“Then on Wednesday, consumer sentiment is expected to slump on ‘recession’ talk.
“NAB business conditions sank in December (+11 to +3) while confidence has flat-lined at +3-4. As we edge towards the May election, a change of government is looking likely.
“The ALP plan to abolish higher income tax cuts, boost the minimum wage and lift welfare payments, all straight out of the New Zealand Labour Party playbook. Across the ditch, confidence and conditions sank in Nov 2017 after the Labour coalition was formed. Could we see the same reaction in Australia?”
Local data: NAB business survey – conditions and confidence February, Housing finance January, RBA’s Guy Debelle speech
Overseas data: UK industrial production January; US NFIB small business optimism February, CPI February
SPI futures up 32 points or 0.5% to 6218 near 5am AEDT
AUD +0.2% to 70.60 US cents
On Wall St at 1.56pm: Dow +0.6% S&P 500 +1.3% Nasdaq +1.9%
In New York, BHP +1% Rio +1.5% Atlassian +5.5%
In Europe: Stoxx 50 +0.6% FTSE +0.4% CAC +0.7% DAX +0.8%
Spot gold -0.6% to $US1290.95 an ounce at 1.55pm New York time
Brent crude +1.2% to $US66.53 a barrel
US oil +1.2% to $US56.76 a barrel
Iron ore -2.3% to $US83.79 a tonne
Dalian iron ore +0.5% to 604 yuan
LME aluminium -1.3% to $US1847 a tonne
LME copper +0.2% to $US 6407 a tonne
2-year yield: US 2.48% Australia 1.65%
5-year yield: US 2.44% Australia 1.67%
10-year yield: US 2.64% Australia 2.03% Germany 0.06%
US-Australia 10-year yield gap as of 4.43am AEDT: 61 basis points
From Today’s Financial Review
PM rejects Joyce’s coal push: The Prime Minister Scott Morrison has dismissed a push for new coal-fired power in Queensland as impractical as he tried to quell a worsening civil war inside the Nationals.
Labor commits fully to Hayne, flags regulatory shake-up: Labor will commit the full implementation of all but one of the 76 recommendations of the Hayne royal commission, and flag an overhaul of the financial regulatory system.
Rates, not supply, the key for house prices: Changes in interest rates are the primary driver behind the movement in house prices and not supply and demand, according to an RBA paper that appears to contradict the bank’s governor.
Morgan Stanley on outlook for the S&P 500: “Consensus CY19 EPS forecasts for the S&P 500 are down -6% from their September peak, on par with the 6.5% decline in the S&P 500. Valuations aren’t as stretched as they were in September due to the fact that 10-year Treasury yields are 40bps lower. This leaves the market only modestly overvalued at Friday’s close but with earnings likely to fall another 4-5%, we think there is more downside in this correction. We get more interested below 2600.”
AGF’s Greg Valliere: “The biggest waste of time of the year in Washington is reading a new budget, and this year is no exception. If you want proof of this irrelevancy, look at the White House’s projected rate of GDP growth that will get us to an alleged balanced budget — 3.2% this year and 3% for the next decade, as if recessions have been outlawed.”
Levi Strauss & Co said it expects to raise as much as $US587 million through an initial public offering (IPO), giving it a value of up to $US6.2 billion as the jeans maker returns to the market after three decades.
Facebook added another bull to its collection as Nomura Instinet upgraded its view on the stock to buy from neutral, saying that users were transitioning to the company’s Stories feature faster than it had anticipated. The firm also raised its price target to $US215 from $US172.
Britain’s FTSE 100 kicked off a week of key Brexit votes in parliament on a positive note, with financial stocks shrugging off fears of a potentially disruptive no-deal divorce while mining companies found their support from higher zinc prices.
The main index added 0.4 per cent, shaving off some earlier gains as sterling strengthened, and the FTSE 250 was 0.2 per cent higher.
Challenger banks OneSavings and Charter Court Financial Services both surged about 11 per cent, topping the mid-cap index, after confirming merger talks which analysts at Investec described as “a marriage made in heaven”.
The rise marked OneSavings’ biggest one-day gain since August 2016 and Charter Court Financial enjoyed its best-ever day.
London-listed shares of Ryanair were down 2.1 per cent. The low-cost carrier said its board had passed resolutions to protect its EU airline licences after Brexit. But traders cited concerns about possible disruptions from Brexit even despite the contingency plans.
Hong Kong shares rebounded on Monday after two straight sessions of losses amid cautious optimism that China and the United States will work out a trade deal, and as Chinese officials boosted investor hopes of policy support for a slowing economy.
At the close of trade, the Hang Seng index was up 274.88 points, or 1 per cent, at 28,503.30, having lost 1.9 per cent on Friday. The Hang Seng China Enterprises index rose 1.1 per cent to 11,276.91.
China’s main Shanghai Composite index closed up 1.9 per cent at 3026.99 points, while the blue-chip CSI300 index ended up 2 per cent.
Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.5 per cent, while Japan’s Nikkei index closed up 0.5 per cent.
President Donald Trump’s newest budget forecasts the US fiscal deficit surpassing $US1 trillion this year and staying above that level until 2022.
The fiscal 2020 proposal sees the deficit expanding to $US1.1 trillion for 2019 and 2020, when Trump will run for re-election. The shortfall is seen narrowing slightly to $US1.07 trillion in 2021 and $US1.05 trillion in 2022, before shrinking every year through 2029.
The budget deficit has already climbed 77 per cent in the first four months of the current fiscal year through September, according to Treasury Department data.
Newmont Mining managed to fend off a hostile bid by Barrick Gold by agreeing to a joint venture around the two companies’ projects in Nevada. That should shield the Colorado-based miner from an unwanted offer from its recent suitor – at least for two years.
The agreement to end Barrick’s $US17.8 billion hostile bid for Newmont was reached after the companies opted to pursue a joint venture around their Nevada projects. In reaching that pact, Newmont decided to give Barrick a 61.5 per cent stake in the venture, up from 55 per cent that was offered last week.
The United States will drive global oil supply growth over the next five years, adding another 4 million barrels per day to the country’s already booming output, the International Energy Agency said on Monday.
US oil output, including natural gas liquids (NGLs) and other hydrocarbons, will climb to 19.6 million bpd by 2024 from 15.5 million last year, the Paris-based agency said. Gross crude exports will double, leading to greater competition especially in the Asian market.
Crude output in the United States will rise nearly 2.8 million bpd, growing to 13.7 million bpd in 2024 from just under 11 million bpd in 2018, the IEA said.
Steelmaking raw materials fell in China on Monday, with the benchmark iron ore contract hitting its lowest for this month so far and coke extending its losses into a fifth session, as demand waned amid restrictions on steel production.
The drop in futures mirrored weakness that has prevailed in the physical market since last week, a Shanghai-based trader said.
“The air pollution situation in many areas in China is not that good. I believe there will be another round of restrictions on production for the steel industry,” the trader said.
Officials in 28 northern Chinese cities, including in the top steelmaking city of Tangshan, face central government evaluations at the end of March on their performance in curbing air pollution over the past winter.
The most-traded iron ore contract on the Dalian Commodity Exchange, with May expiry, fell as much as 3.5 per cent to 595 yuan ($US88.53) a tonne, the lowest since February 27.
Other raw materials for steel production fell as well, with Dalian coke dropping as much as 3.0 per cent to 1982.5 yuan. Coking coal slid 2.5 per cent to 1223 yuan.
Australian shares opened the week lower on Monday, as investors digested Friday’s economic figures from the US and China, and moved toward more defensive sectors.
The S&P/ASX 200 Index fell 23.6 points, or 0.4 per cent, to 6180.2 while the broader All Ordinaries slid 23.8 points, or 0.4 per cent, to 6263.3.
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with Reuters, Bloomberg, AAP
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