Tuesday 9th April 2019

OPENING CALL: The Australian market looks to open higher with SPI Futures up 10 points.

The S&P 500 drifted higher late in the afternoon of a quiet trading session, narrowly avoiding breaking its longest streak of consecutive gains since 2017.

Overnight Summary


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Each Market In Focus

Australian Market
US Markets

The S&P 500 drifted higher late in the afternoon of a quiet trading session, narrowly avoiding breaking its longest streak of consecutive gains since 2017. Major indexes started the trading day with losses, weighed down by tumbling shares of manufacturers and airlines. As the afternoon progressed, though, stocks brushed off early declines, and the S&P 500 closed higher for an eighth straight day-its longest winning streak since October 2017. Much of stocks’ gains in recent weeks have been supported by bets that economic growth will be strong enough to support corporate profits, but modest enough to keep the Federal Reserve from having to raise interest rates. Investors will get their next look at how well that thesis is holding up when earnings season kicks off in earnest Friday, with JPMorgan Chase and Wells Fargo on tap to post results. “People worry too much,” said Emiel van den Heiligenberg, head of asset allocation at Legal & General Investment Management, who believes a recession in the U.S. economy may not occur until as late as 2021. The S&P 500 rose 3.03 points, or 0.1%, to 2895.77 on Monday. The Dow Jones Industrial Average fell 83.97 points, or 0.3%, to 26341.02, although it closed well off its session low. The Nasdaq Composite rose 15.19 points, or 0.2%, to 7953.88. Sliding industrial shares weighed on major indexes Monday. General Electric fell 52 cents, or 5.2%, to $9.49 after JPMorgan downgraded its rating for the stock to “underweight” from “neutral” and warned that investors were likely underestimating the severity of the firm’s problems. Boeing lost $17.41, or 4.4%, to $374.52, extending a slide that began after hours Friday when the company said it would cut production of its 737 MAX by one-fifth. Southwest Airlines, which has the biggest fleets of MAX jets in the U.S., fell $1.31, or 2.5%, to $51.94 after Raymond James analysts warned the global MAX grounding could hit its profits in the short term.

Matières premières

In other commodity news, gold prices climbed, supported by a weaker dollar. Gold for June delivery, the most-active futures contract, advanced 0.9% to $1,306.80 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices of the haven metal have risen about 2% for the year, though they are roughly 3% below February’s 10-month peak. A steady rebound in stocks and other risk assets has lowered demand for safer assets like gold, while a stronger dollar has made the metal more expensive for overseas buyers. However, on Monday, the WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, fell 0.2%. Some analysts expect gold and other assets to continue wobbling until fresh earnings or economic data changes the market backdrop. Some investors are also waiting for the U.S. and China to resolve their monthslong tariff fight before adjusting positions accordingly. Elsewhere in precious metals on Monday, most-active silver futures rose 1.1% to $15.25 a troy ounce. Platinum advanced 1.5% to $918.90, while palladium inched down 0.2% to $1,343.80. Among base metals, most-active Comex copper futures rose 1.3% to $2.9310 a pound, staying in their current trading range as analysts weigh trade talks. Prices are up about 11% for the year, though they remain roughly 11% below their June four-year highs. Some investors fear an economic slowdown will lower demand for industrial metals crucial to construction and manufacturing. On the London Metal Exchange, aluminum for delivery in three months fell 0.3% to $1,883.50 a metric ton. Zinc dropped 0.1% to $2,918, tin shed 0.7% to $20,860, nickel climbed 1.6% to $13,285 and lead was up 0.7% at $1,999.50.

Iron Ore: 93.09s + 1.59 (May Contract)

Oil Futures

U.S. oil prices rose to their highest since Halloween on fears of a global supply squeeze due to fighting in Libya and the Trump administration’s decision to designate Iran’s Islamic Revolutionary Guard Corps a foreign terrorist organization. West Texas Intermediate futures, the U.S. oil benchmark, rose 2.1% to $64.40 a barrel on the New York Mercantile Exchange, marking the highest closing price since Oct. 31. Brent crude, the global oil benchmark, ended 1.1% higher at $71.10 a barrel on London’s Intercontinental Exchange. Brent has climbed three straight sessions, to its highest since Nov. 7. Crude prices were already 40% higher from the beginning of the year when Monday’s session began, and added to those gains after the U.S. announced it was labeling Iran’s IRGC as a terrorist organization. The move escalates the US. pressure campaign against Tehran, and could mean even tighter restrictions on Iran oil exports. President Trump ordered oil sanctions against Iran last November that barred countries from importing Iranian oil, but said it was allowing eight countries including China, India, Italy and others to keep temporarily buying Iranian crude. The administration is due to review and possibly yank those waivers in a month. Oil prices were also finding continued support from an agreement by the Organization of the Petroleum Exporting Countries late last year — when oil prices were in the $40’s per barrel — to reduce production by 1.2 million barrels a day. Now Libya, another key OPEC member, is teetering on a full-scale civil war.

Forex

The Turkish lira stumbled out of the blocks, with the currency putting in the worst performance among the more closely watched. The lira fell more than 1%, trading to a two-week low, as political uncertainty continues to weigh on the Turkish economy. “At the start of a new week of trading the Turkish lira is the weakest link due to rising market concerns that political tension may increase in the coming days/weeks. President Erdogan questioned the validity of the Istanbul vote saying this morning that there are ‘too many’ irregularities and he also cited ‘organized crime,'” wrote Piort Matys, EM FX strategist at Rabobank. Matys said bets against the lira could fuel further downside. “Last, but not least, speculators are also able to bet against the vulnerable Turkish currency without severe restrictions imposed ahead of the crucial local elections on March 31. The CBRT [Central Bank of the Republic of Turkey] resumed weekly repo auctions today and cut FX swaps to 24% from 25.5%,” he added. In afternoon trade in New York, one dollar fetched 5.6927 lira, down 1.2%, compared with late Friday. Weakness in lira extended as U.S. equities moved lower at the open, though markets, with the exception of the Dow Jones Industrial Average, finished slightly higher. Meanwhile the ICE Dollar Index,, a measure of the greenback’s value against six of rivals, was 0.4% lower at 97.041 as traders bought currencies, viewed as havens, including the Japanese yen and Swiss franc. The Japanese yen, rose 0.3% to Yen111.40 and the Swiss franc added 0.2% to 0.9983. Elsewhere the British pound logged small gains at $1.3066 as investors eye whether Prime Minister Theresa May can strike a Brexit deal with the opposition Labour Party.

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