Thursday: 23rd August 2018

OPENING CALL: The Australian market looks to open higher with SPI futures up 17 points.

U.S. stocks edged lower and gold and Treasurys edged higher amid political turmoil surrounding President Trump. The dollar fell as Fed officials expressed trade concerns in released minutes. Crude oil rose after a larger than expected drop in inventories.

Overnight Summary


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Australian Market
US Markets

The S&P 500 edged slightly lower, even as the broad index extended its bull run from the depths of the financial crisis to become the longest ever. Uncertainty around the political fortunes of President Trump weighed on investors, contributing to a momentary lull in trading activity in what is typically a slow period for the stock market, several money managers and analysts said. It was the lowest full day of trading volume for the year, with just 5.2 billion shares changing hands, well below the year’s average trading volume of 6.8 billion. That caused the S&P 500 to bounce around the flatline before closing down less than 0.1% Wednesday. Even with the tepid trading activity, the S&P extended its bull run from March 9, 2009, to 3,453 days to become the longest rally in U.S. history, surpassing the previous record set between 1990 and 2000. Still, investors didn’t cheer the milestone too much as they tried to gauge the fallout of two criminal convictions against people who were closely tied to Mr. Trump, his former personal attorney Michael Cohen and former campaign manager Paul Manafort. While the convictions shouldn’t substantially alter the stock market’s landscape, money managers and analysts said the developments raise the likelihood of further turbulence ahead for Mr. Trump heading into the midterm elections, and that uncertainty would likely weigh on the minds of investors. The S&P 500 fell 1.14 points, or less than 0.1%, to 2861.82, dashing a four-session winning streak. The Dow Jones Industrial Average fell 88.69 points, or 0.3%, to 25733.60 to also snap a four-day run of gains, while the Nasdaq Composite rose a fifth consecutive session, adding 29.92 points, or 0.4%, to 7889.10. The S&P 500’s bull-run milestone isn’t concrete just yet though. Some analysts contend a new closing high is needed to ensure the index’s run is in fact the longest ever. The S&P 0.4% away from its previous closing high set on Jan. 26, and if the index suffered a 20% draw down before notching a new record close, several analysts would consider Jan. 26, the last S&P 500 closing record, as the final day of the rally. For now, investors say the stock-market landscape remains favorable for major U.S. indexes to move higher. Unemployment remains low and economic growth has been robust so far this year, while companies are reporting gains in sales and revenue. With about 95% of S&P 500 companies having reported earnings, profits overall grew about 25% from a year earlier, according to FactSet, ahead of analysts’ early estimates.

Commodities

In other commodity news, gold prices edged higher, with a weaker U.S. dollar and political tension helping to attract buyers. The front-month contract for August rose 0.3% to $1,196.30 a troy ounce at the Comex division of the New York Mercantile Exchange. The more-active October contract also rose 0.3%. Prices briefly rose above $1,200, which traders said was an important milestone, before pulling back.

IRON ORE: 66.70 – 0.20 (September contract)

Oil Futures

Oil prices rose to a two-week high after government data showed that crude stockpiles fell by more than analysts expected last week. Light, sweet crude for October delivery gained 3.1% to $67.86 a barrel on the New York Mercantile Exchange, the highest close since Aug. 7. Brent, the global benchmark, advanced 3% to $74.78. On Wednesday, the U.S. Energy Information Administration reported that the amount of crude in storage fell by 5.8 million barrels, exceeding average analyst forecasts for a 2-million-barrel drop. The American Petroleum Institute, an industry group, estimated Tuesday that stockpiles fell by 5.2 million barrels. Prices have risen for five straight sessions, as the market has rebounded from bearish inventory data a week earlier. Analysts said prices have also been supported by a weaker U.S. dollar. Commodities like crude oil are priced in dollars and become cheaper for foreign buyers when the U.S. currency falls. Renewed trade negotiations between the U.S. and China, set for Wednesday in Washington, and looming U.S. sanctions on Iran’s oil industry have boosted market sentiment as well.

Forex

The dollar extended losses, after minutes from the Federal Reserve’s latest meeting showed growing concerns among officials over how trade will affect economic growth. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.07% at 89.18. Officials at the meeting pointed to trade disputes as “an important source of uncertainty and risks” and highlighted a long list of concerns, including potential harm to business sentiment and a reduction in U.S. households’ purchasing power. Fed officials also signaled that the central bank will likely raise rates next month, as widely expected.

European Markets
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