October 9, 2019
OVERNIGHT MARKET SNAPSHOT (as at 7:30am AEDT)
US Stock Indexes headed south overnight as the US/China trade war heats up going into the high level talks Thursday. The US has clamped down on China as it added Chinese companies to its trade blacklist along with twenty public security bureaus. The US said that the action was due to China’s treatment of Muslim minorities and human rights violations. The US is also moving ahead with possible restrictions on capital flows into China, with a focus on investments made by US government pension funds. The US also announced that they will impose visa restrictions on Chinese officials which tipped the market over into the close. The DOW closed down 1.19% while the broader SP500 was down 1.56% and the Nasdaq ended down 1.67%. In Europe, Indexes also came under fire on trade war concerns as the expectations increased for no resolution to the dispute in the near term. Also causing concern was news that German Chancellor Angela Merkel and British Prime Minister Boris Johnson had spoken and Merkel had made it clear that a Brexit deal was ‘overwhelmingly unlikely’.
Trade talks may not last as long as expected as China said that the Chinese delegation could leave earlier than planned because “there’s not too much optimism.” The IMF (International Monetary Fund) MD issued a stark warning about the state of the global economy, saying an economic deceleration could worsen without action to resolve trade conflicts and support growth. The US is poised to raise tariffs on $250 billion worth of Chinese goods from 25% to 30% on 15th Oct which, if it happens, will have a negative effect on share markets as traders go risk off into Equities.
The USD rallied on safe haven buying as the trade war again heats up. Some heat was taken out of the rally during the US session as Fed Chair Powell flagged the potential for further rate cuts to fend off global economic risks. He also said the central bank would soon begin allowing its balance sheet to expand to ensure smoother functioning of US short-term funding markets to provide adequate supply of reserves to manage periods of high demand. The EURO fell apart once the USD started to rally as flows went out of the Euro and into the safe haven currency. The GBP came under pressure at the start of European trade as Brexit issues again reared its ugly head pushing price down to previous lows around 1.2200. The AUD also came under pressure as the USD rallied and concerns increased that a trade deal later this week is unlikely. The USDJPY initially fell over at the start of the European session but then bounced back as the USD rallied. News that the Fed is potentially happy to cuts rate further, eased the buying pressure in the currency pair into the US close.
Gold rallied through the European session and held the gains into the US close as safe haven traders jumped back into the action as shares fell and on the likelihood that there is more share market pressure to come. Oil came under renewed pressure as price headed lower and moved down towards support around 51.00 which looks set to be tested in the very near term. Copper had a choppy session after initially coming under pressure at the start of the Europe session. The move in the USD did not have an affect as the price was already lower which indicates the metals strong ties to trade tensions.
Cryptocurrencies managed to hold on to the previous gains and hover around the same levels as Bitcoin is currently trading at $8179.6 down 0.49% while Ethereum is at $179.17 down 0.67% and Ripple is at $0.27491 down 0.27%.
The ASX200 yesterday continued on with the previous sessions move up and rallied into the close to end the session up 29.8 points to 6593.4. It was pretty much a green session with the Consumer Discretionary and Energy sectors ending the strongest while Gold was slightly weaker. Rising stocks outnumbered declining ones by 562 to 550 and 358 ended unchanged.
The ASX200 is expected to open down 65 points after the SPI200 gave up all of the last two sessions gains.
ECONOMIC DATA OUT TODAY (AEDT)
AUD Consumer Sentiment 10:30am
EUR Eurogroup Meetings All Day
USD Final Wholesale Inventories and Job Openings 1am
USD Crude Oil Inventories 1:30am
USD Fed Chair Powell Speaks 2am
USD FOMC Meeting Minutes 5am
SPI200 INTRADAY LEVELS TO WATCH
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