Tuesday: 2nd October 2018

OPENING CALL: The Australian market looks to open higher with SPI futures up 7 points.

U.S. stocks were mixed, with the S&P 500 and Dow industrials higher. U.S. government bonds were lower on eased concerns about the U.S. economy. The dollar was little changed. Crude oil finished higher, with Brent crude near a four-year high. And gold was lower on the day and was down 0.9% for last month.

 

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market
US Markets

U.S. stocks rose on the first day of the fourth quarter after the U.S. and Canada reached a last-minute deal late Sunday to revise the North American Free Trade Agreement. Investors had been watching trade developments closely for weeks as the U.S. and China ramped up tariffs against each others’ goods and negotiations over Nafta were mired in uncertainty. The fact that the U.S. was able to forge agreements with other large trading partners in recent months -including the European Union, Mexico and now Canada – has helped alleviate investors’ fears about global trade. The Dow Jones Industrial Average rose 192.90 points, or 0.7%, to 26651.21, extending advances after posting its biggest one-quarter gain of the year. The S&P 500 climbed 10.61 points, or 0.4%, to 2924.59, stopping just short of its record, while the Nasdaq Composite fell 9.05 points, or 0.1%, to 8037.30, pressured by losses in a number of biotechnology stocks. Relief over Nafta helped lift shares of automobile makers and industrial conglomerates, which analysts have said look particularly vulnerable to a global trade conflict.

Commodities

Meanwhile, gold prices ended lower to start October trade after bullion chalked up its sixth straight monthly loss. The yellow metal was knocked back to six-week lows in recent sessions as the ICE U.S. Dollar index revived its 2018 march higher, including a 0.2% increase in Monday dealings as markets kept tabs on the updated North American Free Trade Agreement deal. The gold bulls have to be discouraged “that news of a NAFTA deal has failed to provide the metals markets with classic physical buying off improving macroeconomic conditions,” analysts at Zaner Precious Metals, wrote in a daily note. December gold fell $4.50, or 0.4%, to settle at $1,191.70 an ounce after trading as low as $1,188.10. Prices, based on the most-active contracts, were down 0.4% for last week and down 0.9% for last month, FactSet data showed. Based on the most-active contract’s settlement of $1,254.50 on June 29, prices lost 4.6% for the third quarter.

IRON ORE: 68.40s + 0.29 (October contract)

Oil Futures

U.S. crude prices rose to their first multiyear high in more than three months, the latest sign that bullish optimism is spreading throughout the oil market as investors anticipate supply shortages. Light, sweet crude for November delivery climbed $2.05, or 2.8%, to $75.30 a barrel on the New York Mercantile Exchange, hitting its highest level since November 2014 and posting a multyear peak for the first time since June 29. Brent crude, the global benchmark, added $2.25, or 2.7%, to $84.98 and is also at a nearly four-year high. Both benchmarks have climbed in three consecutive sessions, with traders increasingly betting that U.S. sanctions against Iran and lower output from producers such as Venezuela and Libya will cause supply deficits. With Iranian crude exports already falling, some analysts expect a further decline ahead of the Nov. 4 deadline for companies to stop buying oil from the Islamic Republic to comply with U.S. sanctions. Bets that large producers such as Saudi Arabia won’t be able to easily fill a supply gap have pushed both U.S. and global prices up about 25% for the year.

Forex

The Canadian dollar powered ahead after Canada and the U.S. reached a last-minute deal on the North American Free Trade Agreement and as oil prices continued their climb. The pending agreement allows Canada to join the accord reached by Mexico and the U.S. in late August. The Canadian dollar took off on the news, with one dollar last buying C$1.2799 versus C$1.2911 late Friday in New York. The U.S. unit traded at its lowest versus the loonie, as the Canadian unit is widely known, since May 22, according to FactSet. The Mexican peso traded at its strongest level versus the dollar since early August but then retraced gains. The dollar fetched 18.724 pesos in recent trade, up from 18.7135 pesos late Friday in New York. The ICE U.S. Dollar Index, which measures the currency against a basket of six major rivals, was up 0.2% at 95.279. The dollar rose to Y113.95 against the Japanese yen from Y113.69 late Friday in New York. The euro traded at $1.1578, down from $1.1616 late Friday. The dollar was little changed versus major rivals after the Institute for Supply Management’s manufacturing index fell to 59.8% in September from 61.3%.

European Markets
Asian Markets

More Asian stock markets fell than gained to start the fourth quarter. Although there were holidays in Hong Kong and China, some other markets reacted to soft September economic data from China. Japan’s Nikkei rode a weaker yen to a 27-year closing high and trade worries were set aside in Taiwan as that market notched a 1-month best. The worst market was the Philippines’ benchmark, down 1% following September’s 7.4% slide, the most in two years. The Nikkei Stock Average rose 0.5% and Korea’s Kospi Index slipped 0.2%. Indian shares snapped three-session losses as a move by the central bank to ease liquidity boosted the sentiment. The S&P BSE Sensex rose 0.8% to 36526.14. Bank stocks led the gainers, with Yes Bank jumping 9.7%, while State Bank of India and ICICI Bank each climbed 3%. Gains in technology and auto stocks also helped. Major technology and financial stocks in Taiwan helped the island’s benchmark index outperform most others in the region to start the fourth quarter. The Taiex rose 0.4% to 11051.80, the highest close since Aug. 31. Lens maker Largan Precision, which slumped 23% in September for its worst month in seven years, rebounded 2.9%.

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