ASX to edge higher on bets of US/China trade war thaw


In addition Mr Summers stated: “Like generals fighting the last war, too many policymakers are focused on yesterday’s problems. The global economy is much more likely to suffer from a downturn than from overheating in the next two years.”

Capital Economics’ Simona Gambarini additionally has a bearish outlook. “We now anticipate the S&P 500 to fall to 2300 by end-2019 and are sticking to our forecast that the 10-year Treasury yield will decline to 2.50 per cent. With this in thoughts, we expect that safe-haven belongings, together with gold, will proceed to carry out nicely.”

Another potential guess, in accordance to Ms Gambarini: “Among ‘fiat’ currencies, the performance of the Japanese yen stands out. Whilst most major currencies have declined against the dollar during the period, the yen has gained almost 4%. It has done substantially better than the Swiss franc, which is also often considered to be a safe haven.”

Today’s Agenda

Local knowledge: AiG efficiency of providers December, Building approvals November, ABS job vacancies November

NAB on the pending development knowledge: “Building Approvals, ever-volatile, have recently seen a downtrend in both house and apartment approvals. In November, these trends are likely to continue, although NAB expects a small rebound in apartment approvals (+3.5% m/m) to more-than-offset a modest reversal in House approvals (-0.8% m/m). Taken together, NAB expects Approvals ticked up 1% m/m (-24% y/y).”

Overseas knowledge: Euro zone unemployment fee November; US Fed December policymeeting minutes

Capital Economics on the pending Fed minutes: “… we suspect that the minutes for the December FOMC meeting may strike a more dovish tone, stressing the uncertainty surrounding the Fed’s plan for further interest rate hikes this year. With economic growth set to hold up fairly well in the near term we continue to expect up to two more rate hikes in the first half of this year. But a renewed plunge in the stock market or more serious disruption resulting from the government shutdown would probably take any further hikes off the table.”

Market Highlights

SPI futures up 20 factors or Zero.four% to 5683 as of eight.45am AEDT

AUD -Zero.1% to 71.40 US cents

On Wall St: Dow +1.1% S&P 500 +1% Nasdaq +1.1%

In New York, BHP -Zero.three% Rio +1.2% Atlassian +2.three%

In Europe: Stoxx 50 +Zero.7% FTSE +Zero.7% CAC +1.2% DAX +Zero.5%

Spot gold -Zero.three% to $US1285.00 at 1.29pm New York time

Brent crude +1.7% to $US58.30 a barrel

US oil +1.9% to $US49.45 a barrel

Iron ore +1.three% to $US74.46 a tonne

Dalian iron ore +Zero.5% to 515 yuan

LME aluminium -Zero.eight% to $US1864.50 a tonne

LME copper -Zero.three% to $US5906 a tonne

2-year yield: US 2.59% Australia 1.88%

5-year yield: US 2.58% Australia 2.03%

10-year yield: US 2.73% Australia 2.36% Germany Zero.22%

US-Australia 10-year yield hole as of eight.49am AEDT: 37 foundation factors

From Today’s Financial Review

Atlassian bounces back from October lows: Aussie firm Atlassian is about to be a prime tech-stock decide for US buyers this yr, with analysts saying it’s possible to outperform different tech stocks even when the bear market continues.

Industry super roars to the lead: Industry superannuation funds are on monitor to overtake self-managed tremendous funds to turn out to be the dominant gamers within the $2.7 trillion retirement financial savings system within the subsequent two years.

Chanticleer: China’s equities to hit tipping point in 2019: China’s opening up of its fairness capital markets to foreigners is progressing because the world’s three largest suppliers of stock market indices recognise its significance.

United States

Wall Street rises to three-week peak: The S&P 500 jumped to a three-week excessive, led by Apple, Amazon, Facebook and industrial shares on bets that the United States and China would strike a deal to finish their trade war.

BlackRock chief fairness strategist on US equities: “”We’re speaking a few slowdown within the tempo of financial progress, not essentially an finish to the enlargement.”

Yardeni on the pending earnings season: “The This fall earnings reporting season is about to get underway. We assume there’ll yet one more constructive shock, however it’s positive to mark the start of the slowdown in income progress. Analysts anticipate S&P 500 earnings to rise 13.four% y/y in This fall, down from 27.5% in Q3-2018. Still, that marks the tenth straight quarter of constructive y/y earnings progress and the fifth with double-digit proportion features.

“Of the 10 sectors anticipated to report constructive y/y earnings progress, six are forecasted to rise at a double-digit proportion price, down from 10 throughout Q3. Here are the newest forecasted This fall-2018 earnings progress charges on a proforma same-company foundation versus their remaining Q3-2018 progress charges: Energy (64.three% in This fall-2018 versus 114.2% in Q3-2018), Industrials (24.eight, 18.9), Financials (22.1, 44.eight), Communication Services (17.5, 26.1), S&P 500 (15.1, 28.four), Consumer Discretionary (13.2, 25.four), Health Care (11.1, 16.5), Tech (eight.9, 29.1), Real Estate (6.9, 5.three), Materials (6.Zero, 30.1), Consumer Staples (2.eight, 11.four), and Utilities (-9.Zero, 10.9).”

Risk is back say Morgan Stanley, Goldman: Investors and strategists who shunned danger, from stocks and credit score to rising markets, are cracking the door again open.

While Pivotal Research says keep away from Facebook, JPMorgan informed shoppers that a “compelling” valuation and accelerating earnings progress will assist the social community’s stock transfer previous scandals and controversies.

The agency outlined the explanation why Facebook is one of its “2019 Best Ideas” in a analysis report on Tuesday. Analysts led by Doug Anmuth stated that whereas investor sentiment “remains negative” amid considerations over knowledge privateness, consumer metrics stay wholesome and the income slowdown seems manageable. “We view core FB as stickier than many think, with recent metrics mostly stable and our proprietary survey work showing solid engagement,” Anmuth wrote.

JPMorgan reiterated its obese score and $US195 worth goal, which means upside of 41 per cent from Facebook’s closing worth on Monday. The common analyst worth goal is $US187, in accordance to knowledge compiled by Bloomberg.

Oracle’s Ellison reveals $US1b Tesla stake: Oracle founder Larry Ellison has acquired a $US1 billion stake in Tesla, making him the carmaker’s second-biggest particular person investor after his shut pal Elon Musk.

Housing bear who called 2018 crash says worst to come: James Stack, who predicted the 2008 US actual property crash and nailed final yr’s housing slowdown with uncanny timing, is again with some dangerous news for 2019.

Europe

May stymied in her plans to exit the EU: London Mayor Sadiq Khan is looking on Prime Minister Theresa May to maintain a new referendum on Brexit as she suffers defeat on funding in Parliament.

British shares jumped to their highest in virtually a month on Tuesday amid hopes of a US-China trade deal and as grocery store chain Tesco led a revival in retailers after upbeat gross sales knowledge that helped offset Morrisons’ disappointing vacation replace.

The FTSE 100 was up Zero.7 per cent after touching its highest since December 13 earlier, and the mid-caps have been up 1.1 per cent to their its loftiest since December 5.

The midcap index crossed its 50-day shifting common – seen as a technical help degree – in the course of the session, though it closed underneath the extent.

The bourse, which is extra uncovered to uncertainties at house in contrast to the exporter-heavy FTSE 100, is probably going to come beneath the highlight with a parliamentary vote on Prime Minister Theresa May’s disputed Brexit deal subsequent week.

Britain plans to maintain a vote in parliament on the federal government’s deal to depart the European Union on January 15, May’s spokesman stated on Tuesday after a gathering of senior ministers.

May once more advised her cupboard it was not authorities coverage to delay Brexit by extending the so-called Article 50 discover, the spokesman stated, including the thought might have been mentioned by EU officers however not by British officers.

Deutsche Bank’s administration board has determined to minimize the lender’s 2018 bonus pool by round 10 % in an effort to reduce prices whereas retaining expertise, Bloomberg reported.

Bloomberg, citing unnamed individuals conversant in the matter, additionally reported on Tuesday that bonuses can be paid extra selectively. The pool might change, relying on fourth-quarter earnings figures, the report stated.

Asia

China’s best 2019 stock is up 39pc and no one knows why: Founder Securities is the CSI 300 Index’s prime performer, however the dealer stated it had no materials info to disclose.

Hong Kong shares rose barely on Tuesday as buyers awaited outcomes of the talks being held in Beijing between the US and Chinese officers to ease their trade tensions.

The Hang Seng index rose Zero.2 per cent to 25,875.45, whereas the China Enterprises Index gained Zero.1 per cent to 10,133.74 factors.

Fitch might reduce China’s A+ credit standing or secure outlook if Beijing reverts to the type of debt-fuelled stimulus programmes it has used prior to now, the agency’s prime sovereign analyst stated.

Fitch’s head sovereign analyst James McCormack stated his agency nonetheless anticipated Beijing to hold its pledge and stick to tackling excessive ranges of company debt, however underscored the dangers to the score if authorities did attain for the stimulus levers.

“If the policy response to slowing growth was similar to what we saw around the time of the global financial crisis, then that would cause us to look again at the rating,” McCormack informed Reuters. “Because we think that would increase macroeconomic imbalances in China when debt levels in the corporate sector are already high.”

Asian markets could win from ‘decoupling’: Asian stock and bond markets could possibly be the shock winners in 2019, in accordance to fastened revenue specialists at UBS Asset Management.

In Tokyo, the Nikkei share common closed Zero.eight per cent higher at 20,204.04, comfortably sitting above the psychologically necessary line of 20,00Zero.

Fears of a worldwide slowdown have led to a pointy pullback in markets during the last two weeks, sending the Nikkei as little as 18,948.58 on December 26, its lowest since April 2017.

The broader Topix rose Zero.four per cent to 1518.43, although 12 of 33 sub-sectors ended the session in unfavourable territory.

Currencies

BNZ on the NZ greenback: “The NZD has continued its run of underperformance, down 0.4% over the past 24 hours to 0.6730 and recovering over the last couple of hours after reaching an overnight low of 0.6708. It is down slightly on all the crosses. CFTC positioning data before Xmas showed that the large short positioning had been completely closed so perhaps we are seeing new short positions being taken on board early in the New Year.”

Trade surplus shrinks slightly in November: Australia’s trade surplus shrank barely in November, however the knowledge painted an image of a comparatively strong export sector.

Anticipation of €35 billion of new authorities debt issuance this week stored upward strain on euro zone bond yields on Tuesday, overshadowing extra weak knowledge from Germany and a decline in euro zone financial sentiment.

Austria, Germany and the Netherlands held auctions on Tuesday. Ireland’s debt company stated it had employed a syndicate of banks and brokers to promote a new 10-year bond and sources informed Reuters that Italy is getting ready a 15-year bond sale.

Portugal is predicted to add to current syndications from Belgium and Slovenia.

BlackRock on the Fed: “The January meeting could provide clues to the Fed’s future path. We see a pause in March looking increasingly likely, as the Fed weighs the impact of tightening financial conditions and economic fundamentals.”

Commodities

Aluminium closed down Zero.eight per cent at $US1864.50 a tonne in remaining open outcry buying and selling, rowing again some of its rebound since touching $US1785.50 final week, the bottom in a few yr.

Aluminium has the biggest speculative net short position of the LME complex at 28 per cent of open curiosity, a degree not seen since November 2015, in accordance to estimates by Marex Spectron detailed in a word.

Excess provide was evident in a build-up of LME aluminium inventories , which rose once more on Tuesday, day by day LME knowledge confirmed. The stocks have surged almost 40 per cent since mid October final yr.

The outlook nevertheless has improved for copper.

Chart patterns are indicating that draw back momentum has receded in copper, Stéphanie Aymes, head of technical evaluation at Societe Generale, stated in a word.

“Copper is now inching towards the upper band of the short-term down sloping trend at $US5980/$US6010… A break above will mean signs of a larger recovery towards $US6079 and more importantly $US6108/$US6170.”

US soybean farmers count the cost of trade war: America’s soybean exports to the world’s largest market have all however disappeared, leaving farmers dependent on a $US12 billion bailout.

Chinese iron ore costs climbed for a fourth session on Tuesday to strike a two-month excessive, supported by restocking demand at metal mills.

Steel mills in China usually haven’t any robust incentives to ramp up output due to skinny margins and weak demand, famous Zhuo Guiqiu, analyst, Jinrui Futures. “But some steel mills in Tangshan and Xuzhou that restarted operations after emergency measures were lifted still need to replenish their stocks of raw materials,” Zhuo stated, referring to two of China’s key steel-making hubs.

Profit margins for rebar have fallen greater than 66 per cent since late October to 300 yuan ($US43.77) a tonne this week, whereas hot-rolled coil is just simply worthwhile, in accordance to knowledge compiled by Jinrui Futures.

Zhuo expects that extra metal mills might schedule upkeep till the top of China’s Lunar New Year vacation in February.

Last week, utilisation charges at metal mills throughout China fell for a seventh consecutive week at 64.23 per cent, as of January four, the bottom degree in 9-1/2 months, knowledge tracked by Mysteel consultancy confirmed.

Australian Sharemarket

Australian shares closed higher for a second straight session on Tuesday, hitting their highest level in additional than a month as trade talks between the US and China continued.

The S&P/ASX 200 Index rose 39.2 factors, or Zero.7 per cent, to 5722.four, whereas the broader All Ordinaries rose 38.eight factors, or Zero.7 per cent, to 5783.three.

Australian shares opened Tuesday’s trade decrease on the again of some minor losses from the main banks, however rallied following a constructive begin to buying and selling in Asian markets.

Street Talk

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with Reuters, Bloomberg, AAP

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





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