Tuesday: 10th July 2018

OPENING CALL: The Australian market looks to open higher with SPI Futures up 19 points.

Australian shares are set to start higher, tracking Wall Street as expectations of a strong US earnings season helped lift the Dow to its best session in a month.
The Dow Jones Industrial Average headed toward its best day in a month as investors focused on a strong jobs report from late last week and the coming earnings season, despite heightened trade tensions.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australia’s two largest miners helped propel the country’s stock benchmark to fresh 10 1/2-year highs and a third day of gains as the market underperformed the sharp bounces seen in many other parts of Asia Pacific. The S&P/ASX 200 rose 0.2% to 6286 after briefly cracking 6300 earlier. The materials sector took the lead today, with Rio Tinto gaining 1.4% and BHP Billiton jumping 2.1% following reports that BP was the frontrunner to buy BHP’s U.S. shale assets. Meanwhile, the recovery by the major banks also continues to lend support. But, industrials were weighed down by weakness in U.S. peers Friday.

US Markets

The Dow Jones Industrial Average headed toward its best day in a month as investors focused on a strong jobs report from late last week and the coming earnings season, despite heightened trade tensions. Recent tariffs have kept investors on edge, with the U.S. and China slapping levies on $34 billion of each other’s exports on Friday. Some fear the protectionist trade policies will slow corporate activity and crimp global growth, hurting a range of assets from stocks to commodities. Still, some analysts say they expect the countries to eventually reach a compromise on trade, instead focusing on the latest economic and corporate earnings figures. Investors said Friday’s monthly jobs data was a positive for stocks, as it showed strong hiring and contained gains in wage growth, indicating inflation is still in check. Now, many are looking ahead to second-quarter earnings season, which begins in earnest Friday with results from some of the nation’s largest banks, to see how the trade threat is affecting companies. In the last half hour of trading the Dow industrials climbed 1.37%, on track for its largest one-day climb since June 6. The S&P 500 added 0.86%, while the tech-heavy Nasdaq Composite rose 0.81%. All three indexes were on track for a sixth day of gains in the past seven sessions. Trading has been quiet lately, with Friday the lowest-volume day for a full session this year on exchanges owned by the New York Stock Exchange and Nasdaq. In the coming earnings season, analysts will also be looking for signs that corporate profits might be peaking. Earnings at companies in the S&P 500 are expected to increase 20.7% from a year earlier, according to Thomson Reuters I/B/E/S. That would be the second-best quarterly gain in over seven years.

Commodities

Gold for August delivery was up 0.3% to $1,259.60 a troy ounce on the Comex division of the New York Mercantile Exchange. Copper prices climbed Monday, as investors second-guessed some of the industrial metal’s heavy losses of recent weeks. Copper for September delivery was up 0.9% to $2.85 a pound. Prices for copper, which is extensively used in manufacturing and construction, suffered their worst four-week stretch since 2011 through Friday, tumbling 15% after hitting a four-year high as investors focused on trade threats.

IRON ORE: $63.10s – 0.27 (August contract)

Oil Futures

Nymex crude settled higher, with global prices boosted by ongoing supply issues in Libya, while signs of rising output in the U.S. weighed. Light, sweet crude for August delivery was recently up 0.07% to $73.85 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 1.24% to $78.07. Unplanned supply outages in Libya and Canada, which started earlier this month, are helping support the market with prices holding near more than three-year highs. Expectations that U.S. sanctions against Iran and the continued economic crisis in Venezuela could further deplete global oil supplies were also bullish. Rising output from the Organization of the Petroleum Exporting Countries and Russia is offsetting the tighter supply outlook for now, however. The number of rigs drilling for oil in the U.S. rose by 5 to 863-a proxy for activity in the sector-according to data published on Friday by oil-field services firm Baker Hughes, a GE company. The Energy Information Administration forecasts U.S. crude production to average a record 11.8 million barrels a day next year, as the industry responds to higher oil prices and logistical constraints are addressed.

Forex

The British pound fell after a second prominent supporter of Britain’s departure from the European Union quit Prime Minister Theresa May’s government. But investors appear unsure how to react, glad that two supporters of a so-called hard Brexit have left Mrs. May’s government but concerned that this could lead to a challenge to the Prime Minister. The pound fell 0.2% to $1.3256 and 0.3% against the euro after Boris Johnson resigned as foreign secretary. It had earlier gained after David Davis, the minister in charge of Britain’s negotiations to leave the EU, left the government Mr. Davis said he was quitting because he couldn’t support a plan agreed by the cabinet on Friday which would lead to what critics have called a Brexit in name only. For some investors, his departure was good news given it suggested that this plan would be more likely to happen. Investors have long hoped that the U.K. would retain strong links to its largest trading partner. But Mr. Johnson’s departure stoked fears of a rebellion against Ms. May.

European Markets

European shares rose on positive economic news and dovish comments from the European Central Bank. The Stoxx Europe 600 gained 0.6%, or 2.23 points, to 384.59 while the DAX rose 0.4%, as did the CAC 40. CMC Markets noted that ECB President Mario Draghi reiterated that interest rates are likely to remain unchanged for another year or so. Daiwa Capital Markets say German trade data were encouraging, consistent with industrial production figures for May released last week.

Asian Markets

In Asian trading, China’s Shanghai Composite Index rose 2.5% and Hong Kong’s Hang Seng was up 1.3% following a week of declines for both indexes. Shares of Chinese smartphone maker Xiaomi edged lower in its Hong Kong trading debut however, as the broader market rose. Japan’s Nikkei rose 1.2% and South Korea’s Kospi was up 0.6%.

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