1, or 1.7%, to settle at $60.67 a barrel, marking its ninth straight losing session and the lowest close since March. The close left the U.S. benchmark down 21% from its Oct. 3 peak, meeting a widely used definition of a bear market as a pullback of 20%. October marked a turnabout in the crude-oil market, which had rallied sharply in 2018, with gains fueled in part by fears that the Trump administration’s renewal of sanctions against Iran, bottlenecks in U.S. shale oil producing regions, and strong U.S. economic growth would tighten the oil market. WTI hit a nearly four-year high above $76 a barrel on Oct. 3, while Brent crude, the global benchmark, topped $86 a barrel. Brent is off more than 18% from its recent high.

Forex

The U.S. dollar jumped intraday as the Federal Reserve suggested that it would likely raise rates at its next meeting. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, rose 0.4% to 90.31. It was on track to snap a three-day streak of declines. The dollar hit a year-plus high ahead of the U.S. midterm elections as investors sought safety amid turmoil in other markets. It has pared some of its gains since. The dollar darted higher after the conclusion of the two-day Fed meeting. The central bank held interest rates steady but signaled that another rate increase was likely at the next meeting. Rising interest rates can make the greenback more attractive for yield-seeking investors.

European Markets

The Stoxx Europe 600 closed up 0.2% at 367.08, helped by gains in health-care stocks after solid results from AstraZeneca. There were notes of caution, however, with Germany’s DAX ending down 0.45% and France’s CAC 40 down 0.1%, as Wednesday’s boost after the U.S. midterm elections fades and attention turns to a Federal Reserve announcement at 1900 GMT. Interest rates are expected to stay on hold. The U.K.’s FTSE 100 outperformed, ending up 0.3%, as sterling fell, while AstraZeneca gained 4% after results and Coca-Cola HBC rose 5.1%. Spain’s Ibex 35 rose 0.1%, though renewed concerns about Italy’s budget pushed Italy’s FTSE MIB down 0.6%.

Asian Markets

Afternoon fades were again seen in Hong Kong, China and South Korea, while other stock markets in the region were able to maintain early strength. Japanese equities stood out throughout trading, helped by a rise in dollar-yen, with the Nikkei climbing 1.8%. South Korean and Hong Kong benchmarks were up more than 1% in the morning before late day weakness left the Kospi up 0.7%. Chinese stocks again lagged as benchmarks there finished lower on end-of-session weakness. It’s the only market to have closed lower, and those yet to wrap up trading are all higher following the post-election jump in the U.S. Hong Kong’s Hang Seng Index climbed 0.3%, while China’s Shanghai Composite Index bucked the trend, falling 0.2%, in its fourth consecutive session of declines.

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