Wednesday: 11th July 2018

OPENING CALL: The Australian market looks to open higher with SPI Futures up 16 points.

An extended rally on Wall Street look set to bolster Australian stocks to a better start after strong results from PepsiCo signalled a positive US earnings season ahead.
U.S. stocks rose notched their seventh session of gains in the past eight trading days as investors looked to what is expected to be another strong corporate earnings season.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

An extended rally on Wall Street look set to bolster Australian stocks to a better start after strong results from PepsiCo signalled a positive US earnings season ahead. The local Australian share price index futures rose 0.3 per cent or 16 points, to 6,227 on Wednesday, but mining stocks could hamper the rise on overnight weakness in base metal prices. The Australian benchmark lost 0.4 per cent on Tuesday. The Australian dollar was worth 74.59 US cents at 0820 AEST, slipping from 74.64 on Tuesday

US Markets

U.S. stocks rose notched their seventh session of gains in the past eight trading days as investors looked to what is expected to be another strong corporate earnings season. The Dow Jones Industrial Average climbed 0.6%, the S&P 500 added 0.4%, and the Nasdaq Composite rose less than 0.1%. The blue-chip index had its best day in a month Monday, and all three indexes have climbed in recent sessions, despite uncertainty over trade threats with China. Two sectors that have underperformed this year — consumer staples and utilities — were among the leaders in the S&P 500, rising 1.3% and 1%, respectively. Financials, the only sector in the red, fell 0.4%. Many investors are looking ahead to the second-quarter earnings season, which unofficially kicks off Friday, when three of the biggest U.S. banks report results. Earnings for companies in the S&P 500 are expected to grow 20% in the second quarter from the year-earlier period, according to FactSet.

Commodities

Front-month gold for July delivery shed 0.3% to $1,253.80 a
troy ounce. Prices hit their lowest level of the year last week and have been hurt by the
dollar’s strength and worries that higher Treasury yields will limit demand as interest rates rise.

IRON ORE: $63.06s – 0.04 (August contract)

Oil Futures

Oil prices climbed toward a 3 1/2-year high, supported by supply issues across several major producing countries. Light, sweet crude for August delivery rose 0.4% to $74.11 a barrel on the New York Mercantile Exchange, near its highest close since November 2014. Brent, the global benchmark, rose 1% to $78.86. Strikes by oil-and-gas workers in Norway and Gabon were expected to hit supply compounding unplanned outages in Libya and Canada, which had already tightened the global market. Analysts said higher prices indicated investors were losing confidence that rising output from the Organization of the Petroleum Exporting Countries and Russia would be enough to fill the growing gap created by supply problems. On Tuesday, Credit Suisse analysts raised their oil forecasts through 2020 on expectations for a tighter market, as Saudi Arabia’s spare capacity declines and geopolitical risks threaten supply. The bank raised its 2018 price forecast for U.S. oil prices from $66 to $67.25 a barrel. Traders are also looking ahead to government data due Wednesday on the amount of crude in storage. Analysts surveyed by The Wall Street Journal expect on average to see that U.S. oil stockpiles fell by 3.6 million barrels in the week ended July 6. The American Petroleum Institute, an industry group, said Tuesday its data for last week showed a 6.8 million barrel decrease in crude supplies.

Forex

Britain’s pound pared its recovery gains in afternoon trading after Prime Minister Theresa May’s government was rattled by additional resignations. The Conservative Party’s vice chairs, Maria Caulfield and Ben Bradley, resigned to show their discontent with May’s Brexit compromise plan. They’re just the last casualties in the U.K. political drama that has seen Brexit Secretary David Davis step down from his post and Foreign Secretary Boris Johnson quit. Together, the developments are seen raising the chances that May will face a formal leadership challenge. Just last week, Prime Minister Theresa May had appeared to unite warring factions of her cabinet behind a new Brexit plan, which calls for a U.K.-EU free-trade area for goods but British autonomy over regulation for many services. All this took the British pound on a wild ride. On Monday, sterling rallied to a two-week high before dropping more than a cent below $1.32 on the back of the domestic political turmoil. Earlier Tuesday, sterling recovered some of the sharp losses suffered a day earlier. But following the additional resignations, the currency came off session highs again. The pound briefly rose above $1.33 on Tuesday, but last traded at $1.3269 up from $1.3258 late Monday in New York.

European Markets

The pound firmed against Europe’s shared currency after touching a four-month low a day earlier. Euro-sterling recently changed hands at GBP0.8854, down 0.2%, according to FactSet. Meanwhile, the WSJ Dollar Index shed 0.04%, reversing earlier gains.

Asian Markets

While neighbors like Indonesia and the Philippines have started to gradually lift interest rates, Malaysia’s central bank is expected to leave its benchmark unchanged on Wednesday. All 11 economists surveyed by The Wall Street Journal expect Bank Negara Malaysia to hold its overnight policy rate at 3.25% at Wednesday’s meeting, which will be the first with Gov. Nor Shamsiah Mohd Yunus at the helm. In Asian trading Tuesday, stocks continued to climb even as Chinese data showed an uptick in inflation. China’s Shanghai Composite Index rose 0.4% while Hong Kong’s Hang Seng was little changed. Japan’s Nikkei added 0.7%, and South Korea’s Kospi increased 0.4%.

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