Monday: 5th February 2018

OPENING CALL: The Australian market looks to open lower with SPI Futures down 65 points.

The Australian share market looks set to open lower than one per cent lower after Wall Street’s two key indexes plunged more than two per cent in their last session.
Worries about the impact of a tightening job market on the prospects for inflation and a surge in bond yields have sent investors fleeing equities with the Dow Jones Industrials Average swooning almost 666 points, for its biggest daily percentage loss in 20 months.
The dollar rose Friday, as investors reacted to stronger-than-expected U.S. jobs data.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

The Australian share market looks set to open lower than one per cent lower after Wall Street’s two key indexes plunged more than two per cent in their last session.
At 0700 AEDT on Monday, the share price futures index was down 65 points, or 1.07 per cent, at 6,006.
In economic news on Monday, the ANZ’s monthly job ads figures, the Ai Group’s Australian Performance of Services Index, and the CoreLogic capital city house prices survey for the week just ended are all due out.
In equities, Argo Investments is expected to release its half-year results.
The Australian market on Friday made solid gains after a surge in energy stocks and improvements for the big banks turned around a mixed overnight lead out of the US.
The benchmark S&P/ASX200 index rose 31.3 points, or 0.51 per cent, at 6,121.4 while the broader All Ordinaries index was up 31 points, or 0.5 per cent, at 6,229.8 points.

US Markets

Worries about the impact of a tightening job market on the prospects for inflation and a surge in bond yields have sent investors fleeing equities with the Dow Jones Industrials Average swooning almost 666 points, for its biggest daily percentage loss in 20 months.
It was the biggest daily point fall in the Dow since December 2008 during the financial crisis.
With Friday’s rout, Wall Street’s three major indexes logged their biggest weekly losses in two years, after closing at record highs the previous week. The S&P 500 and Dow saw their worst weeks since early January 2016 while Nasdaq had its worst week since early February 2016.
Stock price losses accelerated after the US Labor Department reported employment grew more than expected in January with the biggest wage gain in more than 8-1/2 years. The picture of workers commanding higher salaries fuelled expectations that inflation is on the rise, which could prompt the Federal Reserve to take a more aggressive approach to rate hikes this year.
The Dow Jones Industrial Average fell 2.54 per cent, to 25,520.96, the S&P 500 lost 2.12 per cent, to 2,762.13 and the Nasdaq Composite dropped 1.96 per cent, to 7,240.95.

Commodities

Gold prices fell Friday after the latest jobs report showed that the U.S. economy added more jobs than expected and that wage growth picked up.
Front-month Gold for February delivery closed down 0.8% at $1,333.70 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have fallen slightly since hitting their highest level since August 2016 last week, as the dollar has stabilized and Treasury yields have surged.
IRON ORE: $72.46 +1.06(March contract)

Oil Futures

Oil prices are no longer trading in their own world.
After months of moving off signs of global supply and demand, crude markets are falling back into step with broader markets, taking cues over the past two weeks from fluctuations in the U.S. dollar.

Forex

The dollar rose Friday, as investors reacted to stronger-than-expected U.S. jobs data.
The Wall Street Journal Dollar Index, which measures the U.S. currency against a basket of 16 others, was up 0.7% at 83.58.
U.S. hiring remained robust in January and wage growth picked up to its strongest pace since the recession. Nonfarm payrolls rose a seasonally adjusted 200,000, the Labor Department said Friday. Economists surveyed by The Wall Street Journal had expected 177,000 new jobs in January.
Weeks of strong U.S. data have bolstered the case for the Federal Reserve to raise rates at a faster pace this year. Expectations of tightening monetary policy tend to boost the dollar, as rising rates make the currency more attractive to yield-seeking investors.
Based on Friday’s jobs numbers, “it looks more and more likely that we will have to revise up our call for three Fed rate hikes this year to four,” analysts at ING wrote in
a note to clients.
Australian dollar:
The Australian dollar is back under 80 US cents as the downward movement in the US dollar seems to have stopped and weaker metals prices offered no help.
At 0635 AEDT on Monday, the Australian dollar was worth 79.14 US cents, down from 80.01 US cents on Friday.

European Markets

Stocks in Europe plunged on US data showing the strongest annual wage growth since 2009, as the strong labour market report boosts the chances the Federal Reserve will raise rates four times this year instead of the three hikes analysts had expected.
Deutsche Bank’s disappointing results pulled the heavyweight banking sector down to help European shares post their biggest weekly loss in more than a year, while Britain’s top share index sealed its weakest week in nine months on BT’s results.
The pan-European FTSEurofirst 300 index of leading regional shares closed down 1.37 per cent and the blue-chip FTSE 100 index in London closed down 0.63 per cent at 7,443.43 and sealed its worst week in nine months
Disappointing earnings updates were to blame for the bulk of declines on the day.
Germany’s DAX fell 1.68 per cent to close at 12,785.16.

Asian Markets

Asian shares stumbled, with Korean and Japanese benchmark indices falling 1.7 per cent and 0.9 per cent, respectively.
Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.43 per cent while Japan’s Nikkei index closed down 0.90 per cent per cent at 23,274.53.
Hong Kong’s Hang Seng Index ended Friday marginally down, but posted its biggest weekly loss in two months, as rising bond yields triggered volatility in global equities.
At close of trade, the Hang Seng index was down 0.12 per cent at 32,601.78. For the week, the Hang Seng lost 1.7 per cent, its biggest weekly fall in two months.
However, key Chinese indexes moved higher. China’s main Shanghai Composite index closed up 0.44 per cent at 3,462.08 points while its blue-chip CSI300 index ended up 0.60 per cent at 4,271.23.
The S/NZX50 Index rose 0.4 per cent, to 8,415.29.

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