Wednesday: 2nd May 2018

OPENING CALL: The Australian market looks to open higher with SPI Futures up 7 points.

The Australian share market is expected to open slightly higher after a mixed performance on Wall Street and falls in base metals prices.

Wall Street’s S&P 500 pared early losses on Tuesday after a Trump administration official said he hoped to further open China’s economy to US companies, though manufacturing data stoked concerns of rising costs that could cut corporate profits.

Overnight Summary


Market Quotes by TradingView

Each Market In Focus

Australian Market

The Australian share market is expected to open slightly higher after a mixed performance on Wall Street and falls in base metals prices.
At 0700 AEST on Wednesday, the Australian share price futures index was up seven points, or 0.12 per cent, at 6,000 points.
The Australian share market on Tuesday was higher, after surge in support for the banks led the major stock indexes to close above 6,000 points for the first time since February.
The benchmark S&P/ASX200 closed up 32.5 points, or 0.54 per cent, at 6,015.2 points, while the broader All Ordinaries index was up 28.4 points, or 0.47 per cent, at 6,100.0 points.
In equities news on Wednesday, Rio Tinto holds its annual general meeting, Woolworths issues its third quarter sales update, and Qantas is also releasing a third quarter trading update.
On Wednesday, the Australian dollar fell to its lowest level in almost a year, as the US dollar rallies, partly helped by higher interest rates.

US Markets

Wall Street’s S&P 500 pared early losses on Tuesday after a Trump administration official said he hoped to further open China’s economy to US companies, though manufacturing data stoked concerns of rising costs that could cut corporate profits.
US stocks came off the day’s lows after US Trade Representative Robert Lighthizer said he did not desire to change China’s economic system but wanted to limit the damage it causes to the United States and encourage more foreign competition.
The Dow Jones Industrial Average fell 64.10 points, or 0.27 per cent, to 24,099.05, the S&P 500 was up 6.75 points, or 0.25 per cent, to 2,654.80 and the Nasdaq Composite added 64.44 points, or 0.91 per cent, to 7,130.70.
Earlier on Tuesday, US Commerce Secretary Wilbur Ross said the Trump administration was prepared to levy tariffs on China if an American delegation heading to Beijing did not reach a settlement on trade imbalances.
The news came after President Donald Trump on Monday extended a temporary exemption from metal tariffs for the European Union, Canada and Mexico to June 1 just hours before the tariffs were due to come into effect.

Commodities

The spot price of gold in Sydney at 0700 AEST was $US1,303.47 per fine ounce, from $US1,311.00 per fine ounce on Tuesday.
IRON ORE: $65.75 +0.35 (May contract)

Oil Futures

Oil prices declined on signs of rising U.S. crude production and stockpiles, despite uncertainty about whether the U.S. will pull out of the Iran nuclear deal.

Forex

The U.S. dollar surged to its highest level this year after recent economic data signaled stronger growth in the U.S. than other developed nations.
The WSJ Dollar Index, which measures the currency against a basket of 16 others, rose 0.6% to 86.13, its highest since Dec. 28. The currency rose broadly, gaining 0.7% against the euro to $1.1992, 0.5% versus the Japanese yen to Y109.86 per dollar and 1.1% versus the British pound to $1.3612.
The dollar has been buoyed by an array of strong economic data, which has contributed to investors’ expectations for the Federal Reserve to raise interest rates four times in 2018. Fed funds futures late in the day showed the market sees a 49% likelihood for fourth rate increases, up from 32% a month ago, according to CME Group data.
“If you look at monetary policy expectations outside the U.S., they’ve shifted” and become less aggressive, said Eric Viloria, a currency strategist at Wells Fargo Securities. That, combined with stronger U.S. data has been “contributing to some of the dollar strength.”

European Markets

British shares traded higher on Monday as the planned merger between
Sainsbury’s and Asda, the UK arm of Walmart, sent shockwaves through British retail stocks as investors sought to adjust to a potentially game-changing overhaul of the industry.
Britain’s FTSE was up 0.15 per cent at 7520.36 points but all eyes were on Sainsbury’s shares, which surged up to 20 per cent and were set for their highest ever rise.
“Traders will be bracing themselves for volatility in the retail sector and particularly in Sainsbury,” London Capital Group said in a research note.
“Given that shorting retailers has been a huge trade over the past two years, news of potential tie up between Sainsbury, the UK’s 2nd biggest supermarket and 7th most shorted stock, and Walmart subsidiary Asda could see many caught on the wrong side of the bet in early trade on Monday,” the broker explained.
Shorting a stock consists of borrowing a share, then selling it with the hope a buying it back later at a lower price and pocketing the difference.
Sainsbury and Asda confirmed a deal which will create Britain’s biggest supermarket group by market share, surpassing current leader Tesco whose shares tumbled 2.9 per cent.

Asian Markets

Asian share were mixed after the United States postponed the imposition of steel and aluminium tariffs on Canada, the European Union and Mexico, and offered permanent exemptions for several other allies.
Japan’s Nikkei rose 0.2 per cent while MSCI’s US dollar-denominated index of Asia-Pacific shares outside Japan was down 0.1 per cent though only Australia and New Zealand are open.
On Tuesday, New Zealand’s S&P/NZX 50 index fell 0.09 per cent, to 8,435.97.

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