Wednesday: 19th September 2018

OPENING CALL: The Australian market looks to open higher with SPI futures up 28 points.

U.S. stocks were higher as investor fears eased on the U.S.-China fight. U.S. government bonds were lower, with the 10-year yield at its highest level since late May. The dollar recovered from early weakness on trade issues to settle higher. Crude oil prices rose on tensions between Russia and Israel. And gold was lower, but still above $1,200.


Overnight Summary

Market Quotes by TradingView

Each Market In Focus

Australian Market
US Markets

U.S. stocks came off earlier highs but still closed up as investors shrugged off escalating trade tensions to instead focus on the robust economy. The gains were underpinned by consumer-discretionary and industrial shares – the so-called cyclical sectors which tend to thrive during periods of strong economic growth. The Dow Jones Industrial Average climbed 184.84 points, or 0.7%, to 26,246.96. The S&P 500 index advanced 15.51 points, or 0.5%, to 2,904.31 and the Nasdaq Composite Index climbed 60.32 points, or 0.8%, to 7,956.11. President Donald Trump reiterated his hard stance on China during a press conference with Polish President Andrzej Duda and said the U.S. has “no choice” but to levy another $267 billion in duties on China. Trump had already announced new tariffs on about $200 billion in Chinese goods late Monday and threatened additional penalties as part of his campaign to pressure Beijing to change its commercial practices. In response, China retaliated with tariffs of 5% to 10% on $60 billion worth of U.S. products that will take effect Sept. 24 and said it may introduce more measures if the U.S. goes ahead with higher tariffs, according to The Wall Street Journal.


Gold futures ended lower, but held above $1,200 an ounce for a sixth session in a row, as the next jabs emerged in the intensifying U.S.-China trade dispute, prompting cautious trading in the U.S. dollar. Metals for industrial use, tied to the fortunes of the powerful Chinese and U.S. economies, continued to move with sensitivity to the trade developments. December gold fell $2.90, or 0.2%, to settle at $1,202.90 an ounce. Prices for the most-active contract have now settled above $1,200 for six-consecutive trading sessions. They gained 0.4% on Monday. The dollar and gold, which is chiefly priced in the U.S. currency unit, tend to move inversely, but the benchmark dollar index made only modest moves. The ICE U.S. Dollar Index — a gauge of the buck against a half-dozen currencies — was up less than 0.2% at 94.464. It has lost 0.5% month to date.

IRON ORE: 69.03 + 0.30 (October contract)

Oil Futures

Oil prices rose, boosted by heightened geopolitical tension after Russia blamed Israel for the loss of one of its reconnaissance planes shot down overnight by Syrian defense systems. Light, sweet crude for October delivery rose 1.4% to $69.85 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, increased 1.3% to $79.03. The loss of Russia’s reconnaissance plane, shot down by Syrian defense systems, threatens to increase geopolitical instability, contributing to uncertainty in the global oil market. The Russian Defense Ministry told Israel that it “reserved the right to take steps to respond” to the downed plane. Analysts said oil prices have become more sensitive to shifts in geopolitical tensions, as global supply has been called into question. Traders are grappling with the impact of Iranian sanctions to the country’s exports, while also debating how much the global oil cartel will make up the difference.


The U.S. dollar bounced higher in the second half of the session, recovering from earlier weakness that came on the back of new tariffs being announced by China. The ICE U.S. Dollar Index, which tracks the currency against a basket of six major rivals, was last up 0.2% at 94.664. The dollar index steadied as the tone remains soft, nursing a 0.3% weekly loss and a 0.5% decline so far in September, according to FactSet. In the offshore market, the dollar fetched 6.8634 yuan, down 0.1% versus late Monday in New York. In other major currency pairs, the euro reversed previous gains, trading at $1.1663, compared with $1.1685, while the buck edged up 0.5% versus the Japanese currency to fetch Y112.38, its highest since mid-July.

European Markets
Asian Markets

Asian stocks edged up despite the Chinese commerce ministry’s threat of retaliation following President Trump’s announcement that he would impose new levies on about $200 billion in Chinese goods. China-exposed indexes shrugged off early pressure in Asia-Pacific trading. Hong Kong’s Hang Seng closed 0.6% higher, with the Shanghai Composite Index 1.8% higher and the tech-heavy Shenzhen A Share up 1.7%. Investors reacted with cautious optimism to news late Monday that Washington is to impose further tariffs on Beijing. China’s commerce ministry said that it “has no choice but to undertake synchronous retaliation” to defend its interests, after the White House released details of the 10% tax set to be imposed on a range of Chinese imports including luggage and seafood on Sept. 24. That levy will rise to 25% at the end of 2018. Taiwan’s tech-heavy Taiex index underperformed most other Asia-Pacific indexes and after the Nasdaq Composite on Monday suffered its heaviest one-day loss since July on Monday. Those moves signaled investors’ increasing concerns that the import taxes visited by the U.S. and China on one another will sting U.S. tech-sector giants with significant manufacturing bases in China.

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