Wall Street was tanking again last night when Trump received a “beautiful letter” from his Chinese counterpart. Dow down -138.
| World Overnight | |||
| SPI Overnight (Jun) | 6263.00 | – 9.00 | – 0.14% |
| S&P ASX 200 | 6295.30 | + 26.20 | 0.42% |
| S&P500 | 2870.72 | – 8.70 | – 0.30% |
| Nasdaq Comp | 7910.59 | – 32.73 | – 0.41% |
| DJIA | 25828.36 | – 138.97 | – 0.54% |
| S&P500 VIX | 19.10 | – 0.30 | – 1.55% |
| US 10-year yield | 2.46 | – 0.03 | – 1.01% |
| USD Index | 97.44 | – 0.17 | – 0.17% |
| FTSE100 | 7207.41 | – 63.59 | – 0.87% |
| DAX30 | 11973.92 | – 206.01 | – 1.69% |
By Greg Peel
Ignoring the President
The ASX200 started strongly yesterday morning, fell back into a hole and then recovered again, reaching what would be its closing price just before noon.
The positive tone belied a speech by President Trump after Wall Street’s close in which he proclaimed China “broke the deal”, more often than once. By the close of trade on the ASX, the Dow futures were down -120 points.
We now know Wall Street plunged from the open last night but recovered most of that loss to the close, and our futures are down -9 points this morning. At 2.01pm Sydney time the tariff increase will go into effect unless a deal is agreed upon or an extension is granted. If there is no deal, the next step is for tariffs on all Chinese imports to the US.
Consensus has Wall Street down -10-15% on such a scenario.
So for now we wait, but as for yesterday, buying in the banks (+0.4%) ahead of dividend payments and strength in telcos (+2.1%), specifically Telstra, in the wake of the ACCC decision, helped support the market.
Energy (+1.3%) was also strong as were utilities (+2.2%) given AGL joined in.
No sector was overly weak. Materials (-0.3%) fared the worst following a profit warning from Adelaide Brighton ((ABC)) which sent that stock down -10.4%. On Wednesday peer CSR’s earnings result commentary suggested the housing downturn was not yet biting.
Orica ((ORI)) was a winner on the day, exploding up 5.6% on its earnings result while a quarterly update from Qantas ((QAN)) was well received, to the tune of 2.2%.
It was a dry argument for Graincorp ((GNC)), which fell -4.3% on its earnings result.
Not much point in dwelling any further – the world might be a different place by the close of trade this afternoon.
Not Ignoring the President
Trump’s “broke the deal” comment saw the Dow down -450 points early in US trade. He did not mean a deal was off, he was simply explaining why tariffs would increase at midnight. But Wall Street is very jittery.
By around mid-morning Trump reappeared to say he had just received a “beautiful letter” from President Xi, suggesting there is scope for a deal to be reached. Hence Trump believes a deal is possible before the tariff increase goes into effect.
Wall Street bounced, and the Dow closed down -138.
The Chinese delegation will only now be arriving in the US.
The question is as to whether a comprehensive deal can really be reached in the timeframe. Commentators suggest it is more likely the “framework” for a deal could be laid out – enough to appease Wall Street to the point it won’t crash, but it may not shoot to the moon either. Thereafter, it could still be a long and drawn out process, as most have expected for some time.
We can only now wait.
Also waiting with baited breath will be shareholders of Uber, the IPO for which priced last night at a slightly disappointing US$45 per share. That values the ride-share company at around US$7.5bn despite never having made a profit over the many years it’s been in operation.
What sort of market will Uber meet on its first day of trade?
Commodities
| Spot Metals,Minerals & Energy Futures | |||
| Gold (oz) | 1283.40 | + 3.10 | 0.24% |
| Silver (oz) | 14.72 | – 0.08 | – 0.54% |
| Copper (lb) | 2.77 | – 0.00 | – 0.16% |
| Aluminium (lb) | 0.79 | – 0.01 | – 1.13% |
| Lead (lb) | 0.84 | – 0.01 | – 1.02% |
| Nickel (lb) | 5.34 | – 0.12 | – 2.21% |
| Zinc (lb) | 1.24 | – 0.01 | – 1.00% |
| West Texas Crude | 61.60 | – 0.39 | – 0.63% |
| Brent Crude | 70.24 | 0.00 | 0.00% |
| Iron Ore (t) futures | 95.15 | + 0.90 | 0.95% |
It appears LME traders are taking no chances.
However iron ore has bounced back a little from Wednesday night’s fall.
The US dollar and gold price are largely hovering at this point.
The Aussie is also relatively steady at US$0.6991.
Today
The SPI Overnight closed down -9 points.
The US will see CPI numbers tonight, although they may pale into insignificance. It is anticipated, nevertheless, that after tonight the Fed will be very much in focus once more as it responds to deal or no deal scenarios.
The RBA will release its quarterly Statement on Monetary Policy today.
REA Group ((REA)) and News Corp ((NWS)) will release quarterly earnings reports.
The Australian share market over the past thirty days…
| BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS | |||
| AWC | ALUMINA | Upgrade to Neutral from Sell | UBS |
| CCL | COCA-COLA AMATIL | Downgrade to Underperform from Neutral | Macquarie |
| CSR | CSR | Downgrade to Underperform from Neutral | Credit Suisse |
| Downgrade to Hold from Buy | Deutsche Bank | ||
| EPW | ERM POWER | Upgrade to Add from Hold | Morgans |
| GNC | GRAINCORP | Downgrade to Reduce from Hold | Morgans |
| HUB | HUB24 | Downgrade to Sell from Neutral | Citi |
| HVN | HARVEY NORMAN HOLDINGS | Downgrade to Neutral from Outperform | Macquarie |
| JBH | JB HI-FI | Downgrade to Neutral from Outperform | Macquarie |
| MFG | MAGELLAN FINANCIAL GROUP | Downgrade to Hold from Buy | Ord Minnett |
| MYR | MYER | Downgrade to Sell from Neutral | UBS |
| PPH | PUSHPAY HOLDINGS | Downgrade to Lighten from Hold | Ord Minnett |
| PTM | PLATINUM | Upgrade to Hold from Sell | Ord Minnett |
