Monday: 23rd July 2018

OPENING CALL: The Australian market looks to open lower with SPI Futures down 18 points.

Australian shares look set to open lower on the back of a disappointing end to the week on Wall Street on Friday.
U.S. stocks inched lower Friday, ending the week little changed, as White House comments on monetary policy sent the dollar and government bond prices sliding.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australian shares look set to open lower on the back of a disappointing end to the week on Wall Street on Friday. In futures trading, the SPI200 futures contract was down 18 points, or 0.29 per cent, to 6,207 points in latest trading, pointing to a lower open for the Australian stock market on Monday. On Wall Street the Dow Jones Industrial Average finished the week down 6.38 points, or 0.03 per cent at 25,058 points. The Australian dollar is buying 74.21US cents, up from 73.71 US cents in trading on Friday. The AUD/USD will be guided this week by Australia’s 2Q CPI report on Wednesday. Consensus around the headline CPI inflation rate points to 0.5% growth on-quarter, bringing the annual rate to 2.2% and comfortably within the RBA’s 2-3% target range. But underlying inflation pressures are likely to remain soft, with a 0.5% rise in the quarter or 1.9% on year. CBA says this would reinforce expectations that a RBA interest rate hike is still a fair way off and limit gains for the Aussie dollar.

US Markets

U.S. stocks inched lower Friday, ending the week little changed, as White House comments on monetary policy sent the dollar and government bond prices sliding. Major indexes struggled to break higher throughout the week as investors parsed dozens of earnings reports and rebukes from President Donald Trump on Federal Reserve policy. A White House official told CNBC that Mr. Trump was worried the Fed would raise interest rates twice more this year. The comments came after Mr. Trump had earlier Friday said China and the European Union were “manipulating their currencies and interest rates lower” and on Thursday criticized the Fed for raising interest rates — departing from the convention presidents have followed of not commenting on monetary policy. The Dow Jones Industrial Average fell less than 0.1% on Friday, rising 0.2% for the week. The S&P 500 fell 0.1% on the day and added less than 0.1% for the week, while the Nasdaq Composite edged down less than 0.1% on the day and advanced less than 0.1% for the week. Even as uncertainty around trade and monetary policy has weighed on the markets this year, analysts and investors say upbeat earnings and economic data are helping them remain cautiously optimistic. S&P 500 firms are on track to report their second fastest pace of earnings growth since 2010 for the second quarter, according to FactSet, pointing to sustained momentum in the U.S. even as growth elsewhere around the world has faltered.

Commodities

In other commodity markets, a sharp drop in the dollar helped gold rebound after it closed at its lowest level of the year a day earlier. Front-month gold for July delivery added 0.6% to $1,229.50 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have fallen almost 10% from their January peaks, hurt by a stronger dollar and worries that higher Treasury yields will make gold less attractive to investors as interest rates rise.

IRON ORE: 64.75s + 0.07 (August contract)

Oil Futures

Oil prices rose after top exporter Saudi Arabia said it wouldn’t flood the market with crude in an effort to cap on prices. Light, sweet crude for August delivery rose 1.4% to settle at $70.46 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, gained 0.7% to $73.07 a barrel. Saudi Arabia’s governor to the Organization of the Petroleum Exporting Countries, Adeeb al-Aama, said that concerns the oil cartel and its allies could oversupply the market with more output are “without basis.” He added that Saudi oil exports this month should be on par with June levels, while in August exports should decline by around 100,000 barrels a day. “It was not long ago that the Saudis said they would make sure that there is adequate oil supply in the market, and now they are trying to reassure those who think they could oversupply the market,” analysts at ING Bank wrote in a note Friday. Prices were also buoyed Friday after data from Baker Hughes showed that the number of rigs drilling for oil in the U.S. fell by five in the past week to 858, signaling a slowdown in production.

Forex

The dollar fell after President Donald Trump commented on the U.S. currency’s strength on Twitter. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, ended down 0.7%. The dollar extended its losses later in the day, after CNBC reported that President Donald Trump is worried the Federal Reserve will raise interest rates two more times this year, citing a White House official. On Thursday, Mr. Trump expressed frustration that rising interest rates had caused the currency to strengthen and said he hoped the Federal Reserve would stop tightening. The barrage of comments reignited concerns that the White House will use the U.S. currency as a weapon in a growing trade battle with China and Europe, threatening a rally in which the dollar has gained around 4.8% since mid-April. While markets may look through occasional forays into foreign-exchange policy, a steady drumbeat of dollar-negative tweets or comments will be harder to ignore, the report said.

European Markets
Asian Markets

In Asian trading Friday, the Shanghai Composite Index rose Friday but posted its eighth weekly decline in nine. Japan’s Nikkei finished down 0.3%.

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