ASX to open lower, Wall St rallies on trade truce


Australian shares are poised to drop on the open as an preliminary burst of enthusiasm over the US/China trade truce was questioned. ASX futures have been 10 factors decrease at about eight.30am AEDT. The Australian greenback was up zero.5 per cent.

Shares closed larger in Europe and ended greater in New York although positive factors have been off their early peaks. The Dow superior 288 factors, paced by Boeing, Nike and Apple. The benchmark S&P 500 climbed greater than 1 per cent, extending its largest weekly proportion achieve in almost seven years every week in the past.

Still the US listed shares of each BHP and Rio have been larger, bolstered by base metals. Copper hit a two-month excessive. As what occurred on Wall St, metals spiked greater in early trade in London amid repositioning from the weekend Donald Trump/Xi Jinping assembly earlier than fading considerably as White House advisers squared off on their interpretation of what occurred on Saturday.

President Trump tweeted about how “very good things will happen” because of his assembly with China’s Xi; his advisers together with trade hawk Peter Navarro weren’t as optimistic and that originally dented the advance on Wall Street. After surging greater than 400 factors in early trade, the Dow’s achieve was halved by noon. 

“Talk is cheap,” Mr Navarro informed National Public Radio radio. “What we are looking for is not more talk, but by the end of 90 days that we see verifiable and real structural changes that yield actual, verifiable and immediate results.”

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Navarro additionally stated US Trade Representative Robert Lighthizer can be in control of 90 days of quick negotiations with Chinese officers. “He’s the hardest negotiator we have ever had on the USTR and he’s going to go chapter and verse and get tariffs down, non-tariff obstacles down and finish all these structural practices that forestall market entry,’ Navarro additionally stated.

Later although White House financial adviser Larry Kudlow stated he was “cautiously optimistic”. “The historical past right here with China guarantees just isn’t excellent. And we all know that. However, I’ll say this: President Xi has by no means been this concerned.”

Mr Kudlow stated: “They can’t sluggish stroll this, stall this, meander this. Their phrase: “immediately”.”

Mr Kudlow’s optimism, he stated, mirrored Mr Xi’s determination to take cost of the trade talks on Saturday. “I felt that bolstered the Chinese dedication. I could also be incorrect, however I consider it did. 
 
“In terms of the actual discussions, as I said earlier, we have never had such broad-based, detailed — I’ll call them “commitments” at this point, which are — commitments are not necessarily a trade deal, but it’s stuff that they’re going to look at and presumably implement. And this is new. It’s broader and more detailed than anything we had.”

Prices of commercial metals rose on Monday, with copper hitting a two-month excessive although dangers stay.

“We cannot get too excited about prospects for metals. Trade issues will continue to dog the global economy for much of the year,” INTL FCStone analyst Edward Meir advised Reuters. “The Argentina agreement is not going to be a significant game-changer.”

Mr Meir stated low inventories throughout most metals might be a “bullish catalyst”, however added the stock argument turns into troublesome to maintain towards the prospect of a deteriorating macroeconomic outlook subsequent yr.

Federal Reserve chairman Jerome Powell’s testimony to Congress’s Joint Economic Committee set for Thursday (AEDT) has been postponed and shall be rescheduled at a later date, the committee stated, within the wake of the passing of former president George HW Bush whose funeral will probably be held on Thursday (AEDT).

Today’s Agenda

Local knowledge: Current account third quarter, Net exports contribution to GDP third quarter, RBA money fee choice at 2.30pm AEDT

​NAB on pending RBA price name: “No surprises are expected from the RBA. The market is in agreement for no change in the cash rate, nevertheless as always the Statement will be closely analyse for the Bank’s assessment on the  outlook for the economy and risks.”

Overseas knowledge: Euro zone PPI October

Market Highlights

SPI futures down 10 factors or zero.2% to 5761 at about eight.30am AEDT

AUD +zero.5% to 73.53 US cents

On Wall St: Dow +1.1% S&P 500 +1.1% Nasdaq +1.5%

In New York, BHP +four.eight% Rio +2.three% Atlassian +four.three%

In Europe: Stoxx 50 +1.three% FTSE +1.2% CAC +1% DAX +1.9%

Spot gold +1.1% to $US1234.01 an oz at 11.59am New York time

Brent crude +four% to $US61.84 a barrel at four.15pm New York time

US oil +four.three% to $US53.10 a barrel at four.16pm New York time

Iron ore +zero.7% to $US66.38 a tonne

Dalian iron ore +zero.5% to 466 yuan

LME aluminium +1.1% to $US1974 a tonne

LME copper +1.6% to $US6295 a tonne

2-year yield: US 2.82% Australia 2.00%

5-year yield: US 2.82% Australia 2.20%

10-year yield: US 2.97% Australia 2.61% Germany zero.30% UK 1.31%

US-Australia 10-year yield hole as of eight.29am AEDT: 36 foundation factors

From Today’s Financial Review

Chanticleer: Critical issues for AMP’s new CEO: Francesco De Ferrari may have to keep in mind two important issues about AMP: how a lot capital it may well launch – and the way a lot it capital it will possibly destroy.

Bank pay backlash to hit Dunn, Dwyer: Westpac’s Craig Dunn and ANZ’s Paula Dwyer are set to bear the brunt of a backlash towards financial institution pay at financial institution AGMs within the coming fortnight.

From car dealer to $100m hedge fund genius: How did a former Toyota vendor increase hundreds of thousands from seaside villagers and native sporting celebrities by claiming to be a hedge fund genius?

United States

Wall Street’s main indexes rallied on Monday following a truce between the United States and China of their trade dispute, which has clouded the outlook for the stock marketplace for a lot of the yr.

“Today is mostly about celebrating the fact that the US and China have delayed what could have been some of the worst-case scenarios regarding their trade relations,” stated Michael Arone, chief funding strategist at State Street Global Advisors.

Last week, the S&P 500 gained four.eight per cent as buyers interpreted commentary from the Federal Reserve as signalling that US rate of interest hikes could also be much less aggressive than feared. The index rebounded after confirming its second 10 per cent correction of the yr, and is now up four.four per cent in 2018.

The tech sector, among the many teams seen as delicate to trade tensions, gained 2.1 per cent. Apple shares, lately hit by worries over potential tariffs on iPhones, gained three.5 per cent.

Earnings growth outlook casts shadow: A trade truce is a constructive, nevertheless US stock buyers should nonetheless cope with a weaker earnings outlook, writes Stephen Gandel.

Horizon’s Greg Valliere on the trade truce: “There isn’t a deal, of course, but the markets – which have demanded one – can relax for a while. The key is that things won’t get any worse for three months or longer: there will be no new 25% tariffs, there was progress on autos, fentanyl and especially agriculture. Trade anxiety will heighten again by early spring, but there’s nothing wrong with a winter truce, is there? Larry Kudlow and the pragmatists have prevailed – and the markets should be happy.”

Fed’s Quarles affirms rate path: Fed vice chairman Randal Quarles stated the central financial institution’s growing “data dependence” doesn’t imply it’s going to react to each rise or fall in financial statistics or markets.

Europe

Business fears Corbyn more than Brexit: Australian buyers and British corporations are already getting ready for the danger of a Corbyn authorities.

Glencore restructures management: Glencore has appointed Peter Freyberg to the newly created position of head of commercial mining, the worldwide dealer and miner stated.

Executives from BMW, Daimler and Volkswagen have been referred to as to talks with White House financial adviser Larry Kudlow on Tuesday, a supply accustomed to the discussions advised Reuters.

BMW stated CFO Nicolas Peter will attend the assembly in Washington, whereas Daimler stated CEO Dieter Zetsche shall be in attendance. VW declined to remark on whether or not its CEO Herbert Diess will go to the US.

French Finance Minister Bruno Le Maire stated on Monday he noticed broadening help in favor of a proposed joint euro zone price range, although robust particulars remained to be hammered out. “I think there is a widening consensus about the necessity of having that euro zone budget,” Le Maire stated as he arrived for a gathering together with his euro zone counterparts in Brussels anticipated to run into the night time.

Eager to get a deal earlier than the top of the yr, Le Maire stated that there was broadening help for a price range to finance convergence, however he acknowledged that there was opposition to a stabilisation position.

The Dutch particularly have dug in towards any joint fund that could possibly be used to stabilise troubled economies, saying that the see no want for it.

Asia

China omits key US condition in trade truce spin: China’s propaganda machine went into overdrive on Monday, promoting the message that president Xi Jinping had negotiated an obvious everlasting truce within the nation’s trade conflict with the US.

China stocks surged and the yuan posted its greatest achieve in almost three years. 

The benchmark Shanghai Composite index closed 2.6 per cent greater at 2654.80 factors and the blue-chip CSI300 index jumped 2.eight per cent.

In Hong Kong, the Hang Seng index closed 2.6 per cent greater at 27,182.04, additionally its greatest day in a month. The index for Chinese corporations listed in Hong Kong rose 2.5 per cent.

“This is a relief rally. The markets are oversold. I don’t think we needed much of an excuse (for a rebound),” stated Paul Kitney, chief fairness strategist at Daiwa Capital Markets in Hong Kong.

The settlement “is not a ceasefire, it’s just a de-escalation. The existing tariffs are still having a negative impact on the Chinese economy, they haven’t gone away”.

In Tokyo, the Nikkei share common soared 1.zero per cent to 22,574.76, the very best closing degree since October 22.

Japanese cyclical stocks similar to these in tech, autos and equipment which have giant publicity to the Chinese market outperformed.

Hitachi soared four.1 per cent and TDK surged four.three per cent, whereas Toyota Motor superior three.four per cent.

Factory automation gear maker Yaskawa Electric rose three.three per cent, babybottle maker Pigeon added 2.eight per cent and cosmetics maker Shiseido gained three.four per cent.

Currencies

NAB’s Rodrigo Catril on in a single day foreign exchange strikes: “Relative to yesterday’s opening levels the USD is weaker against most currencies with the improvement in risk appetite the main factor at play. GBP is one exception a tad weaker after erasing early gains amid more Brexit developments. That said as noted in previous commentary, USD indices are still hovering very close to their year to date highs.”

Mr Catril on the Australian greenback: “Looking at the AUD in more detail, the pair traded to an overnight high of 0.7391 early in the session, but as US-China trade news raised some questions and equity markets faded, the AUD gave back some of its early gains and now trades at 0.7350. Yesterday, the AUD also struggled to retain early gains with domestic data releases printing on the softer side of expectations. Housing market indicators continue to slow in November and Q3 GDP partials came out softer than expected, pointing to downside risks to Q3 GDP on Wednesday. Inventories were flat in the month against expectations of a +0.4% rise, meaning inventories will likely subtract around -0.26%points from quarterly GDP growth and company profits rose 1.9% q/q (weaker than the 2.8% consensus).”

While some commentators resembling Oxford Economics harassed that the US/China trade truce seems fragile, the yuan took coronary heart from the suspension of the looming tariff hike and promise of extra talks.

The yuan rose 1.02 per cent – its strongest day by day achieve since February 15, 2016 – to breach the 6.89 per US greenback mark and ended onshore buying and selling session at 6.8885.

It has misplaced almost 6 per cent thus far this yr as trade ties deteriorated and the US greenback firmed, and a few analysts had forecast it will slide additional if the trade conflict escalated.

The offshore yuan additionally breached 6.89 per greenback to trade at 6.8846 at 0836 GMT.

A Shanghai-based dealer stated a stronger yuan and easing trade tensions gave authorities extra flexibility to handle the slowing financial system. “If the CNY does not depreciate, the PBOC has more room for easing,” he stated, referring to decreased dangers of capital outflows.

BMO on the outlook for Bank of Canada coverage within the wake of a choice by the province of Alberta to reduce oil output amid a glut that has hammered costs: “The Bank’s progress forecast shall be affected, however the drop in manufacturing is predicted to be momentary and subsequently should not have a huge impact on coverage. But we might discover out their preliminary ideas this week, with the Bank of Canada coverage announcement due Wednesday and an financial replace speech from Governor Poloz on Thursday.

“No price hike is predicted this week, however there’s uncertainty across the tone the Bank will take. The BoC was notably upbeat in October, however with oil costs since falling sharply, the Fed sounding a bit extra dovish, and the Q3 GDP particulars on the delicate aspect, a extra cautious tone is predicted. The market might be awaiting clues to the potential for a January hike, which is presently about 70% priced.”

Commodities

Glencore has appointed Peter Freyberg to the newly created position of head of commercial mining, the worldwide dealer and miner stated, whereas its head of copper advertising Telis Mistakidis retires on the finish of the yr. Freyberg was beforehand head of the corporate’s coal belongings and might be changed in that position by Gary Nagle, Glencore stated in an replace to buyers.

Industrial metallic worth good points have been capped to an extent by a survey displaying China’s manufacturing unit exercise grew barely in November, whereas new export orders prolonged their decline. China accounts for about half of worldwide demand for base metals.

Qatar to quit OPEC: Qatar’s power minister stated it will withdraw from OPEC in January 2019 and would as an alternative focus on its pure fuel business.

Fitch Solutions Macro Research on the outlook for Chinese metal costs: “We maintain our steel price forecast for 2019 at USD700/tonne as we continue to believe steel demand and prices will be buoyed throughout the year by the Chinese government’s frontloading of infrastructure project approvals since H218. We believe the present fall in steel prices will prove temporary.”

Fitch additionally stated it expects “the Chinese government to continue attempting to bolster the domestic economy from external headwinds through a more expansionary fiscal policy. The Chinese government first announced targeted economic support policies in late-July at the 25-member Politburo’s meeting, where adopting a ‘proactive’ fiscal policy was one of the highlights of the State Council’s announcement. Beijing has since put this into action by cutting taxes and providing a floor to the deceleration in infrastructure fixed asset investment (FAI) growth. An increasing number of approvals of infrastructure projects, despite taking a few months to translate into actual demand once construction works begin, will also once again buoy steel prices.”

As for what lies additional forward: “We maintain our view for global steel prices to ease from current levels in the longer term, and see them averaging USD600/tonne during the 2019- 2023 period and falling to USD530/tonne by 2023. Ultimately, we expect that a combination of slowing Chinese steel consumption growth and rising global steel market protectionism prompting greater production in affected countries to loosen the market and drag prices lower late 2019 and beyond. Chinese domestic demand for steel will slow overall in 2020 and beyond as the rebalancing of the economy away from heavy industry and towards the service sector resumes, which will drag down domestic steel prices in China and thus the global average.”

Australian Sharemarket

Australian shares rallied initially of the week. The S&P/ASX 200 Index climbed 104 factors, or 1.eight per cent, to 5771, whereas the All Ordinaries Index rose 106 factors, or 1.9 per cent, to 5856.

“Miners, banks and power stocks led the market larger. In the mining sector, BHP shares jumped three.7 per cent to $31.82, whereas South32 climbed 7.1 per cent to $three.32 and Rio Tinto rose 2.three per cent to $74.99. Of the banks, Westpac rose 1.1 per cent to $26.25, and Macquarie, up 2.eight per cent, to $117.61.

Energy stocks have been lifted because the oil worth rallied, with Woodside larger by three.5 per cent to $32.16, Santos up eight.7 per cent to $6.00 and Origin up 6 per cent to $6.87.

Graincorp shares soared 26.7 per cent to $9.25 on news of a $2.4 billion takeover offer. Former Business Council of Australia president Tony Shepherd is behind the bold bid for control of GrainCorp which comes simply because the agriculture big was contemplating its personal acquisitions.

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with Reuters, Bloomberg, AAP

Comments? Questions? Let us know what you consider Before the Bell: timothy.moore@fairfaxmedia.com.au





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