Friday: 13th July 2018

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

Australian shares look set to open higher on the back of a rise on Wall Street overnight as industrials rebounded following trade concerns.
U.S. stocks rose Thursday, putting major indexes on track for a rebound from a midweek selloff.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Despite a 10-point end-of-day adjustment lower, Australia’s stock benchmark still more than offset Wednesday’s drop as the index remains near 10 1/2-year highs. Amid solid gains in large chunks of Asia-Pacific, the S&P/ASX 200 climbed 0.85% after two days of declines. Banks again led, with the Big 4 up 1.6% to 2.2%, while health care jumped 2.3% as CSL and Sonic outperformed. But BHP Billiton and Rio Tinto weighed on the miners and the energy sector dropped 1.1% on the overnight plunge in oil prices that was slightly offset in Asian trading.

US Markets

U.S. stocks rose Thursday, putting major indexes on track for a rebound from a midweek selloff. Shares of technology companies led the stock market higher. A major software-deal announcement appeared to fuel the buying spree, sending the S&P 500 technology sector up more than 1%.
Meanwhile, investors momentarily put aside their brewing trade concerns a day after the Trump administration threatened tariffs on an additional $200 billion of products from China, including bicycles, refrigerators and pocketbooks. Beijing is currently reviewing plans to hit back beyond levies on imports, although no new policies have been announced. The Dow Jones Industrial Average rose 0.8% in the last half hour of trading. The S&P 500 also gained 0.8%, while the tech-heavy Nasdaq Composite added 1.3%. CA led tech firms and the broader S&P 500 higher after Broadcom agreed late Wednesday to buy the software company for $18.9 billion. Shares of CA rose 18% and appeared to boost the stocks of other software companies that trade in the S&P 500, including Red Hat and Autodesk, up more than 3% each, while Salesforce.com added 2.4%. Meanwhile, industrial companies, including aerospace firms, also contributed to Thursday’s better performance, recovering some of the losses those firms suffered during Wednesday’s trade-fueled selloff. Shares of Lockheed Martin rose 2%, while Boeing, a Dow component, added 1.5%. Airline stocks got a boost after Delta Air Lines reported profits that beat analyst expectations, even though the company said higher fuel costs will weigh on profits for the rest of the year. Shares of\ Delta added 1.5%. While the trade spat between the U.S. and China continues to play out, investors will be focusing on the glut of second-quarter earnings results that are expected to be released in the coming weeks to glean clues on how the ongoing trade rhetoric is affecting companies and how businesses are faring with higher commodity prices. Overall, profit results are expected to build on the strong first quarter, analysts said. Companies continue to enjoy the one-time benefits of the tax overhaul passed last year, while the global growth upswing last year has left businesses on better footing. S&P 500 companies are expected to increase second-quarter earnings 20% from a year earlier. That should help stabilize stock prices and push major indexes higher, with analysts predicting a 13% price increase in the S&P 500 over the next 12 months, FactSet said.

Commodities

Gold prices ended higher, finding some support a day after a fresh round of global trade-war worries buoyed the dollar and sent the yellow metal to a more than one-week low. August gold tacked on 0.2% to settle at $1,246.60 an ounce. Fears of a spillover effect from intensifying trade disputes are seen as more severely hurting industrial metals, which tend to slide amid angst that a tit-for-tat spat over import duties that could hurt global economies. September copper climbed by 1.2% to $2.777 a pound after plunging by 3.4% Wednesday to mark the lowest finish since late July 2017. The metal, colloquially known as Dr. Copper, due to its importance in technology and constructing buildings, was set for a weekly decline of about 1.6%. Meanwhile, September silver, which dually serves as a precious and industrial metal, rose 1% to $15.977, a day after marking its lowest most-active contract finish year to date. October platinum added 1.4% to $846.40 an ounce and September palladium settled at $948.80 an ounce, up 1.3%. In other commodity markets, cotton futures surged after the USDA lowered its projections for stockpiles of fiber for the 2018/2019 marketing year. The agency updated its estimates for world and domestic carryover for the year, lowering them by 77.84 million and 4 million bales, respectively, with world consumption at a record 127 million bales and production lower by 300 million bales. Cotton for December rose 4.8% to 88.23 cents a pound.

Iron Ore: 63.66s +0.41

Oil Futures

Oil settled on a mixed note, with U.S. benchmark prices posting a slight decline but global benchmark prices rebounding from the three week low they hit a day earlier. A monthly report from the International Energy Agency hinted at a coming slowdown in crude demand and revealed an uptick in global supplies. Traders also looked to the resumption of Libyan oil exports and mulled the impact of the U.S. China trade dispute on the global economy, and oil demand. August West Texas Intermediate crude, the U.S. benchmark, edged down by less than 0.1% to settle at $70.33 a barrel on the New York Mercantile Exchange- the lowest since June 25. September Brent crude rose 1.4% to $74.45 a barrel on the ICE Futures Europe exchange. It recouped some of Wednesday’s nearly 7% drop to $73.40 a barrel, which was the lowest settlement since June 21.

Forex

The dollar fell against emerging-market currencies, as trade tensions appeared to ebb after reports earlier this week that the Trump administration was considering additional trade measures against China. The U.S. currency was down against the Mexican peso and the South African rand, while also losing ground against the Brazilian real, Russian ruble and other currencies. Investors are concerned that an intensifying trade fight will slow global growth and weigh on commodity prices, hurting the economies of developing countries. The worries have boosted the dollar, as money managers cut positions they deem to be risky and seek shelter in the U.S. currency. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was up less than 0.1% in afternoon trading in New York.

European Markets

European stock markets finished solidly higher Thursday, recovering a portion of the losses after the prior day’s selloff that came amid heightened concerns of a global trade war. The U.K.’s FTSE 100 index ended up 0.8%, while France’s CAC 40 index jumped by 1%, marking its largest one-day gain since June 22, according to WSJ Market Data Group. Germany’s DAX 30 index rose 0.6%.

Asian Markets

Stocks in Asia rose, a day after major global indexes fell amid concerns over escalating trade tensions and falling oil prices. Hong Kong’s Hang Seng was up 0.6% while the Shanghai Composite Index rose 2.2%. Japan’s Nikkei rose 1.2%. Hong Kong-listed shares in Chinese telecommunications equipment maker ZTE soared 25% Thursday, after the company cleared the last major hurdle to lifting U.S. sanctions. The
U.S. Commerce Department in April had banned U.S. companies from selling to ZTE as punishment for the company’s failure to honor an earlier U.S. agreement over sales to North Korea and Iran. Thursday’s gains in Asian equities come as China guided the yuan to its largest one-day drop against the U.S. dollar in a year and a half. The central bank, which determines a daily dollar-yuan exchange rate and allows the currency to trade within 2% of that level, set the dollar’s reference rate at 6.6726 yuan.

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