Wednesday: 14th February 2018 - US markets up but key inflation data pending

OPENING CALL:  Australia’s stock benchmark didn’t partake in the gains seen across Asia, with the market hurt in part by the end-of-week skid in oil prices.

The Australian share market looks set to open higher, taking its lead from Wall Street which has lifted for its second consecutive session.
On Tuesday, the share price futures index was up 34 points, or 0.59 per cent, at 5,774.
Worldwide, investors brushed aside fears of rising inflation and tried to put last week’s worst rout in two years past them, but some volatility still lingered.
Volatility picked up, with the major indexes on Wall Street climbing more than one per cent shortly after the open, then pared about half that advance before rebounding further.

Overnight Summary

Market Quotes by TradingView

Each Market In Focus

Australian Market
Miners helped drive a broad recovery in Australian stocks.
  Shares finished near session highs as the S&P/ASX 200 rose 0.6% to 5855.9 after
Monday’s fresh four-month low. With a modest rise in Chinese iron-ore futures, BHP
Billiton and Rio Tinto each gained more than 1%. The major banks also climbed, led by
Commonwealth Bank’s 0.6% advance after recent underperformance.
  But energy stocks fell further following the overnight retreat in oil prices that’s
been partially reversed in Asian trading. Woodside shed 0.7% ahead of its 2017 results
US Markets


Major U.S. stock indexes edged slightly higher intraday, rising for a third consecutive
session, though investors remained on edge ahead of a key report on inflation.
  The Dow Jones Industrial Average fell as much as 180 points earlier in the session
before giving up those losses to eke out a slight gain later in the day. Despite the
intraday swing, investors appeared to avoid making any drastic trades ahead of
Wednesday’s Bureau of Labor Statistics report on consumer prices.
  Further evidence of inflation will likely prolong the market selloff, similar to how
strong wage growth in January pressured U.S. bonds ahead of last week’s correction,
analysts added.
  “Never before has a monthly [consumer-price index] number received so much attention,”
said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management. “Traders
and those much shorter-term oriented are reluctant to take big positions in advance of
the data.”
  The Dow industrials rose 51 points, or 0.2%, to 24656 in afternoon trading, while the
S&P 500 added 0.3%. The Nasdaq Composite climbed 0.4%.
Gold prices inched higher, with many investors looking ahead to inflation data later in
the week that could provide clues about the path forward for interest rates.
  Front-month gold for February delivery rose 0.3% to $1,328.10 a troy ounce on the Comex
division of the New York Mercantile Exchange. Prices have fallen 2.5% since hitting their
highest level since August 2016 late last month, with some analysts pinning the declines
on concerns about higher interest rates.
  Gold struggles to compete with yield-bearing assets like Treasurys as borrowing costs
rise. The yield on the 10-year U.S. Treasury note has recently hit a four-year high, with
some analysts attributing the gains to investors’ rising inflation expectations. Some
think that could give the Federal Reserve a freer hand to raise interest rates more
quickly than expected.
  Many analysts will be closely monitoring consumer and producer price data, scheduled to
be released Wednesday and Thursday, for the latest signals on inflation. Some investors
have also said markets are still looking for a new equilibrium after a recent surge in
volatility in the stock market rattled investors.
Oil Futures
Oil prices were mixed, as the market digested fresh signs that U.S. crude production
could cause global supply to outpace demand this year.
  U.S. crude futures fell 10 cents, or 0.17%, to $59.19 a barrel on the New York
Mercantile Exchange – their lowest level since Dec. 22. Brent, the global benchmark, rose
13 cents, or 0.21%, to $62.72 a barrel on ICE Futures Europe, snapping a seven session
losing streak.
  The International Energy Agency said that crude output from countries outside the
Organization of Petroleum Exporting Countries — primarily driven by U.S. shale
production — should surpass global demand in 2018 and weigh on oil prices.
The dollar slid intraday, as some investors locked in profits on the U.S. currency a
day ahead of key economic data.
  The Wall Street Journal Dollar Index, which measures the U.S. currency against a basket
of 16 others, was recently down 0.5% to 83.66.
  Two weeks of market turbulence have pushed haven-seeking investors into the dollar,
lifting the U.S. currency from its lowest level in more than three years.
  Some market participant are now looking to trim their exposure to the currency ahead of
U.S. consumer price data due out Wednesday, said Omer Esiner, chief market analyst at
Commonwealth Foreign Exchange, in a note to clients.
  The dollar was down 1% against the yen to Y107.59, its lowest level since September.
The recent volatility in markets has caused some investors to pull back on trades where
they borrowed money in yen to fund bets on riskier currencies, said Kit Juckes, a
strategist Société Générale.
European Markets
European stocks fell, as advances for mining and travel shares weren’t enough to guide
the market toward a second consecutive win.
  The Stoxx Europe 600 index shed 0.1% to 372.62, with the telecom and technology groups
losing the most. But the basic materials and consumer services sectors were moving
higher. On Monday, the benchmark climbed 1.2%, the first win in three sessions.
  Germany’s DAX 30 index fell 0.3% to 12,245.82, and France’s CAC 40 index slipped 0.1%
to 5,132.10. The U.K.’s FTSE 100 was up 0.2% to 7,191.24.
Asian Markets
The global rebound for stocks continued as Asian markets rose broadly once again,
though gains eased as afternoon trading progressed.
  The pullback in gains was most pronounced in Japan, where the Nikkei Stock Average went
from finishing morning trading up 1.3% to finishing the day down 0.6% as the yen saw an
afternoon rally following stable trading throughout the morning.
  Hong Kong’s Hang Seng Index rose to 1.3% after dropping nine of the past 11 trading
days. The Shanghai Composite Index rose 1%.
  The pullback in China and Hong Kong came ahead of the Lunar New Year holiday. The Stock
Connect trading link between Hong Kong and China is closed until next week.
  Mainland investors, which had been supporting the Hong Kong market with inflows of
capital, withdrew some funds during the past two weeks. They won’t be able to trade
stocks in the city until Feb. 22.
  Stock indexes were up at least 0.5% in much of Asia excluding Japan and a few small
Southeast Asian markets, where gains were no more than 0.2%.
  Despite the choppiness in trading, Jim Fong, portfolio manager at Oceanwide Asset
Management in Hong Kong, said last week’s rout provides a chance to hunt for bargains.
  “It’s a golden opportunity to accumulate some good, quality stocks,” he said, adding
that Oceanwide has increased positions in Asian tech stocks.

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