Tuesday: 24th July 2018

OPENING CALL: The Australian market looks to open higher with SPI Futures up 18 points.

Australian shares look set to open higher despite Wall Street falling overnight as investors showed concern about the effects of international trade tensions on the US dollar.
The S&P 500 rose, driven by shares of financial companies as investors dumped government bonds, pushing Treasury yields higher.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

Australian shares look set to open higher despite Wall Street falling overnight as investors showed concern about the effects of international trade tensions on the US dollar. In futures trading, the SPI200 futures contract was up 18 points, or 0.29 per cent, to 6,186 points at 0700 AEST, pointing to a higher open for the Australian stock market on Tuesday. On Wall Street the Dow Jones Industrial Average is down 13.83 points, or 0.06 per cent at 25,044 points. The Australian dollar is buying 73.80 US cents, down from 74.16 US cents on Monday.

US Markets

The S&P 500 rose, driven by shares of financial companies as investors dumped government bonds, pushing Treasury yields higher. Stock investors have been cautiously optimistic in recent days amid strong earnings results and economic data. More than one-third of the companies in the S&P 500 are scheduled to report results this week, and investors will be watching for signs that tariffs are affecting corporate decision making. Analysts will also scrutinize economic data releases, as the gross domestic product report for the second quarter and other barometers of the U.S. economy are unveiled this week. Corporate earnings so far have come in above expectations, with 87% of companies posting stronger-than-expected profits and more than two thirds beating revenue expectations, according to FactSet. Earnings are up 21% from the year-earlier period, which would mark the second highest growth rate since the third quarter of 2010, according to the data provider’s research. The S&P 500 added 5.15 points, or 0.2% to 2806.98, led higher by shares of financial and technology companies. The Nasdaq Composite climbed 21.67 points, or 0.3%, to 7841.87. The Dow Jones Industrial Average shed 13.83 points, or less than 0.1%, to 25044.29. Treasury prices remained under pressure Monday amid concerns that international appetite for U.S. debt could wane, after White House comments on monetary policy sent the dollar and government bond prices sliding last week. That gave ammunition to the financials sector in the S&P 500, which was the biggest gainer, advancing 1.3%. Shares of banks like Wells Fargo, JPMorgan Chase, Northern Trust and Bank of America led the way. Bank stocks tend to benefit when Treasury yields rise because higher interest rates lift banks’ net interest margins, a key measure of their lending profitability. Though the U.S. continues to spar with other countries on trade, the back-and-forth hasn’t weighed broadly on domestic stock indexes. The S&P 500 is up about 5% this year. Three big auto makers-Ford, General Motors and Fiat Chrysler-and tech giants Facebook and Amazon.com are set to report results this week. Google parent Alphabet reported strong earnings after the market closed Monday, sending its shares higher in after-hours trading. Tech stocks have led the market higher and investors will be tracking whether they can maintain impressive growth rates and continue to glide higher. Still, equities have seesawed in recent months, as investors react to heightened trade rhetoric and the imposition of U.S. tariffs and retaliatory measures from China and Europe.

Commodities

Meanwhile, gold prices resumed their downward course, halting a brief recovery that started last week. Front-month contracts for July delivery fell 0.5% to $1,224 per troy ounce at the Comex division of the New York Mercantile Exchange. Prices last week fell to the lowest point in over a year, before turning higher on Friday and briefly on Monday morning.

IRON ORE: 65.36s + 0.61 (August contract)

Oil Futures

Oil prices swung between gains and losses before closing lower after heightened rhetoric between the U.S. and Iran added to uncertainty about crude exports from the Islamic Republic. Light, sweet crude for September delivery settled 37 cents, or 0.5%, lower at $67.89 a barrel on the New York Mercantile Exchange, after falling in three consecutive weeks. Brent crude, the global benchmark, fell 1 cent, or less than 0.1%, to $73.06 a barrel. Prices have recently fallen from multiyear highs hit earlier this year with investors worried that the supply disruptions that have fueled much of the rally might be easing. But President Donald Trump late Sunday tweeted a message to his Iranian counterpart, Hassan Rouhani, warning that threats against the U.S. will be met with consequences few in history have suffered. The tweet appeared to refer to comments Mr. Rouhani had made warning against hard-line U.S. policies against Iran. Mr. Trump in May withdrew the U.S. from a 2015 international agreement to curb Iran’s nuclear program, setting the stage for the reimposition of economic sanctions that are expected to hinder Iran’s oil industry. Analysts have estimated up to one million barrels a day out of Iran’s more than 2.5 million barrels a day of crude exports could be at risk. The U.S. has threatened to slap sanctions on countries that don’t cut oil imports from Iran to “zero” by Nov. 4. While supply uncertainty surrounding other countries including Libya and Venezuela has boosted oil, some investors say the wide range of outcomes regarding Iranian oil exports could spur further market volatility. At the same time, oil prices have been tempered by rising supply from the Organization of the Petroleum Exporting Countries-led by Saudi Arabia-and producing allies like Russia following a decision in late June to begin ramping up output after more than a year of holding back production. That and other “neutralizing factors,” including the “escalation of the global trade conflict and possible negative effects on oil demand,” have limited the market’s reaction to the latest threats by Mr. Trump against Iran, Commerzbank analysts said in a note to clients.

Forex

The dollar edged higher after Treasury Secretary Steven Mnuchin played down comments President Donald Trump made last week about the Federal Reserve and currency markets. Mr. Mnuchin said Saturday he and the president still “fully” support Fed independence. He also said the U.S. isn’t trying to interfere in foreign-exchange markets after Mr. Trump accused China and the European Union of manipulating their currencies to make their economies more competitive. Mr. Trump expressed frustration last week that rising interest rates had caused the dollar to strengthen and said he hoped the Fed would stop tightening. A stronger dollar makes U.S. exports relatively more expensive on world markets. The WSJ Dollar index was ended up 0.12% at 88.34.

European Markets

Sergio Marchionne’s exit as the leader of Ferrari is likely to upend an Italian sports-car legend whose strategy he revolutionized-including a production ramp-up, an IPO and the planned launch of an SUV.

Asian Markets

China’s resilient domestic demand has helped absorb ever-increasing steel production. But waning fiscal support for programs like infrastructure will gradually see more of the metal pushed overseas, said Sabrin Chowdhury at BMI Research. China’s net steel exports fell 15% from a year earlier in the first half, and she said they could start growing “by 2019.” That as the country’s surplus output is seen reaching 92.8 million tons this year, estimates Chowdhury, which is nearly equal to India’s 2017 steel output. China is by far the world’s biggest producer, making roughly half of global steel output annually.Bank of Japan Is Wary of Big Shifts Though its low long-term interest rates leave lenders little opportunity for profit, Japan’s central bank is likely to stick to the contours of its current policy at its meeting next week. Chinese Telecom Giant Could Dial Up the Biggest IPO Since Alibaba. China Tower, the monopoly behind China’s vast network of cellphone towers, started marketing what could be the world’s largest initial public offering in four years.

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