Wednesday: 22nd August 2018

OPENING CALL: The Australian market looks to open lower with SPI futures down 19 points.

Australian stocks stuck out like a sore thumb amid another session of regional gains. The S&P/ASX 200 finished down 1% at 6284.4 after two days of 10 1/2-year closing highs, logging the worst day in five months.
The S&P 500 rose to a fresh intraday high, drawing closer to snapping what has been the index’s longest stretch without a closing record in two years.

Overnight Summary


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Each Market In Focus

Australian Market

Australian stocks stuck out like a sore thumb amid another session of regional gains. The S&P/ASX 200 finished down 1% at 6284.4 after two days of 10 1/2-year closing highs, logging the worst day in five months. BHP Billiton’s fiscal year report helped bring a reason to take some profits. The big miner fell 1.9% and the materials sector lost 1.3%, as did financials. Energy lost 1.8%. But health care rose 0.4%, hitting fresh record highs. The market segment has been this year’s star, surging 35%. This all as Prime Minister Turnbull survived a leadership challenge in a 48-35 vote.

US Markets

The S&P 500 rose to a fresh intraday high, drawing closer to snapping what has been the index’s longest stretch without a closing record in two years. Signs of a buoyant labor market, strong consumer spending and extended corporate earnings growth have helped U.S. stocks edge higher over the summer, even as worries about trade negotiations and fading growth in China cast a pall over major indexes elsewhere around the world. Yet the gains have been modest, and new highs elusive: the S&P 500 briefly topped its Jan. 26 closing record before edging just below the level again. Earlier in the month, the index had gotten within 0.5% of the January record before withdrawing again. If the S&P 500 closes above the level, it will have cleared what some investors say has been a black mark for the stock market-reassuring those who have worried that a monthslong stretch without a new high pointed to broader weakness in the market. The U.S. stock market has been “amazingly resilient,” said Erik Davidson, chief investment officer at Wells Fargo Private Bank, adding that he feels valuations don’t look too expensive. The S&P 500 was recently up 0.5% at 2870, just off its January record close. The Nasdaq Composite gained 0.8% and the Dow Jones Industrial Average advanced 101 points, or 0.4%, to 25861.

Commodities

Gold prices climbed to settle at the closely watched $1,200 level, after U.S. President Donald Trump’s comments on Federal Reserve policy hurt the dollar. The greenback weakened against major rivals, helping to boost demand for dollar-denominated yellow metal, a day after Trump criticized Fed Chairman Jerome Powell for delivering interest-rate increases. December gold rose $5.40, or nearly 0.5%, to settle at $1,200 an ounce – the highest finish for a most-active contract in a week, according to FactSet data. A popular metals exchange-traded fund, the SPDR Gold Trust traded up 0.3% Tuesday. The precious metal on Monday had climbed by $10.40, or roughly 0.9%, to log the best single session gain of August so far, as prices bounced back from their worst weekly decline in more than a year. In other commodity markets, wheat futures fell to the lowest close in four weeks as uncertainty about Russia’s wheat crop continued to weigh down prices. Contracts for September delivery fell 2.8% to $5.27 1/4 a bushel at the Chicago Board of Trade, closing at the lowest point since July 24. Traders attributed much of the selling to ongoing debate about the size of Russia’s wheat crop and exports this year. Prices rallied last week on reports that Russia’s agriculture ministry might curb exports as a result of a tougher growing season.

IRON ORE: 66.90s – 1.17 (September contract)

Oil Futures

Oil prices moved higher for a fourth-straight session on expectations Iran oil sanctions will tighten global supplies, and as investors anticipate a weekly decline in U.S. oil inventories. Light, sweet crude for September delivery rose 1.4% to $67.35 a barrel on the New York Mercantile Exchange. Brent crude, the global benchmark, rose 0.6% to $72.63 a barrel. WTI has risen by more than $2 over the past four sessions, after falling to a seven-week-low Wednesday. The government’s weekly crude oil inventory data from the Energy Information Administration is due to be released Wednesday morning. A survey of oil analysts by The Wall Street Journal indicates the report could show a 2 million-barrel decline in U.S. crude oil stockpiles, which would help to reverse some of last week’s bearish and unexpected data that showed a 6.8-million-barrel increase.

Forex

The dollar fell intraday, a day after President Donald Trump criticized the Federal Reserve for raising interest rates. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.3% at 89.29. Mr. Trump said he is “not thrilled” with Fed Chairman Jerome Powell for raising interest rates and said the central banker should do more to help him lift the economy, Reuters reported Monday. The comments pushed some dollar bulls to lock in gains on the U.S. currency, which is up around 4% against other currencies this year. Higher rates tend to boost the dollar by making it more appealing to yield-seeking investors. The White House has expressed dissatisfaction with the Fed’s policy before. Mr. Trump last month complained that rising interest rates had buoyed the dollar and said he hoped the Fed would stop tightening. A stronger dollar makes U.S. exports less competitive abroad.

European Markets

European stocks closed mostly higher, rising for a second straight session with banks and pharmaceutical stocks leading the day’s advancers. Despite the general uptrend on the day, U.K. stocks ended with modest losses, pressured by a decline in BHP Billiton after the company’s results. Investors were also looking ahead to comments from the Federal Reserve, which could provide insight into the outlook for monetary policy. The Stoxx Europe 600 Index rose 0.2% to 384.15. This was the second straight day of gains for the index, although it came after three straight weeks of losses. Italian stocks were proving the day’s best performers in Europe, with the FTSE MIB Italy index climbing 1.5% to 20,767.73. Germany’s DAX rose 0.4% to 12,384.49. On Monday, the index rose 1% in its biggest single-day percentage gain since July 26. That came after its third straight down week, its longest such stretch since February. France’s CAC 40 jumped 0.6% to 5,413.58.

Asian Markets

Asian stocks inched higher as investors parsed the latest signals in the trade spat between the U.S. and China and U.S. President Donald Trump’s comments about the Federal Reserve. Japan’s Nikkei Stock Average finished up 0.1% while Hong Kong’s Hang Seng was up 0.5%. Indian shares, however, eased from fresh highs as investors looked for cues. The S&P BSE Sensex ended flat at 38,285.75 after hitting a new intra-day high of 38,402.96. Analysts said the focus will now shift to the release of economic growth data next week. Indonesian stocks logged a second day of strong gains. The JSX index climbed 0.9% to 5944.30, the highest in a week-and-a-half as Aug. 13’s Turkey-fueled slump continues to get reversed. Japanese stock were again soft, feeling further pressure from a rebounding yen. The Nikkei did manage to turn higher late, finishing up at 22219.73 after having dropped seven of the prior nine days, but the broader Topix fell 0.4% amid fresh gains in most of Asia.

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