Friday 30 November 2018

OPENING CALL: The Australian market looks to open unchanged.

Australia’s S&P/ASX 200 index shared the bullish mood gripping equities markets in the wake of an apparent dovish shift by Fed Chairman Powell.
U.S. stocks turned higher intraday after the minutes from the Federal Reserve’s latest meeting showed officials appeared more tentative about their path in raising interest rates.

Overnight Summary

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Each Market In Focus

Australian Market

Australia’s S&P/ASX 200 index shared the bullish mood gripping equities markets in the wake of an apparent dovish shift by Fed Chairman Powell. The benchmark index rose 0.6% to 5758.4 on Powell’s hints of a slower pace of Fed rate hikes next year, although some economists viewed the market response as too aggressive and felt the Fed isn’t deviating from its prior script. The materials sector outperformed, with Rio Tinto rising 1.7% to A$73.25 after giving the go-ahead to a new iron-ore mine in the Pilbara. BHP added 1.2% to A$30.98 and Fortescue gained 2.3% to A$4.03. Building materials supplier CSR advanced 3.3% to A$3.12 as investors bet on possible capital management following the sale of its underperforming glass business. However, Bingo Industries fell 5.3% to A$2.15 after Australia’s antitrust regulator raised competition concerns about its proposed purchase of a waste-management rival.

US Markets

U.S. stocks turned higher intraday after the minutes from the Federal Reserve’s latest meeting showed officials appeared more tentative about their path in raising interest rates. The Dow Jones Industrial Average added 21 points, or 0.1%, to 25388. The S&P 500 rose 0.1% and the tech-heavy Nasdaq Composite climbed 0.2%. All three indexes had been lower ahead of the release of the minutes, following a big rally Wednesday when the S&P 500 surged 2.3% on dovish comments by Federal Reserve Chairman Jerome Powell. The indexes are now on track to extend their winning streak to four sessions; the last time all three major indexes rose for four consecutive days was in late August. Minutes from the Fed’s November meeting revealed officials intend to raise interest rates next month. However, they appeared less certain about maintaining a pace of quarterly increases after that, as the bankers debated how trade tensions and corporate debt could affect economic growth. The release of the minutes follows Mr. Powell’s comment Wednesday that said there is “no preset policy path” concerning future rate increases, and that new economic data will guide the bank’s decisions.


Copper prices edged lower following their best day in more than two months as investors awaited new signals on trade and monetary policy. Front-month copper for December delivery fell 0.6% to $2.7780 a pound on the Comex division of the New York Mercantile Exchange. Prices have slumped more than 15% from their June four year highs on fears that tariffs and higher interest rates will weaken the global economy, lower demand for industrial commodities critical to manufacturing and construction. But copper surged more than 3% Wednesday, climbing alongside other risk assets like stocks after Federal Reserve Chairman Jerome Powell said interest rates are “just below” broad estimates of a neutral level. Mr. Powell seemed to retreat from a comment from early October that described the benchmark interest rate as a “long way” from neutral, easing some investor worries that the Fed will aggressively boost rates and threaten economic growth. Minutes from the Fed’s most recent meeting late Thursday showed officials appeared more tentative about maintaining a pace of quarterly increases after next month’s meeting, where another boost to rates is widely expected. Analysts are also monitoring trade signals ahead of the Group of 20 summit starting Friday in Buenos Aires. President Trump and Chinese President Xi Jinping are expected to meet to discuss the monthslong tariff fight between the U.S. and China, and some investors hope a path to a resolution could boost the outlook for global growth. More broadly, some analysts think copper and other industrial metals could benefit from long-term supply shortages amid slumping investment in new mines and possible disruptions such as labor strikes.

IRON ORE: 64.15s – 0.51 (December contract)

Oil Futures

Oil prices jumped after reports that Russian officials are signaling the likelihood of a production cut in tandem with Organization of the Petroleum Exporting Countries. Light, sweet crude for January delivery rose 2.3% to $51.45 a barrel on the New York Mercantile Exchange, reversing losses after falling below $50 a barrel for the first time in almost 14 months. Brent, the global benchmark, was settled up 1.3% at $59.51, moving off its lowest level since late October 2017. Oil rebounded on reports that Russia is negotiating with Saudi Arabia, the de facto leader of OPEC, on how much Russian oil output needs to be curtailed and when. Reuters reported that Russian energy ministers had held a meeting with domestic oil chiefs on Tuesday in advance of the meeting of OPEC nations and their allies on Dec. 6 to discuss potential cuts. The news came ahead of a planned meeting between Russian President Vladimir Putin and the Saudi Crown Prince Mohammad Bin Salman at the Group of 20 nations summit in Buenos Aires this weekend. Oil investors are watching for signs of collaboration between the two countries to pull back on production, as global supply has climbed and weighed on prices. Russia’s reported acceptance of the need for a production cut came despite remarks from Mr. Putin on Wednesday that his country would be able to live with Brent prices at $60 a barrel. Mr. Putin’s remarks displaying an apparent lack of concern about lower oil prices followed tweeted remarks last week from President Donald Trump that welcomed lower oil prices, comparing them to “a big tax cut for America and the world.” Saudi officials have in recent days expressed their reluctance to unilaterally cut production, although recent conversations between Energy Minister Khalid Al-Falih and oil officials from Libya, Iraq and Nigeria — all countries that have expressed unwillingness to cut production — suggest Saudi Arabia has been rallying support for a cut, said UBS’s Mr. Staunovo. The news of a potential cut by OPEC and Russia came as a continuing stream of figures showed rising global oil inventories. U.S. Energy Information Administration figures released on Wednesday signaled a larger rise in U.S. oil stocks than many market participants had expected. The increase of 3.58 million barrels over the past week marked the 10th consecutive week of rising inventories, and was similar to the 3.45 million barrel rise flagged by the American Petroleum Institute the previous day.


The dollar edged lower intraday, extending its losses from Wednesday when comments from Federal Reserve Chairman Jerome Powell reassured investors that the central bank will take a cautious approach to raising interest rates next year. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.1% at 90.20. The index fell 0.5% Wednesday, dropping sharply after Mr. Powell said interest rates are “just below” estimates of a neutral level that would neither speed nor slow economic growth. That choice of words was notable because Mr. Powell had said in early October that the Fed’s benchmark interest rate was a “long way” from neutral, leading to speculation that the Fed could keep raising rates at a fairly deliberate pace. The euro was recently up 0.1% against the dollar at $1.1379, while the dollar was down 0.3% against the yen at 113.318 yens per dollar.

European Markets

European stocks were up, with the Stoxx Europe 600 up 0.1% to 357.85, after ending little changed on Wednesday. The German DAX edged up 0.1% to 11,312.10, while the French CAC rose 0.4% to 5,005.01. The FTSE 100 was up 0.6% at 7,048.77 after shedding 0.2% on Wednesday. Deutsche Bank AG was raided by German prosecutors and police on Thursday, amid suspicions that the bank helped clients set up offshore accounts in tax havens and failed to inform authorities to potential money laundering. All British banks passed the Bank of England’s Brexit stress test, which modeled for the most severe outcome of a no-deal Brexit. Royal Bank of Scotland Group PLC was one of the best, while Barclays PLC and Lloyds Banking Group PLC were among the worst.

Asian Markets

Japanese stocks were up for the fifth straight session, with the Nikkei 0.4% higher. Among individual stocks, Nintendo was up more than 4% and SoftBank gained more than 3%. Still, some risk persists. With the dollar sitting around ¥113.42 during Asian trading compared with ¥113.68 in late New York trade, the 20-year Japanese government bond’s yield was lower at 0.605%. Hong Kong’s Hang Seng Index gave up early gains to close down 0.8%. Index heavyweight Tencent fell nearly 1% while property developer Sun Hung Kai Properties fell 1.5%. China’s benchmarks were slightly higher initially, with investors are on their toes for the weekend meeting between presidents Donald Trump and Xi Jinping. The Shanghai Composite and the Shenzhen Composite swung between slight gains and losses before a lower finish for both. Nomura analysts remain wary of the trade summit, calling the meeting “a high-stakes dinner but the menu might not include a trade deal.” South Korea’s Kospi rose 0.2% as Samsung gained slightly. Taiwan’s Taiex gained 0.01% as Apple Inc. suppliers Largan Precision and Taiwan Semiconductor advanced. Singapore’s benchmark index was up slightly, ending off higher early levels.

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