Monay: 13th August 2018

OPENING CALL: The Australian market looks to open higher with SPI futures up 11 points.

Australia’s stock benchmark struggled most of the day, with a late-day fade also hitting other Asia Pacific indexes capping the week’s action.
The S&P 500 and Dow Jones Industrial Average fell, snapping a five-week streak of gains, as renewed trade tensions and a slide in the Turkish lira rippled across global markets.

Overnight Summary

Market Quotes by TradingView

Each Market In Focus

Australian Market

Australia’s stock benchmark struggled most of the day, with a late-day fade also hitting other Asia Pacific indexes capping the week’s action. The S&P/ASX 200 fell 0.3% to 6278.4, cutting the week’s gain to 0.7%. Helping that advance was the 3.5% bounce in CBA amid the bank’s better than-feared fiscal-year report. Energy stocks were the biggest drag of the day as oil prices fell further overnight. Utilities also lagged as AGL fell a further 2.3% after yesterday’s weak forecast. But Baby Bunting was a standout, soaring 39% on its results.

US Markets

The S&P 500 and Dow Jones Industrial Average fell, snapping a five week streak of gains, as renewed trade tensions and a slide in the Turkish lira rippled across global markets. Trading had been relatively quiet for much of the week with the corporate earnings season winding down, keeping major indexes in a relatively narrow range through Thursday. But stocks around the world lost traction Friday as selling accelerated in the Turkish lira, sending the currency to a fresh low against the dollar and raising fears that the country may be unable to repay debt denominated in other currencies. The Dow industrials slumped 196.09 points, or 0.8%, to 25313.14. The S&P 500 slipped 20.30 points, or 0.7%, to 2833.28 sliding further from its January high, and the technology-heavy Nasdaq Composite dropped 52.67 points, or 0.7%, to 7839.11, breaking an eight-session winning streak. For the week, the Dow industrials dropped 0.6%, while the S&P 500 posted a 0.2% loss and the Nasdaq advanced 0.3%. Although markets wobbled Friday, many investors and analysts remain optimistic about the nine-year bull market. With results in from 91% of companies, the S&P 500 is on track to report the second fastest pace of earnings growth since the third quarter of 2010, according to FactSet. Meanwhile, a measure of expected stock swings climbed. The Cboe Volatility Index, sometimes referred to as Wall Street’s “fear gauge,” jumped 17% in its biggest one-day percentage climb since June.


The price of gold slipped to a new one-year low after the latest rise in the U.S. dollar continued to put pressure on the metal. The price of gold initially rose in response to the Turkish situation as its attraction to investors in times of uncertainty appeared to insulate it from a fall, but it ultimately slipped to close 80 cents or 0.07% lower to $1211.10 an ounce. Latest U.S. consumer pricing data showed another rise in living costs, also hurting the case for gold. Gold has now fallen for five straight weeks and is down 7.3% this year. Copper for August delivery, meanwhile, fell 0.8% to $2.7325 a pound on the Comex division of the New York Mercantile Exchange. In other commodity markets, U.S. soybean farmers are due to harvest a record crop this year, even as Chinese tariffs hurt demand for American oilseed. The U.S. Department of Agriculture forecast that U.S. soybean production in 2018-19 would rise to an all-time high of 4.6 billion bushels, up from 4.4 billion bushels last year and more than expected. Soybean yields are due to rise from last year. The larger bounty will contribute to a growing domestic surplus, the agency said, with stockpiles in 2018-19 expected to climb to a record 785 million bushels, 80% above the same time a year earlier. Global soybean stocks are due to increase, according to the USDA. Soybean futures for August tumbled 4.7% to $8.46 a bushel at the Chicago Board of Trade after Friday’s report. Wheat futures fell 3.1%

IRON ORE: 68.80s – 0.93 (September contract)

Oil Futures

Oil prices rose as a forecast for rising global crude demand offset lingering concerns about trade tensions. Light, sweet crude rose 1.2% to $67.63 a barrel at the New York Mercantile Exchange, rebounding from a seven-week low. Brent crude, the global oil benchmark, gained 1% to $72.81 a barrel on London’s ICE Futures exchange. The International Energy Agency on Friday raised its forecast for global oil demand growth by 110,000 barrels a day to 1.5 million barrels for 2019. Its monthly report also said global supply had risen by 300,000 barrels a day last month, mainly because of higher output from Russia and higher output from the Organization of the Petroleum Exporting Countries. The IEA noted that there were risks to the demand forecast from the escalating trade dispute along with any rally in prices caused by supply constraints. Separate data showed that the number of active oil rigs in the U.S. rose by 10 to a total of 869 in the most recent week of data. The uptick in activity suggested that U.S. output could rise, which would pressure prices.


The Turkish lira plunged to its lowest level ever on worries about Ankara’s stability, sending tremors through Europe and emerging markets amid renewed jousting between the country’s leader and President Trump. The lira dropped as much as 17% against the dollar, extending a tumble that ranks as one of the steepest in world markets this year. President Recep Tayyip Erdogan defended his unorthodox policies in two speeches Friday, vowing to prevail in what he called an “economic war.” Mr. Trump meanwhile said he would double steel and aluminum tariffs on Turkey, adding another punitive measure in his campaign to free a U.S. pastor detained in Turkey and exacerbating worries of a trade war between the two NATO allies. “Our relations with Turkey are not good at this time!” he wrote on Twitter. In the U.S., the dollar rose to a one-year high and the Dow Jones Industrial Average slumped 252 points or 1% to 25256, its third straight decline. In late afternoon trading, a dollar bought 6.46 lira, vs. 3.79 lira at the start of the year. In Europe, Turkey’s woes hit shares in Spanish, Italian and French banks with large exposure to the Turkish economy. The immediate impact of a weaker Turkish economy on the global economy is expected to be relatively small. Carsten Hesse, economist at German bank Berenberg, said that even a 20% fall in eurozone exports to Turkey would only subtract only 0.1 percentage point from the bloc’s growth. But some fund managers are concerned that fears about Turkey will trigger outflows from other emerging-market countries and push the dollar even higher, while stock investors are weighing the risk of a Turkish economic rout on the banking systems of nearby countries.

European Markets

The Stoxx Europe 600 fell 1.1%, following Asian markets lower. European banking stocks dropped on concerns about lenders’ exposure to debts in Turkey. As markets fell, analysts and investors debated how far the impact could spread amid other concerns about the effects of a rising dollar on emerging markets and a trade dispute between the U.S. and China. Still, the level of overall exposure of European banks to Turkey remains limited, according to Carsten Hesse, European economist for Barenberg Bank. “That the fallout from Turkey could cause any credit crunch in any part of the eurozone seems highly unlikely,” Mr. Hesse wrote in a note Friday. Mr. Hesse said that even if eurozone goods exports to Turkey were to fall about 20%, that would subtract no more than 0.1 percentage point from growth in the currency bloc.

Asian Markets

Asian markets were mostly lower, as Hong Kong’s Hang Seng fell 0.8% and South Korea’s Kospi shed 0.9%. Japan’s Nikkei dropped 1.3%. The move came as the country returned to solid growth in the April-June quarter, a trend economists said was likely to continue on the back of higher wages and consumer spending unless trade conflicts with the U.S. worsen. The world’s third-largest economy expanded at an annualized pace of 1.9% in the second quarter of 2018 after a revised 0.9% contraction in the first quarter, which ended the longest stretch of growth in 28 years. Meanwhile, the Shanghai Composite Index edged slightly higher, ending a week in which Chinese stocks have seesawed amid escalating trade concerns between the U.S. and China.

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