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Market Opener – 17 Jul 2019
Local Markets Commentary
The Australian market commences mid-week trade on mixed overnight international equities and commodities leads, and a broad increase in geopolitical noise.
Locally today, Westpac and the Melbourne Institute publish their leading index report 10.30am AEST.
In overnight commodities trade, oil dropped.
US gold futures (August) turned to settle slightly lower.
Iron ore (China port, 62% Fe) moved just US1c higher.
LME copper was pushed lower. Nickel picked up the pace of its latest rally.
The $A dropped below US70.15c after falling beneath US70.30c early yesterday evening.
Locally today, Westpac and the Melbourne Institute publish their leading index report 10.30am AEST.
In overnight commodities trade, oil dropped.
US gold futures (August) turned to settle slightly lower.
Iron ore (China port, 62% Fe) moved just US1c higher.
LME copper was pushed lower. Nickel picked up the pace of its latest rally.
The $A dropped below US70.15c after falling beneath US70.30c early yesterday evening.
Overseas Market Commentary
Trade diverged across major European and US equities markets overnight.
Traders were faced with a swag of data releases, high-profile stocks, including US banks, reporting mixed earnings, broad geopolitical argy-bargy, and a US parliamentary grilling of large-cap tech and communications companies.
Currencies swung, the British pound dropping again on fears of the UK separating from the European Union (EU) this year without any definitive arrangements in place.
The euro also declined against the $US.
Yesterday, China reacted to the US president’s comments on Monday, that connected a slowdown in national growth with US import taxes and China’s need for a trade deal. China labelled the remarks as ‘misleading’.
Overnight, the US president countered, suggesting any trade agreement would not eventuate in the near-term, and that he could expand import taxes on goods from China.
As with the president, during a cabinet meeting, the US secretary of state claimed Iran was prepared to talk with the US regarding nuclear missile development plans.
This, despite Iran’s recent repeated demands for a lifting of US sanctions ahead of any new negotiations.
Iran has reportedly subsequently denied the claim, after also fielding allegations of having seized a UAE oil tanker in the Strait of Hormuz over the weekend.
North Korea’s foreign ministry in the meantime claimed US-South Korea joint military exercises were one way in which the US was ‘reneging’ on commitments to North Korea, and that this was decreasing North Korea’s justification to follow through with its commitments to the US.
US Federal Reserve chair Jerome Powell told delegates attending a dinner hosted in Paris by the Bank of France that the Fed recognised risks to US economic growth and was ‘carefully monitoring’ these. Mr Powell again cited trade relationships and global economic growth.
Mr Powell also talked of the need for central banks in general to investigate strategies and policy tools other than those traditionally relied on in higher interest rate environments, and to be accountable and transparent to a wider, more generalised audience.
Later, the Chicago Federal Reserve president appeared to talk up the benefits of a further rate cut.
Among overnight data releases, the euro zone’s May trade surplus came in at €23B from €15.9B
A regional ZEW sentiment index was estimated at -20.3, from -20.2. Germany’s was reported at -24.5, against -21.1.
In the UK, May average earnings (excluding bonuses) rose 3.6% following a 3.4% April rise. Unemployment remained static, at 3.8%.
Overnight US data releases included June retail sales which rose 0.4% for the month and 3.4% year-on-year.
Export prices declined 0.7% over the month, and 1.6% against June 2018. Import prices fell 0.9% after remaining steady for May, and dropped 2% year-on-year.
Industrial production was estimated flat for the month, following a 0.4% May rise. Year-on-year, June output rose 1.3%.
May business inventories were 0.3% higher, after a 0.5% April increase.
A home builders’ housing market sentiment index was reported at 65, from 64.
Tonight in the US, the Federal Reserve’s periodic district-by-district ‘beige book’ economic summary, June building approvals, housing starts and weekly mortgage applications are due.
Elsewhere, the euro zone and UK release CPI updates.
Overnight, euro zone leaders confirmed Ursula von der Leyen as the incoming (1 November) European Commission president in a final vote.
Meanwhile, International Monetary Fund (IMF) MD Christine Lagarde announced she would step down from this role in September, due to her nomination as the European Central Bank’s next president. Ms Lagarde is the only nominee but the European Council must approve this.
In the UK, the results of the conservative party’s vote for a new leader, and hence PM, remain anticipated early next week.
Companies scheduled to report earnings include: Abbott Laboratories, Alcoa, Bank of America, Bank of New York Mellon, EasyJet, eBay, Ericsson, IBM, Kinder Morgan, Netflix, Novartis, Omnicom, Sandvik, US Bancorp and Wipro.
In overnight corporate news, Facebook was the first tech/communications company to face a US parliamentary grilling, which will continue through tonight.
JPMorgan Chase reported better-than-anticipated quarterly profit, but from mixed divisional performances.
The story proved similar for Goldman Sachs and Wells Fargo.
Domino’s Pizza dropped more than 8.5% after sales generally undershot expectations.
Earlier in the UK, Burberry results pleased, in part due to select designer demand, in particular in China.
Traders were faced with a swag of data releases, high-profile stocks, including US banks, reporting mixed earnings, broad geopolitical argy-bargy, and a US parliamentary grilling of large-cap tech and communications companies.
Currencies swung, the British pound dropping again on fears of the UK separating from the European Union (EU) this year without any definitive arrangements in place.
The euro also declined against the $US.
Yesterday, China reacted to the US president’s comments on Monday, that connected a slowdown in national growth with US import taxes and China’s need for a trade deal. China labelled the remarks as ‘misleading’.
Overnight, the US president countered, suggesting any trade agreement would not eventuate in the near-term, and that he could expand import taxes on goods from China.
As with the president, during a cabinet meeting, the US secretary of state claimed Iran was prepared to talk with the US regarding nuclear missile development plans.
This, despite Iran’s recent repeated demands for a lifting of US sanctions ahead of any new negotiations.
Iran has reportedly subsequently denied the claim, after also fielding allegations of having seized a UAE oil tanker in the Strait of Hormuz over the weekend.
North Korea’s foreign ministry in the meantime claimed US-South Korea joint military exercises were one way in which the US was ‘reneging’ on commitments to North Korea, and that this was decreasing North Korea’s justification to follow through with its commitments to the US.
US Federal Reserve chair Jerome Powell told delegates attending a dinner hosted in Paris by the Bank of France that the Fed recognised risks to US economic growth and was ‘carefully monitoring’ these. Mr Powell again cited trade relationships and global economic growth.
Mr Powell also talked of the need for central banks in general to investigate strategies and policy tools other than those traditionally relied on in higher interest rate environments, and to be accountable and transparent to a wider, more generalised audience.
Later, the Chicago Federal Reserve president appeared to talk up the benefits of a further rate cut.
Among overnight data releases, the euro zone’s May trade surplus came in at €23B from €15.9B
A regional ZEW sentiment index was estimated at -20.3, from -20.2. Germany’s was reported at -24.5, against -21.1.
In the UK, May average earnings (excluding bonuses) rose 3.6% following a 3.4% April rise. Unemployment remained static, at 3.8%.
Overnight US data releases included June retail sales which rose 0.4% for the month and 3.4% year-on-year.
Export prices declined 0.7% over the month, and 1.6% against June 2018. Import prices fell 0.9% after remaining steady for May, and dropped 2% year-on-year.
Industrial production was estimated flat for the month, following a 0.4% May rise. Year-on-year, June output rose 1.3%.
May business inventories were 0.3% higher, after a 0.5% April increase.
A home builders’ housing market sentiment index was reported at 65, from 64.
Tonight in the US, the Federal Reserve’s periodic district-by-district ‘beige book’ economic summary, June building approvals, housing starts and weekly mortgage applications are due.
Elsewhere, the euro zone and UK release CPI updates.
Overnight, euro zone leaders confirmed Ursula von der Leyen as the incoming (1 November) European Commission president in a final vote.
Meanwhile, International Monetary Fund (IMF) MD Christine Lagarde announced she would step down from this role in September, due to her nomination as the European Central Bank’s next president. Ms Lagarde is the only nominee but the European Council must approve this.
In the UK, the results of the conservative party’s vote for a new leader, and hence PM, remain anticipated early next week.
Companies scheduled to report earnings include: Abbott Laboratories, Alcoa, Bank of America, Bank of New York Mellon, EasyJet, eBay, Ericsson, IBM, Kinder Morgan, Netflix, Novartis, Omnicom, Sandvik, US Bancorp and Wipro.
In overnight corporate news, Facebook was the first tech/communications company to face a US parliamentary grilling, which will continue through tonight.
JPMorgan Chase reported better-than-anticipated quarterly profit, but from mixed divisional performances.
The story proved similar for Goldman Sachs and Wells Fargo.
Domino’s Pizza dropped more than 8.5% after sales generally undershot expectations.
Earlier in the UK, Burberry results pleased, in part due to select designer demand, in particular in China.