Thursday: 26th July 2018

OPENING CALL: The Australian market looks to open higher with SPI Futures up 13 points.

Australian shares look set to open higher on the back of a rise on Wall Street overnight as US President Donald Trump secured concessions from the European Union on trade.
U.S. stocks jumped to session highs in the last half hour of trading after a European Union official said President Donald Trump had secured concessions to avoid a trade war.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

With no momentum behind an early push, Australian stocks underperformed the region as the major banks faltered anew following soft consumer inflation data and consumer shares struggled. Eating into yesterday’s rebound, the S&P/ASX 200 fell 0.3% to 6247.6 with only the resources sectors showing meaningful gains following overnight strength in commodity prices. Westpac led the big banks lower with a 1% drop as it built on this week’s retreat following news it’s cutting wealth-management prices for new customers. Meanwhile, the consumer-staples and health-care sectors each declined 1.5%.

US Markets

U.S. stocks jumped to session highs in the last half hour of trading after a European Union official said President Donald Trump had secured concessions to avoid a trade war. As part of the negotiations, the EU is set to agree on lowering industrial tariffs and work on more LNG exports from the U.S. The Dow Jones Industrial Average rose 0.4%, while the S&P 500 was up 0.7% and the Nasdaq Composite added 0.9%. Investors are balancing uncertainty over trade conflicts with what is shaping up to be a strong corporate-earnings season. About 28% of companies in the S&P 500 have reported results for the latest quarter, and earnings are up 20% so far for companies in the index that have reported. Coca-Cola and United Parcel Service both posted stronger-than-expected revenue growth, pushing their shares up 1.9% and 6%, respectively. But Boeing shares slumped 2.3% as its results weren’t as strong as some analysts and investors expected. The aerospace giant, though, raised its revenue outlook for 2018 despite the trade tensions the company has said will affect its input costs. AT&T , meanwhile, reported lower revenue in its latest quarter as its satellite-TV business suffered major losses. Its shares dropped 4.5%. The technology sector rose 1% ahead of Facebook’s earnings report after the closing bell. Investors will be looking for signs the questions over the social media giant’s handling of user data have affected its business.

Commodities

Front-month gold for July delivery rose 0.6% to $1,231.40 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have recently plumbed their lowest levels in a year, hurt by confidence in the U.S. economy and a strong dollar. The yellow metal is down 9.6% from its 2018 peaks hit in January. But some analysts think recent declines could provide a buying opportunity if the dollar’s recent rally reverses. A stronger dollar makes gold and other commodities denominated in the U.S. currency more expensive for overseas buyers. On Wednesday, the WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, fell 0.4%. Bets that the Federal Reserve will continue gradually raising interest rates have also hurt gold, which struggles to compete with yield-bearing assets when rates rise. However, some analysts say President Donald Trump’s claim last week that he isn’t happy with the central bank’s rate increases and the dollar’s strength could limit further declines in gold as investors wait for more signals from the Fed.

IRON ORE: 66.15s + 0.44 (August contract)

Oil Futures

Oil prices rose Wednesday after government data showed a large decline in U.S. inventories of crude oil and an increase in demand for gasoline even as the summer driving season prepares to slow down. Light, sweet crude for September delivery ended 78 cents, or 1.1%, higher at $69.30 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, rose 0.7% at $73.93 a barrel. The Energy Information Administration on Wednesday released a weekly report that showed U.S. inventories of crude oil fell by a hefty 6.1 million barrels to 405 million barrels, while analysts surveyed by The Wall Street Journal were only expecting, on average, a 2.9-million-barrel decline. Oil prices surged nearly 2% higher to a seven-session intra-day high of $69.70 a barrel shortly after the bullish report was released. But oil prices pared some of those gains Wednesday afternoon as investors dug deeper into the data. Martin King of GMP FirstEnergy in Calgary said the somewhat muted response to such a large decline in oil inventories may be because most of the overall decline came from the West Coast region known as PADD 5, of which California plays a key role. That region saw a 4.5-million-barrel decline, while the Gulf Coast region known as PADD 3 — which is deemed much more important by investors given its proximity to the oil-rich Permian Basin of West Texas — saw a negligible, not-so-bullish 65,000-barrel decline.

Forex

The dollar fell intraday against emerging-market currencies as investors awaited a meeting between President Donald Trump and European Commission President Jean-Claude Juncker. The dollar was recently down 1% against the Brazilian real and lost 1.2% against the Turkish lira. It was off 0.5% against the Mexican peso while also losing ground against other emerging-market currencies. Some investors are hopeful Wednesday’s meeting can defuse recent trade tensions between the U.S. and Europe. Worries over an intensifying global trade fight have hit emerging-market assets particularly hard, weighing on the prices of stocks and currencies throughout the developing world. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.38% at 87.98.

European Markets

European stocks closed broadly in the red as trade tensions weighed ahead of European Commission President Jean-Claude Juncker’s talks with President Trump. The Stoxx Europe 600 index fell 0.3%, or 1.01 points to 387.17 while Germany’s DAX declined 0.9% and France’s CAC-40 dropped 0.1%.

Asian Markets

In Asia, the Shanghai Composite Index was down 0.1% following yesterday’s gains on new stimulus measures from Beijing. Meanwhile, Japan’s Nikkei was up 0.5% and Hong Kong’s Hang Seng rose 0.9%.

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