Wednesday: 3rd October 2018

OPENING CALL: The Australian market looks to open higher with SPI futures up 9 points.

U.S. stocks were mixed, with the Dow industrials setting a record high, and Nasdaq lower. U.S. government bonds rose on concerns in the eurozone over Italy. The dollar was stronger as the euro fell. Crude oil finished slightly lower, but still near four-year highs. And gold was higher, settling above $1,200.

 

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market
US Markets

The Dow Jones Industrial Average rose to a record, while major indexes in other regions of the world struggled, a sign of investors’ growing divergence in expectations between growth in the U.S. and elsewhere. Shares of Boeing, Caterpillar and 3M, manufacturers that have been sensitive to trade, led the Dow industrials higher, contributing to much of the index’s gain. Monday’s revamped North American trade pact between the U.S., Canada and Mexico helped spur the latest leg of the Dow’s climb, its fourth consecutive session of gains. The Dow’s push to fresh records stands apart from other regions of the world that continue to struggle with economic uncertainty and signs of slowing growth. The disparity is especially apparent in Europe, where stocks fell as investors worried whether Italy’s continuing economic turmoil will seep into public markets and the eurozone. The Dow industrials rose 123 points, or 0.5%, to 26774, a record that tops its previous watermark of 26753.50 set on Sept. 21. The S&P 500 was little changed after falling less than 0.1%, while the Nasdaq Composite slipped 0.5%.

Commodities

Meanwhile, gold settled back above $1,200 an ounce, as jitters surrounding Italy’s financial picture filtered into broader financial markets, lifting prices for the precious metal to their highest closing level in nearly two weeks. “Precious metal bears are getting burned by the sudden return of Italy’s huge public debt to the headlines,” said Adrian Ash, director of research at BullionVault. The European Commission raised concerns over the budget plans of the antiestablishment Italian government. Last week, the Italy’s government proposed a budget deficit target of 2.4% of its gross domestic product, which would triple the deficits proposed by previous governments. The budget plans are seen as putting Italy in conflict with the European Union’s stringent fiscal rules. “The speed of today’s rally in precious metals suggests rapid short-covering by hedge funds and other speculators who were betting against bullion,” said Ash. Against that backdrop, December gold rose $15.30, or 1.3%, to settle at $1,207 an ounce – the highest in nearly two weeks for a most-active contract, according to FactSet data. Gold futures fell 4.6% for the third quarter. They’re down roughly 7.8% for the year so far.

IRON ORE: 68.35s + 0.35 (November contract)

Oil Futures

Oil prices held steady near four-year highs as Washington’s successful renegotiation of a North American free trade agreement reassured investors global demand could remain strong as supplies begin to tighten. Light, sweet crude for November delivery ended seven cents, or 0.09%, lower at $75.23 a barrel on the New York Mercantile Exchange, marking the second-highest closing value of the year. Brent crude, the global benchmark, settled 0.2% lower at $84.80 a barrel. Both crude benchmarks closed nearly 3% higher Monday, with the U.S. benchmark settling at a four-year closing high of $75.30 a barrel. A last-minute trade deal with Canada paves the way for a three-way agreement including Mexico to revise the North American Free Trade Agreement under a new name, and diminishes any chances that President Trump might follow through on his threats to kill Nafta outright.

Forex

A popular U.S. dollar index extended a strengthening trend to a fifth day in a row, putting the benchmark near a six-week peak as its major rivals, notably the euro, weakened amid mounting political strife between Italy and the European Union. The ICE U.S. Dollar Index traded at intraday high of 95.731 before slipping to 95.515, up 0.2% on the day. A fifth daily gain would represent the longest win streak for the dollar index, which measures the buck against a half-dozen rivals, since the six-session period ended May 21, according to FactSet data. The euro, which is the most influential component of the dollar index, has been the predominant story, with the shared currency stumbling amid political uncertainty in Italy, which has been set in motion by a controversial budget proposal by the country’s government.

European Markets

Stocks in Europe stumbled, with banks among the biggest decliners due to concerns around their exposure to Italian debt.

Asian Markets

Earlier in the day, a downbeat mood echoed weak trading in Asia-Pacific, although Japan’s Nikkei was one of the few indexes to climb, rising 0.1% to a fresh 27-year high. With most Chinese exchanges still closed for the country’s public holiday, Hong Kong’s Hang Seng Index returned to trading with a 2.5% drop, partly in a delayed reaction to weak purchasing managers index figures released over the weekend. Investors on Monday reacted positively to the news late Sunday that the Trump administration had successfully renegotiated the North American Free Trade Agreement with Canada, as it did with Mexico in recent weeks. South Korean stocks slid into the close, finishing just off session lows amid broad — and at times heavy — selling in Asian equities. The Kospi fell 1.3% to 2309.58, the biggest drop since mid-August. Korean Air Lines and Korea Electric Power fell about 3% each on higher oil prices, while chip maker SK Hynix dropped 2.7%. But steelmaker Posco fell just 0.3% and Hyundai Motor eased 0.4%.

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