Wednesday: 15th August 2018

OPENING CALL: The Australian market looks to open lower with SPI futures down 7 points.

Australia’s stock benchmark has a rare distinction in being up for the week with the day’s gains.
U.S. stocks rose intraday, putting the Dow Jones Industrial Average and S&P 500 on track for gains for the first time in five sessions, as concerns over the Turkish lira’s recent slide appeared to ease.

Overnight Summary


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Each Market In Focus

Australian Market

Australia’s stock benchmark has a rare distinction in being up for the week with the day’s gains. After falling less than nearly every other major index in Asia Pacific on Monday, the S&P/ASX 200 rose 0.7% to 6298.7, coming in just short of last month’s latest 10 1/2-year closing high. Banks rose some 1%, led by NAB’s 1.5% gain following its quarterly results. Commodities also did well while yield plays like REITs and utilities also advancing nearly 1%. But health care, the Aussie market’s best-performing this year with a 27% pop, edged lower. Among individual names, retailer JB Hi-Fi jumped 5% in a second-day move after little movement following Monday’s fiscal year report.

US Markets

U.S. stocks rose intraday, putting the Dow Jones Industrial Average and S&P 500 on track for gains for the first time in five sessions, as concerns over the Turkish lira’s recent slide appeared to ease. The Dow industrials added 142 points, or 0.6%, to 25329, while the S&P 500 gained 0.7%. The technology-heavy Nasdaq Composite rose 0.7%. Stocks have been under pressure in recent sessions as investors worried that Turkey’s economic crisis could spread to other emerging markets, but analysts said the rebound shows that investors are reassessing the risk of contagion. The Turkish lira rose 8.6% against the dollar after plunging as much as 10% in the previous session. Turkey’s central bank on Monday introduced measures to boost liquidity in the market, but investors remain concerned that the bank isn’t independent from President Recep Tayyip Erdogan. He has blamed the U.S. and social media for the country’s economic troubles.

Commodities

Among precious metals, front-month gold for August delivery edged up 0.1% to $1,193.00 a troy ounce, boosted by a pause in the dollar’s rally. The dollar surging has pushed gold to its lowest level since January 2017 by making the yellow metal more expensive for overseas buyers. Meanwhile, front-month copper for August delivery slumped 1.7% to $2.6765 a pound on the Comex division of the New York Mercantile Exchange – its lowest close since July 13, 2017. Prices are down 19% from their June four-year highs, hurt by worries that trade tensions between the U.S. and China will accelerate a Chinese economic slowdown, weakening demand for materials used in construction and manufacturing. In other commodity markets, September wheat gained 1.6% to $5.41 3/4 a bushel.

IRON ORE: 67.83s – 1.25 (September contract)

Oil Futures

Oil futures held small gains after Saudi Arabia said it had cut production in July, on top of market expectations for lighter Iranian output. Saudi Arabia told the Organization of the Petroleum Exporting Countries that it had reduced crude output by 200,000 barrels per day to 10.29 million bpd in July. OPEC itself, using secondary sources, estimated in a report published on Monday that Saudi production was at a slightly higher level of 10.39 million bpd last month. The reports suggest the kingdom, which is de facto leader of OPEC and the cartel’s largest producer, wants to avoid a repeat of a global supply glut that has depressed prices over the past few years. OPEC said Monday, in its closely watched monthly oil market report, that its output overall rose in July by around 41,000 barrels a day. The U.S. benchmark, West Texas Intermediate crude for September delivery on the New York Mercantile Exchange, was up 8 cents, or 0.1%, at $67.28 a barrel. October Brent crude, the global benchmark, was up 20 cents, or 0.3%, at $72.81 a barrel on the ICE Europe exchange.

Forex

The U.S. dollar edged higher intraday as emerging-markets currencies stabilized, taking a pause from the persistent anxieties about Turkey which have spread into other nations’ currencies. The WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, gained less than 0.1%, rising against the euro and Japanese yen while falling against the Turkish lira, the South African rand and the Mexican peso. The dollar rose modestly as investors assessed whether concerns about Turkey would continue to affect the currencies of other countries. Currencies around the world including those of Argentina, Mexico, South Africa and Indonesia have fallen recently as investors have sought safety in U.S. dollars and Japanese yen while reducing holdings of riskier currencies. The dollar has risen against the euro as investors have tried to determine which parts of the global economy have the most exposure or similarity to Turkey, whose currency has been battered by investors as the country’s central bank has followed the lead of President Recep Tayyip Erdogan, opting not to slow growth by raising interest rates to try to contain inflation.

European Markets

European stocks ended essentially at the flat line, but with enough of a move to mark the first advance in three sessions, as Turkey’s currency meltdown showed signs of steadying. The Stoxx Europe 600 finished virtually unchanged at 384.92, rising less than a point after shedding 0.3% on Monday amid escalating worries about Turkey’s plunging lira. The index shows a decline of 0.2% so far this week and a 1.1% retreat so far in 2018, according to FactSet data. Germany’s DAX 30 ended at break-even levels at 12,358.87, tacking on less than a point, after closing Monday’s session down 0.5%, while France’s CAC 40 declined 0.2% to 5,403.42, following a decline of about 0.1% in the previous session. The U.K.’s FTSE 100, meanwhile, finished with a loss of 0.4% to 7,611.64, after a 0.3% fall on Monday, as a decline in miners weighed on the benchmark. All of the European benchmarks finished the session off their best levels.

Asian Markets

After Monday’s broad declines for most Asian equities, it was much more of a mixed picture. Southeast Asia markets, which are most closely akin to Turkey, saw further declines with benchmarks in the Philippines, Thailand and Indonesia falling 1% — the latter after a 3.6% slump which was the JSX’s largest in 21 months. But Japan’s Nikkei jumped 2.3% as the yen pulled back, allowing that stock benchmark to fully erase Monday’s skid. Meanwhile, South Korean stocks reversed a bit of Monday’s noted pullback even as the country’s equities finished near session highs. The Kospi rose 0.5% to 2258.91 as some construction related names bounced strongly. But Korean Air fell a further 1.1% and Korean Electric Power slid 2.6% to another near-five-year low following its second quarter report. Chinese markets were an exception to the generally buoyant mood after data showed fixed-asset investment in China’s nonrural areas slowed to a near two-decade low in the January to July period. Retail sales and value added industrial output also fell below expectations. The Shanghai Composite Index was 0.2% lower and Hong Kong’s Hang Seng fell 0.8%.

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