Monday: 12th February 2018 - The Australian share market looks set to Ignore Wall Street's positivity and to open half a percent lower.

OPENING CALL:  The Australian share market looks set to Ignore Wall Street’s positivity and to open half a percent lower. At 0700 AEDT on Monday, the share price futures index was down 28 points, or 0.49 percent, at 5724

 U.S. stocks ended a wild week with gains but suffered their steepest weekly losses in
more than two years, with major indexes dropping more than 5% and investors bracing for
more volatility ahead.
  Friday’s session was again marked by heightened volatility with the Dow swinging 1,022
points from its high to its low, before surging in the final minutes of the trading
session to end the day up 330 points, or 1.4%, to 24191. After spending much of the
afternoon in the red, stocks turned higher after the S&P 500 approached a key technical
level.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market
 Australian stocks had their worst week in 2 years even as the market held up better
than most any other market in the region today after Wall Street’s latest slump. Down as
much as 1.8% early, the S&P/ASX settled down 0.9% at 5838. It fell 4.6% for the week.
Energy again led today’s declines, sliding 2.1% as oil continued its retreat. But gold
miners bucked the trend amid modest gains in the precious metal. Elsewhere, Commonwealth
Bank fell a 5th-straight day, losing 5.6% in week where its F1H results largely
disappointed. But rival NAB ticked higher again as analysts pointed to value in the stock
after yesterday’s steady F1Q update.
US Markets
  U.S. stocks ended a wild week with gains but suffered their steepest weekly losses in
more than two years, with major indexes dropping more than 5% and investors bracing for
more volatility ahead.
  Friday’s session was again marked by heightened volatility with the Dow swinging 1,022
points from its high to its low, before surging in the final minutes of the trading
session to end the day up 330 points, or 1.4%, to 24191. After spending much of the
afternoon in the red, stocks turned higher after the S&P 500 approached a key technical
level.
  Friday’s rally followed a weeklong bout of sharp stock swings that left many investors
feeling battered. Not only did stocks fall more than 3% on Monday and Thursday, the Dow
swung at least 500 points every day during the week, adding to the anxiety. The Dow and
S&P 500 formally entered correction territory Thursday–a fall of more than 10% from
their highs two weeks ago.
  “It feels like I’ve been shelled all week by artillery,” said Michael Antonelli, equity
sales trader at Baird. On his trading floor in Milwaukee, Wis., he said stress levels
among traders are high and few people are able to get up to go to the bathroom, let alone
grab lunch, because of the market volatility.
  The Dow’s 5.2% drop for the week marked its steepest decline since January 2016.
Meanwhile, the S&P 500 on Friday rose 1.5%, and the Nasdaq Composite added 1.4%. Their
losses for the week were 5.2% and 5.1%, respectively.
  The moves come as major indexes around the world were on track to post their worst
weeks in years. The Dow is set to fall more than 7%, which would mark its biggest
one-week drop since October 2008. In Asia, the Hang Seng lost 9.5% in the past week, its
worst week in more than nine years, while the Kospi Composite Index tumbled 6.4%, its
largest one-week decline since 2012.
  A week of dramatic swings left many traders and investors feeling battered. Sparked by
inflation fears last week, the selloff spilled over into Monday’s trading as Wall
Street’s fear gauge doubled, clobbering exchange-traded products that investors had used
to bet on the continued stability of stock prices.
  Though major indexes bounced back Tuesday, they couldn’t hold on to gains later in the
week, and on Thursday the Dow and S&P 500 slid into correction territory , marking 10%
falls from their Jan. 26 highs.
  “It feels like I’ve been shelled all week by artillery,” said Michael Antonelli, equity
sales trader at Baird. On his trading floor in Milwaukee, Wis., he said stress levels
among traders are higher, few traders are able to get up to go to the bathroom, let alone
grab lunch, because of the stock-market volatility.

The Dow Jones Industrial Average fell more than 700 points intraday as worries about rising interest rates again rattled markets.
A shaky day in the bond market appeared to spook equity investors, as the Dow industrials recently dropped 600 points, or 2.4%, to 24293. Earlier in the session, the
Dow fell as much as 704 points. The yield on the benchmark 10-year U.S. Treasury note was at 2.848%, near its highest level since January 2014, from 2.843% on Wednesday, according
to Tradeweb.
Fears that a pickup in growth and inflation could force central banks to tighten monetary policy more quickly than expected have driven government-bond yields higher
throughout the year. That, in turn, can pressure stock prices as fixed-income interest payments become more attractive than stock dividends.
Similar concerns sparked the tumble in stocks last week when data showed wage growth accelerating at the fastest rate since 2009 — a sign that long dormant inflation could
be picking up, analysts said. Since then, stocks have taken a wild ride, giving up January’s big gains and flirting with correction territory.

Commodities
Copper prices fell for the fourth straight session Friday, as swelling inventories
pushed the base metal to its worst week since November 2014 and its lowest close since
mid-December.
  Front-month copper for February delivery declined 1.5%, to $3.0245 a pound, on the
Comex division of the New York Mercantile Exchange. Prices are 8% off their four-year
highs hit in late December, and have gotten hit hard this week with stocks and other risk
assets falling and a rise in inventories around the world.
  Copper’s price weakness came from building stocks in London Metal Exchange-licensed
warehouses, some analysts said. LME inventories are up 22% so far this week, at their
highest level since September 2016, according to Alastair Munro, a broker at Marex
Spectron.
  The industrial metal’s recent declines have come as stocks around the world have had
their worst week in years. Some investors have said the stock-market volatility could be
affecting appetite for riskier assets like commodities. On Tuesday and Friday, the days
following more than 1,000-point declines for the Dow Jones Industrial Average, base
metals have also fallen.
  “We are seeing the same pattern play out this time around as well, although not with
the same intensity as what we saw earlier in the week, ” said Edward Meir, a strategist
at INTL FCStone, in a note to clients.
  Oil prices have also tumbled this week, weighing on copper because many investors trade
the two commodities in a single basket. U.S. crude was down 3.1% Friday, bringing this
week’s losses to 9.5%.
  Investors will be keeping an eye on economic data out of China moving forward, as the
country is the world’s largest consumer of industrial metals. Some analysts expect
trading activity to pick up after the Lunar New Year holiday late next week.
  Some investors still see robust global economic growth and the possibility of supply
disruptions with mining labor contracts up for renegotiation supporting copper prices
moving forward.
  Among precious metals, front-month gold for February delivery closed down 0.3%, to
$1,313.10 a troy ounce, its fifth day of declines in the last six sessions. The dollar
rebounding from multiyear lows has weighed on the precious metal by making it and other
commodities more expensive for overseas buyers.
  On Friday, the WSJ Dollar Index, which tracks the U.S. currency against a basket of 16
others, was up less than 0.1%.
  Some analysts have said concerns about how higher interest rates will affect gold
prices have also hurt the precious metal, which struggles to compete with yield-bearing
assets such as Treasurys as borrowing costs rise.
  March wheat fell 1.6% to settle at $4.49 a bushel.
Oil Futures
Oil prices slid below $60 a barrel, posting their biggest weekly slump in more than two
years, as sharp swings in other financial markets spilled over and investors faced an
onslaught of U.S. production.
  U.S. crude futures fell 9.55% this week. On Friday alone, prices fell by $1.95, or
3.19%, to $59.20 a barrel on the New York Mercantile Exchange. Brent crude, the global
benchmark, fell by $2.02, or 3.12%, to $62.79 a barrel on Friday — the biggest one-day
drop since July.
  Earlier this year, it had seemed that nothing could knock oil off its upward
trajectory. Surging economic growth around the world has created more appetite for oil
and fuel, helping propel oil prices to their highest level in more than three years in
January. U.S. prices rose to more than $66 a barrel, a 55% rally from a low in June.
Meanwhile, Brent topped $70.50 last month.
  But after six straight days of declines, oil prices are now back to where they were in
December.
  Volatility in equity markets has weighed on oil prices this week. U.S. stocks rebounded
toward the end of the day Friday, but the Dow Jones Industrial Average still posted its
biggest weekly drop since 2008.
  “There’s a sense of nervousness right now. People are starting to look at whether there
will be some kind of contagion — what’s out there?” said Ric Navy, senior vice president
for energy futures at R.J. O’Brien & Associates LLC.
  One of the biggest shifts in the oil market has been a string of data pointing to an
unrelenting rise in U.S. oil production — something investors have largely looked past
earlier this year.
  Another 26 oil rigs went to work this week, according to Baker Hughes, a GE Company —
the biggest weekly jump since January, 2017.
  This week, the U.S. Energy Information Administration raised its forecast for
production this year to 10.6 million barrels a day. That is up about 300,000 barrels a
day from what it expected just a month ago and would best a 1970 record by about 1
million barrels a day. The agency said output already rose to 10.25 million barrels a day
last week — the highest ever.
  Investors had amassed record net bullish positions in oil in recent weeks, betting that
cutbacks by the Organization of the Petroleum Exporting Countries, escalating
geopolitical tensions, and growing economies would do away once and for all with a glut
of oil that weighed on the market for more than three years.
  But they have been retreating from those bets, according to the most recent data from
the Commodity Futures Trading Commission.
  Some investors said they are watching to see whether the stock market’s tumble affects
how much consumers are spending, and what that means for oil demand.
  “If we see some consumer spending pattern change, that could have a downside
consequence, but right now we’re not too worried,” said Darwei Kung, portfolio manager of
the Deutsche Enhanced Commodity Strategy Fund. “The underlying economic numbers are very
robust.
Forex
The Australian dollar has regained some lost ground against the
US dollar which itself has preserved its recent gains.
   At 0640 AEDT on Monday, the Australian dollar was worth 78.12 US cents, up from 77.76
US cents on Friday.
   The US dollar on Friday lifted to finish its strongest week against a basket of
currencies in nearly 15 months, as some traders piled into the greenback in a week of
tremendous swings felt in stock and bond markets around the world, Reuters said.
   The dollar’s advance was supported by some stabilization in US stock prices.
   Westpac’s Imre Speizer says the US dollar, along with bond yields, stayed firm on
Friday.
   “The USD index closed up 0.2 per cent, near its three-week high …. (while the) AUD
ranged between 0.7760 and 0.7830,” he said in a morning note.
   He said there was little on the calendar to pose any real risk for the markets on
Monday, but he was not optimistic the local currency would continue to rise.
   The Aussie dollar is also higher against the yen and the euro.
   “Only a tentative bottom at 0.7760, momentum is still negative,” he said..
European Markets
European shares extended their losses Friday as an upbeat start on Wall Street fizzled
out.
France’s CAC-40 fell 1.4% and Germany’s DAX was off 1.2%, while all the
region’s other major indices were in the red.

European stocks dropped, taking their cues from a selloff on Wall Street as well as a plunge in oil prices that weighed on shares of the region’s major energy companies.
The Stoxx Europe 600 index fell 1.6% to close at 374.03, partly erasing a 2% rally from Wednesday, when the benchmark broke a string of seven straight declines. The pan-European
index is now on track for a 3.6% weekly slump, which would be its worst since February 2016.
Germany’s DAX 30 index slumped 2.6% to 12,260.29, and France’s CAC 40 index fell 2% to 5,151.68. The U.K.’s FTSE 100 ended down 1.5% to 7,170.69.
European stocks had opened in negative territory, but losses deepened in the afternoon when Wall Street opened with steep losses as volatility returned to grip the market.
Concerns over rising inflation and rising bond yields have weighed on traders’ minds this week.

Asian Markets
On Friday, Chinese stocks posted steep declines, with the Shanghai Composite falling to
its lowest since May and ending down 4.1%. Hong Kong’s stock benchmarks were also
pressured by selling in China as the Hang Seng Index fell 3.1%.
  The bearish sentiment flowing from U.S. markets was exacerbated by traders looking to
book in profits and exit positions ahead of the Lunar New Year holiday at the end of next
week, said Dickie Wong, executive director of research at Kingston Securities.
  Japan’s Nikkei closed down closed down 2.3%, falling 8.1% for the week, the most in two
years, as haven flows into the yen also pressured that country’s stocks. The yen has
risen 1% against the dollar this week.
  Short sellers are helping fuel today’s declines in Japan, said Kyoya Okazawa, head of
institutional clients for global markets in Asia-Pacific with BNP Paribas. “This is not
systematic selling; It’s people creating shorts today. There’s still some leverage
positions that need to be worked out.”

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