Tuesday: 21st August 2018

OPENING CALL: The Australian market looks to open lowerr with SPI futures down 3 points.

Australian stocks were quiet Monday, with the benchmark S&P/ASX 200 moving in a 20-point range around Friday’s 10 1/2-year closing high.
The Dow Jones Industrial Average headed toward its highest close since early February on Monday, lifted by investor optimism about the latest deal activity and trade developments.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australian stocks were quiet Monday, with the benchmark S&P/ASX 200 moving in a 20-point range around Friday’s 10 1/2-year closing high. But it rose a further 0.1% to 6345 as many markets in the region logged bigger gains. The standout was the materials sector rebounding 1.1%, cutting this month’s decline to 4.6%. Consumer discretionary pulled back 0.9%. Meanwhile, financials retreated 0.5%, but health care rose 0.7%.

US Markets

The Dow Jones Industrial Average headed toward its highest close since early February on Monday, lifted by investor optimism about the latest deal activity and trade developments. A busy year for mergers and acquisitions continued as PepsiCo agreed to buy home-carbonation company SodaStream International for $3.2 billion, the latest move by the company to diversify away from sugary sodas and salty snacks. Pepsi shares were down 0.2%, while SodaStream added 9.4%. Meanwhile, Tyson Foods said it would buy Keystone Foods, a supplier of chicken nuggets to McDonald’s and other companies, for $2.2 billion as part of its strategy to bolster its protein offerings. Tyson shares rose 1.3%. Despite worries about weakness in emerging markets and the trade fight between the U.S. and China, stocks have shown resilience this summer and M&A activity has surged. The Dow industrials climbed 0.4% in the last half-hour of trading to 25776, on track for the highest close since Feb. 1, while the S&P 500 added 0.3%. Both indexes have climbed in three straight sessions, with the S&P 500 closing in on its January record. The tech-heavy Nasdaq Composite was recently up 0.2%. Investors are now waiting to see if the S&P 500 can set a record after the index came within 0.5% of that level earlier this month before retreating. Stocks tied to commodities and global growth lifted large indexes Monday, with the energy, materials and industrials sectors rising. Some analysts expect strong economic and earnings figures to continue buoying large indexes and were encouraged by the latest trade headlines late last week. Negotiators from the U.S. and China have been working on talks to try to end their trade standoff ahead of planned meetings between President Trump and Chinese leader Xi Jinping at multilateral summits in November, The Wall Street Journal reported. Worries about a growth-hindering trade war have hurt stocks around the world and other risk assets such as commodities in recent months. Minutes from the Federal Reserve’s August meeting, due later this week, as well as the Kansas City Fed’s annual Jackson Hole symposium, could show how central bankers view the latest developments, analysts said.

Commodities

Metal prices started the week higher, as concerns about economic troubles in China and Turkey and their knock-on effect on other emerging markets appeared to ease. Front-month copper contracts for August delivery rose 1.5% to $2.6635 a pound at the Comex division of the New York Mercantile Exchange, the third consecutive day of gains after tumbling early last week. The more-active September contract also rose 1.5%. The gold price for August climbed 0.9% to $1,186.80 a troy ounce but was still down from a week ago, with the October contract also higher. Both metals last week hit lows not seen in more than 12 months, when spiraling tensions between Washington and Ankara raised fears about emerging-market contagion at the same time that weak data pointed to risks to the growth of the Chinese economy. Those developments pushed the U.S. dollar higher against emerging-market currencies, making dollar-denominated commodities more expensive for other currency holders. But after Beijing and Washington raised the possibility of low-level trade talks, those foreign-exchange moves started to reverse Friday.

IRON ORE: 68.07s + 0.12 (September contract)

Oil Futures

U.S. oil prices roseas investors looked ahead to a meeting this week between U.S. and Chinese officials that may start to to resolve a trade fight that sparked fears of weaker global economic growth and less demand for oil. Light, sweet crude for September delivery ended 0.8% higher at $66.43 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, rose 0.5% to $72.21 a barrel. U.S. oil prices have ended lower on a weekly basis in each of the past seven weeks, and are now about eight dollars below a multi-year high of $74 a barrel reached in late June. Partly fueling those declines have been fears a U.S.-China dispute over tariffs could escalate into a full blown trade war that would eat into global oil-consumption rates. But after months without bilateral talks on the issue, U.S. and China officials are set to meet this week, and hopes are running high it will lay the groundwork for an enduring trade agreement. The biweekly Genscape report showed crude oil storage rose to 26.7 million barrels as of Friday, up 519,000 from the previous Friday, according to a person who saw the report. This compares to the previous week’s official government data that showed a large increase of 1.6 million barrels, so some investors viewed this new Genscape data as price supportive. Investors Monday were also closely watching oil-rich Venezuela after the government late Friday announced a widely criticized economic plan that includes a huge devaluation of its currency. Many of the measures began to be implemented Monday. At the same time, U.S. oil producer ConocoPhillips said Monday it has settled a long-running legal dispute with Venezuela’s state oil company PDVSA, saying it will recover $2 billion. As part of the deal, Houston-based ConocoPhillips said it would suspend further legal actions against PDVSA, which could lead to the freeing up of some PDVSA assets, including oil supplies. Some analysts said this deal could weigh on oil prices as it may mean more oil supply coming to market. But Phil Flynn at Price Futures in Chicago said he doesn’t anticipate much overall impact on global oil prices.

Forex

The dollar edged lower, as investors awaited the Jackson Hole symposium later this week to get a better read on how central bankers view the global economy. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.2%. After rallying more than 4% this year, the dollar looks stretched against currencies such as the euro and yen, said Mark McCormick, North American head of FX Strategy at TD Securities, in a note to investors. The U.S. currency is around 2% overvalued against its peers, Mr. McCormick said. Signs that Federal Reserve officials are growing doubtful that the current run of solid economic data will last could weigh on the dollar, analysts said. In emerging markets, the dollar rose 1.5% against the Turkish lira and gained 1.3% against the Brazilian real.

European Markets

European shares closed 0.6% higher as hopes for U.S.-China trade talks boosted sentiment. The Stoxx Europe 600 gained 2.17 points to 383.23 as the DAX advanced nearly 1% and the CAC 40 added 0.65%. “Now that earnings season is out of the way, a clearer picture of the outlook for stocks has formed, and while we still have things to worry about, trade wars especially, corporate earnings look robust enough to support further equity gains,” said Chris Beauchamp at IG. Oil-storage group Royal Vopak was the top riser, up 4.7%. Accountancy-software business Sage Group was the biggest faller, down 6.9%.

Asian Markets

Asian equities logged another day of broad gains, with two noted exceptions: Japan and the Philippines. Japan’s Nikkei was hampered by end-of-week strength in the yen. That left the benchmark down 0.3% to start what could become a fourth-straight week of declines. Meanwhile, the Philippines’ benchmark lost 1.1%, its third drop of at least that much in the past six sessions. China, which saw an up-and-down session, finished with gains. Hong Kong indexes, meanwhile, rose more than 1%, and Indonesia’s JSX added 1.9% following a Friday holiday.

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