Monday: 6th August 2018

OPENING CALL: The Australian market looks to open higher with SPI Futures up 21 points.

The latest escalation in the U.S.-China tariff battle has some farmers worrying that China, among the world’s biggest markets for agricultural goods, will get used to buying its food elsewhere.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Amcor in Advanced Talks to Buy Bemis. Amcor is in advanced talks to acquire packaging rival Bemis, according to people familiar with the matter.

US Markets

U.S. stocks rose, lifting the S&P 500 to its fifth consecutive weekly gain, after a string of upbeat earnings helped reassure investors that the market is on solid footing. The Dow Jones Industrial Average added 136.42 points, or 0.5%, to 25462.58. The S&P 500 was up 13.13 points, or 0.5%, to 2840.35 while the Nasdaq Composite edged up 9.33 points, or 0.1%, to 7812.01. For the week, the Dow industrials rose less than 0.1%, the S&P 500 rose 0.8% and the Nasdaq advanced 1%. Stocks were steady after Labor Department data Friday showed U.S. nonfarm payrolls rose a seasonally adjusted 157,000 in July, less than the 190,000 that economists surveyed by The Wall Street Journal had expected. Still, over a broader period, job growth looks strong, analysts said-with the pace of hiring through the first seven months of this year rising from last year’s average through July. Robust economic data and corporate earnings have helped keep investors relatively optimistic in recent months, even as global trade tensions have ratcheted higher. After reporting solid revenue and profit gains this week, Apple became the first U.S. company to surpass $1 trillion in market value. On Friday, Kellogg shares jumped $2.27, or 3.2%, to $72.15 after the cereal maker raised its full-year guidance Thursday, and Dish Network soared 4.34, or 15%, to 34.20 after posting better-than-expected results.

Commodities

Gold prices edged higher after the latest monthly U.S. jobs report showed the economy added fewer jobs than expected while unemployment ticked lower. Front-month gold for August delivery added 0.3% to $1,214.20 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have fallen in seven of the past eight weeks and are near their lowest levels since July 2017, hurt by a stronger dollar that has gold more expensive for overseas buyers and worries that higher Treasury yields will make the metal less attractive to investors.

IRON ORE: 69.16s + 2.35 (September contract)

Oil Futures

Oil prices swung between small gains and losses before closing slightly lower and posting a small drop for the week as traders weigh conflicting supply signals. Light, sweet crude for September delivery closed down 47 cents, or 0.7%, at $68.49 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, declined 24 cents, or 0.3%, to $73.21 a barrel. U.S. prices had tumbled to a six week low on the back of data from the Energy Information Administration on Wednesday showing an unexpected rise in U.S. crude oil inventories, before rebounding Thursday. In addition to a rise in U.S. petroleum inventories, prices have come under pressure due to an uptick in production from the Organization of the Petroleum Countries-led Saudi Arabia-and Russia. Analysts are now debating whether U.S. crude has settled in a new trading range for the time being 7.6% off its multiyear highs hit earlier this year, with some suggesting the supply shortage fears that propelled a monthslong rally have eased. Russian crude and condensate production “increased sharply” in July by 150,000 barrels a day month-on-month, according to analysts at consultancy JBC Energy, while OPEC output rose by around 300,000 barrels a day last month. OPEC and 10 members outside the oil cartel, including Russia, agreed in late June to begin ramping up production last month after more than a year of holding back output. Investors are also trying to assess the impact of U.S. sanctions on Iran, which some thought would remove crude from the market. President Donald Trump said earlier this week that he would be willing to meet with Iranian President Hassan Rouhani.

Forex

The U.S. dollar saw subdued trading action, struggling for a clear direction, following the July jobs report. The ICE U.S. Dollar Index , which measures the greenback against six rivals, traded in a narrow band near its levels from Thursday, both ahead of and after the morning’s economic data. The gauge was last little changed in negative territory at 95.136, on track for a 0.5% gain for the week. The broader WSJ Dollar Index was down 0.2% at 88.69. Nonfarm-payroll numbers came in below consensus estimates at 157,000, compared with 195,000 expected by economists polled by MarketWatch. The unemployment rate ticked down to 3.9% from 4%, in line with expectations, and yearly hourly wages were unchanged. Separately, the July ISM nonmanufacturing index also missed consensus forecasts, coming in at 55.7. A reading of at least 50 indicates expansion. Otherwise, trade tensions were at the center of attention.

European Markets
Asian Markets

China said it would slap levies on $60 billion of U.S. goods if Washington moves ahead with tariff threats against Beijing. Its central bank also moved to stabilize the yuan. Earlier in the week, it was reported that the U.S. could raise tariffs on some $200 billion in Chinese goods to up to 25% from 10% previously announced. “The reasons for this looking at increasing the tariff percentage may well be down to the recent decline in the yuan which has likely cushioned some of the effects,” wrote Michael Hewson, chief market analyst at CMC Markets U.K. “Nonetheless it didn’t go down well with Chinese officials who responded by saying that they were ready to retaliate to any escalation.”

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