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Market Opener – 06 Aug 2019

Local Markets Commentary
The Australian market commences today’s trade following overnight tumbles for major international equities indices, with domestic trade figures due late morning, and the Reserve Bank of Australia’s (RBA) post-policy meeting statement this afternoon.

Any additional China-US trade relations disclosures and developments will continue to influence markets today.

Since yesterday’s ASX close, China’s Commerce Ministry confirmed companies in China were no longer purchasing agricultural goods from the US and that the administrations could impose import taxes on any such products that were purchased since Saturday. 

Regionally today, Japan reports June household spending this morning.

Locally, a weekly consumer sentiment reading is due pre-trade. 

The Australian Bureau of Statistics publishes June trade balance 11.30am AEST.

ANZ’s July job advertisements report is also scheduled for release at the same time.

2.30pm, the RBA will announce outcomes from today’s policy meeting. Most speculation centres on any pointers to additional rate moves this year.

In addition, AFI trades ex-dividend today. Please see p4 for a detailed list of stocks trading ex-dividend.

In overnight commodities trade, oil swung lower.

US gold futures (December) extended Friday’s rally. 

Iron ore (Nymex CFR China, 62% Fe) continued to slump, but settled above $US100.30/t.

LME copper fell further. Nickel turned and gained on Indonesian export licensing speculation.

The $A ultimately remained within a relatively narrow range after trading at US67.55c early yesterday evening, but has appreciated beyond US67.60c this morning.

Overseas Market Commentary
Major European and US equities markets reacted overnight for the first time to China allowing its yuan to fall much further than usual yesterday, sentiment pierced well before openings and haemorrhaging in various degrees through to settlement.

Usually, China’s authorities would support the yuan so that it did not fall below seven yuan-for-one $US, but yesterday’s drop, which breached this level for the first time in 11 years, suggested it was a move by China to mitigate additional US import taxes.

Other China-US relations analysts went further, suggesting China was signalling it was no longer anticipating any substantial trade deal with the US, and could well pull back on other co-operation.

Indeed, China’s Commerce Ministry subsequently suggested additional import taxes could be levied against US agricultural products this week, and claimed companies in China have ceased purchasing agricultural products from the US.

Safe-haven currencies, such as Japan’s yen and Switzerland’s franc (two-year peak against the euro), benefited, but not so the more vulnerable currencies, including those of emerging market nations.

Select government bond prices also appreciated, hence pushing yields lower, particularly those for 10-year bonds in the UK and US (three-year lows).

Among overnight data releases, the euro zone’s services PMI was finalised at 53.2, from 53.6 for June.

Germany’s 54.5 represented a 1.3-point fall for the month.

In the UK, the July services PMI rose 0.8 to 51.4.

July new car sales dropped 4.1% year-on-year, following a 4.9% June tumble. 

In the US, the ISM’s July services sector activity index slipped 1.4 to 53.7, all major components, with employment the exception, declining.

Markit’s less-influential final July services PMI represented a 1.5-point rise for the month to 53. 

Tonight in the US, a June job openings report and economic optimism index are due.

In addition, a Federal Reserve regional president, previously on the record as in favour of a series of rates cut this year, is due to speak publicly on the domestic economy.

Companies scheduled to report earnings later today and tonight include: Daikin Industries, Intercontinental, Kirin Holdings, Pioneer Natural Resources, Rinnai, Rolls-Royce and Walt Disney. 

In overnight corporate news, additional job cuts appeared to feature.

Up to 4000 at HSBC, which will also part on mutual terms with its CEO, suggested by some due at least in part to HSBC information leading to the US being able apply for the extradition of Huawei’s CFO. HSBC also reported 15.8% higher, £10.2B pre-tax interim profit and plans for a buy-back.

Also in the UK, supermarket major Tesco announced it would restructure its business and in doing so would require 4500 fewer staff. Tesco reportedly employs 340,000 people across the Republic of Ireland and UK.

Earlier, Kobe Steel reported a ¥1.2B June quarter net loss and revealed it anticipated a 72% plunge in full-year profit.
Posted on 6/08/2019 8:00:00 AM

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