Friday: 5th October 2018

OPENING CALL: The Australian market looks to open lower with SPI futures down 27 points.

U.S. stocks were lower as U.S. Treasury yields surged. U.S. government bond yields hit fresh multiyear highs. The dollar was lower, snapping a six-session streak. Crude oil retreated sharply from four-year highs due to broader market selling. And gold was modestly lower.

 

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market
US Markets

U.S. stocks slumped, pulling back from record levels, as U.S. Treasury yields surged to multiyear highs. Bond yields have jumped over the past week as data have pointed to a robust U.S. economy and investors have expressed relief over easing trade tensions in North America. Further evidence of a strong U.S. economy will likely come Friday, when investors get a snapshot of September’s employment picture. The Dow Jones Industrial Average fell 245 points, or 0.9%, to 26582, a day after notching an all-time high and a fifth straight session of gains. The S&P 500 lost 1% and the technology-heavy Nasdaq Composite declined 2%. The indexes haven’t all closed down at least 1% since June 25. Nine of the 11 S&P 500 sectors tumbled, with the highflying technology and consumer discretionary segments among the biggest losers. Netflix and Google parent Alphabet both dropped more than 3%. Facebook and Amazon.com, meanwhile, shed more than 2% while Apple slipped 1.7%.

Commodities

Gold moved lower “after the China hack revelations” and U.S. Vice President Mike Pence’s speech, said Michael Kosares, founder of gold broker USAGOLD. “The two together [are] a major blow to hopes of trade tension resolution and improved relations with China.” “Gold has moved fairly consistently in sympathy with the prospects for commodities’ usage in China and today’s events undermine prospects of patching things up soon,” he explained. “Gold, as a result, gave up its gains.” Prices for gold had climbed early as global stock markets fell, and as benchmark U.S. stock indexes traded lower. December gold settled $1.30, or 0.1%, lower at $1,201.60 an ounce, after declining by 0.3% Wednesday. The metal traded roughly 0.5% higher this week so far, according to FactSet data, based on the most-active contracts.

IRON ORE: 68.35 + 0.05 (November contract)

Oil Futures

Oil prices retreated sharply from four-year highs due to broader market selling and concerns that recently-rising U.S. oil inventories will keep climbing throughout the low-demand fall season. Light, sweet crude for November delivery ended 2.7% lower at $74.33 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, ended 2% lower at $84.58 a barrel. Both benchmarks closed at four-year highs on Wednesday, and some analysts said the price-plunge suggests those highs will remain in place for a while. Those builds could continue for a while.” Meanwhile, gold prices finished with a modest loss, down for a second session in a row as pressure from strength in bond yields and concerns surrounding U.S.-China trade tensions outweighed earlier support from broad declines in U.S. and global stock markets.

Forex

A six-session win streak for the U.S. dollar was snapped after sovereign bond yields jumped, following Treasury rates, helping to strengthen rivals to the greenback. After hitting a two-week low of $1.1463, the euro has regained the $1.15 handle and was last trading at $1.1516, compared with $1.1480 late Wednesday in New York, up 0.3%. “It’s primarily a yield-driven move,” said Craig Erlam, senior market analyst at Oanda. “After the spike in the U.S., we have seen European yields follow suit this morning.” Treasurys sold off sharply on Wednesday, sending yields, which move in the opposite direction of price, sharply higher. Global yields followed suit. Yields for the 10-year German government bond, known as bunds, traded back above 0.5%. The ICE Dollar Index, which measures the dollar against a basket of six other currencies, was trading at 95.76, after briefly topping 96 earlier in the session.

European Markets
Asian Markets

Earlier in the day, a quiet start turned into a rough day for Asian equities, with the overnight jump in global bond yields and the dollar on strong U.S. jobs data raising concerns about the region. While most Chinese indexes were still closed for the country’s public holiday, Hong Kong’s Hang Seng benchmark led most Asian indexes lower, sliding 1.8%. Japan’s Nikkei closed down 0.6%. India and Indonesia, both with slumping currencies this year, took the brunt of the soured sentiment: Indian’s main stock indexes were down 2%. Indonesian stocks were one of Asia’s worst-performing markets. Logging a fourth-straight drop, the first in a month, the Jakarta Composite Index fell the most since then in dropping 1.9% to 5756.62. Losers thumped gainers 305-90 as foreigners yanked a net IDR1.2 trillion amid the rupiah hitting fresh 20-year lows. Several Asian indexes fell more than 1%. As Japanese stocks reversed early gains amid broad selling in Asian equities, the Nikkei finished down 0.6% at 23975.62. Outperforming were SoftBank and Toyota, up 1.3% and 0.6%, respectively, after announcing a partnership to pursue mobility services in Japan. Meanwhile, banks jumped some 2% as the ongoing jump in Treasury yields pushed them up for JGBs. But exporter stocks were meek.

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