” Nevertheless, markets have rallied hard on the notion of Trump blinking, but overall a high degree of scepticism should remain and an imminent deal is unlikely given Trump has foreshadowed he is going to be campaigning hard on the issue in the 2020 election.”
The news eased the fears of a recession triggered by the protracted trade war that dominated Wall Street this year and spurred a bout of volatility after President Donald Trump announced a new round of tariffs in August.
“The delay in the next round of tariffs is a positive for the tech sector and it is addressing any potential impact on the consumer as we head into year-end whether it’s back to school or holiday shopping,” said Mike Loewengart, vice-president of investment strategy at E*Trade Financial in New York.
“It’s tough to say what the timeline of a trade deal is. All indications are that China is gearing up for a protracted dispute while expectations in the US are for a much quicker resolution.”
Pantheon Macroeconomics’ Ian Sheperdson said the tariff rethink fades the chances of a 50 basis point cut by the Fed next month; he’s retaining his expectation of a 25bp cut.
In its latest survey of global fund managers, Bank of America found that they were the most bullish on rates since 2008 as the trade war sent recession risk to eight-year high.
These sophisticated investors slashed exposure to cyclicals to buy US Treasuries and US growth stocks; with global policy stimuli at a 2.5-year low, the onus is on Fed/ECB/PBoC to restore animal spirits, BofA said.
As for the economic outlook: one third of investors expected a global recession in the next 12 months, the highest since 2011, the bank also found.
Local: WBC-MI consumer confidence August, Second quarter wage price index
NAB on wages: “The Wage Price Index is expected to increase 0.5% q/q and 2.3% y/y – a similar pace of growth to last month. Overall wage pressures in the economy remain subdued and a further tightening in the labour market will be needed to increase wage pressures with tomorrow’s employment print likely to be more sensitive.”
Overseas data: China industrial production July, Retail sales July; Japan machinery orders June; Euro zone industrial production June, Second quarter GDP; US import price index July
ASX futures up 48 points or 0.7% to 6540 near 9am AEST
- AUD + 0.6% to 67.95 US cents
- On Wall St: Dow +1.5% S&P 500 +1.5% Nasdaq +2%
- In New York: BHP +2.2% Rio +2.5% Atlassian +2.1%
- In Europe: Stoxx 50 +1% FTSE +0.3% CAC +1% DAX +0.6%
- Spot gold -0.7% to $US1500.78 an ounce at 1.48pm New York time
- Brent crude +4.5% to $US61.23 a barrel
- US oil +3.7% to $US56.97 a barrel
- Iron ore -5.2% to $US89.25 a tonne
- Dalian iron ore +2.2% to 640.5 yuan
- LME aluminium +0.8% to $US1785 a tonne
- LME copper +1.5% to $US5828.5 a tonne
- 2-year yield: US 1.67% Australia 0.71%
- 5-year yield: US 1.58% Australia 0.66%
- 10-year yield: US 1.70% Australia 0.93% Germany -0.61%
- 10-year US/Australia yield gap near 9am AEST: 77 basis points
From today’s Financial Review
Magellan’s ‘zero’ commissions for brokers: Magellan will create market history by launching a listed investment trust that pays no commissions to stockbrokers and financial advisers.
Chanticleer: Why Magellan will manage $100 billion: Hamish Douglass knows the best time to raise cheap money is when financial markets are frothy with bullish exuberance. This is exactly what is happening.
Up close and personal with NAB’s new CEO Ross McEwan: He won’t make his staff work on weekends, he’s ready for bad headlines, and he says honesty is the best policy, writes Hans van Leeuwen.
US stocks closed higher on Tuesday after an announced delay of planned tariffs on some Chinese imports brought buyers back to the equities market in a broad-based rally.
Apple, a likely beneficiary of the tariff delay, rose 4.2%, while the Philadelphia SE Semiconductor Index gained 3.0%.
Tesla becomes most profitable US short bet as bears gain $4b: Short-sellers have proved a bullish Elon Musk wrong as his electric car maker’s shares have plunged 30 per cent this year.
Wall Street’s main indexes opened lower, adding to a global slide in stocks due to geopolitical concerns, with a US Labor Department report showing that the core consumer price index rose 2.2% in the 12 months through July.
For some analysts, the data spoke against the Federal Reserve delivering aggressive cuts in interest rates, expectations of which have been an important pillar propping up sentiment since June.
Financial markets have fully priced in a single quarter-point move at the US central bank’s September meeting and are still giving good odds on two more cuts this year.
Facebook pared gains following a Bloomberg report that the social media company had hired outside contractors to transcribe user audio clips, ending up 1.7%.
Shares of CBS and Viacom gained 1.4% and 2.4%, respectively, after sources told Reuters the companies had reached an agreement in principle regarding their impending merger.
The second-quarter earnings season has reached the final stretch, with 453 of the companies in the S&P 500 having posted results. Of those, 73.3% beat consensus estimates, according to Refinitiv data.
Analysts see S&P 500 second-quarter earnings growth of 2.9% year-on-year, a significant improvement over the paltry 0.3% growth expected on July 1, per Refinitiv.
European shares staged a comeback from early losses on Tuesday as growth sectors led the charge, after Washington’s move to delay tariffs on some Chinese goods provided a lift to battered global sentiment.
Commodity stocks, auto makers and tech sectors were among the biggest gainers in Europe, and helped the pan-European STOXX 600 index close up 0.5%, erasing session losses of up to about 0.8%.
“What we are seeing now with this announcement is a clear positive development,” said Ken Odeluga, market analyst at City Index. “This definitely counts as a relief to markets because… this announcement shows the willingness to compromise from both sides.”
But Odeluga doubts the longevity of Tuesday’s rally given recent volatility in markets spurred by recession fears, worsening Hong Kong tensions and a crash in Argentine markets.
Export-reliant Germany’s DAX rose 0.6% on the US news, recovering after data showed plunging economic sentiment among German investors. Investors will be closely watching Wednesday’s second-quarter economic growth data to see if Europe’s biggest economy is headed for recession.
China hawks trapped by the wrong lessons from history: Emotive references to Nazis hinder rather than help our understanding of Australia’s rapidly changing strategic situation.
The Hong Kong stock market on Tuesday fell to its lowest level in over seven months, as escalating anti-government protests left the city’s airport in a gridlock on Monday.
At the close of trade, the Hang Seng index was down 2.1% at 25,281.30 points, its lowest level since January 4. The Hang Seng China Enterprises index fell 1.5%
China caught in low-yield vortex: China’s 10-year bond touched 3 per cent for the first time since 2016, mirroring falls across Asia as investors chase yield and safety amid trade war fears.
Is China really the manipulator in Trump’s currency war?: The renminbi’s recent decline was not the result of policy action, writes Paola Subacchi.
China’s steel futures picked up on Tuesday, rising as much as 2.9%, as some steel mills began to limit production on recent price falls and an expected softening in demand.
The most-active construction steel rebar on the Shanghai Futures Exchange, for October delivery, rose 1.7% to 3662 yuan ($US518.88) per tonne as of 0215 GMT. It closed up 2.14% on 3677 yuan ($US520.43) a tonne.
“Some steel firms have reached the breakeven levels and have been actively limiting production,” said Richard Lu, senior analyst at metals consultancy CRU Group’s Beijing office.
“Demand for rebar is expected to soften in the second half of this year and would be in line with the real estate market,” Lu said.
The most-traded iron ore contract on the Dalian Commodity Exchange, for January delivery, was trading within tight range and picked up for the first time in August. It closed up 0.4% at 628 yuan.
Port stocks of seaborne iron ore across China stood at 122.5 million tonnes as of August 11, after rising for almost a month, weekly data tracked by SteelHome consultancy showed.
“The recent sharp price fall in iron ore was driven by looser market conditions in China,” Goldman Sachs wrote in a note, “nonetheless, the iron ore market remains tight.”
Hungry Magellan weaponises its hefty multiple: With shares doubling in value this year, Magellan has wasted no time capitalising on its juicy multiple to chase growth.
Aussie bank share prices defy gravity in low rate world: There is a growing tension between climbing bank valuations and the intensifying pressure of falling rates on lenders’ net interest margins.
The Australian sharemarket joined a global slide in stocks on Tuesday as modest losses from a number of index heavyweights weighed the market down on a quiet day of earnings.
The S&P/ASX 200 Index fell 21.8 points, or 0.3 per cent, to 6568.5 while the broader All Ordinaries lost 22 points, or 0.3 per cent, to end the session at 6648.1.
BlackRock still finding value in the sharemarket: BlackRock’s head of fundamental active equities Australia, Charlie Lanchester, believes there is still value to be found in the equity market.
Insurers, private equity lined up for Eclipx’s Right2Drive
PEP, Hoyts bounce back into frame for Funlab