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The Overnight Report: Relief And Uncertainty

Daily Market Reports | Mar 09 2018

World Overnight
SPI Overnight (Mar) 5953.00 + 14.00 0.24%
S&P ASX 200 5942.90 + 40.90 0.69%
S&P500 2738.97 + 12.17 0.45%
Nasdaq Comp 7427.95 + 31.30 0.42%
DJIA 24895.21 + 93.85 0.38%
S&P500 VIX 16.54 – 1.22 – 6.87%
US 10-year yield 2.87 – 0.02 – 0.59%
USD Index 90.18 + 0.56 0.62%
FTSE100 7203.24 + 45.40 0.63%
DAX30 12355.57 + 110.21 0.90%

By Greg Peel

Let’s Start Again

With the White House hinting that Canada, Mexico and others, no doubt including Australia, would be exempted from Trump’s steel and aluminium tariffs, fears of an impact on Australia specifically and fears of a global trade war subsided on the local market yesterday. It appeared the tariffs will only be targeting the likes of China after all.

There was also relief that when the dust settled, Wall Street was not as upset over the departure of Gary Cohn as was initially apparent.

If we discount the -0.3% fall in materials as being all about BHP ((BHP)) going ex-dividend, only energy failed to join in, closing flat due to a weaker oil price, as all other sectors rose once more in a relatively uniform manner.

With result season now over, but for a handful of stragglers, this week has been one selling the index down, as a whole, and then buying it back up again. There was nothing remarkable about yesterday’s session – the index jumped from the open and continued to gradually move higher to the close.

And on the subject of trade…

Australia’s trade balance swung around to a $1.1bn surplus in January from December’s -$1.1bn deficit. While weak rural exports continued to drag, having noticeably impacted on the December quarter GDP result released on Wednesday, a jump in gold exports provided the boost to provide for a net 4.3% gain.

Imports went the other way, falling -2.4% on a drop in clothing and cars as compared to a strong December, providing a double whammy.

We recall that Wednesday night’s data showed the US trade deficit rose to its highest level in nearly a decade in January. Meanwhile, data released yesterday showed Chinese exports jumped 44.5% in February from a year earlier, Imports rose a mere 6.3%. Exports to the US specifically rose 46.1%.

Maybe Mr Trump has a point.

We have to add a grain of salt with regard Chinese New Year distortions, given the lunar celebration moves around on the solar calendar, but such numbers are certainly grist for the tariff mill.

Yesterday China’s foreign minister vowed a “justified and necessary response” to any efforts to incite a trade war.

Let the games begin.

Up or Down

As I write, Donald Trump should be signing a decree that lays out his tariff plans for steel and aluminium which, the president said earlier, could go “up or down” depending on the country.

Uncertainty remained the issue on Wall Street last night nonetheless. All the major indices were lower mid-session — the Dow by around -180 points — before recovering in the afternoon. While Trump’s decree may ultimately provide some clarity, threats of retaliation from both the EU and China are weighing on investor sentiment.

News so far is that the new tariffs will come into effect in 15 days but will not initially include Canada and Mexico. Earlier in the week Trump had said Australia is “a great country, a long term partner” and “we will be doing something with them”.

Take that as you will.

Until the details are finalised, Wall Street will remain nervous. Focus tonight will nevertheless swing back to the domestic issue of jobs, and specifically wage inflation, when the February non-farm payrolls numbers are released.

For now, there’s not much more to say.


Spot Metals,Minerals & Energy Futures
Gold (oz) 1321.40 – 2.00 – 0.15%
Silver (oz) 16.46 + 0.05 0.30%
Copper (lb) 3.08 – 0.05 – 1.73%
Aluminium (lb) 0.95 + 0.00 0.13%
Lead (lb) 1.06 – 0.02 – 1.71%
Nickel (lb) 6.00 – 0.14 – 2.22%
Zinc (lb) 1.46 – 0.02 – 1.24%
West Texas Crude (Apr) 60.32 – 0.92 – 1.50%
Brent Crude (May) 63.90 – 0.54 – 0.84%
Iron Ore (t) 72.00 – 3.20 – 4.26%

The Chinese winter curbs on steel production will be lifted on March 15, but inventories of iron ore at Chinese ports are at record levels. The US dollar index has bounced up 0.6% on easing trade war fears. It was not a good night for metals prices.

Oil continued to fall on increasing fears of excessive US production.

Gold has managed to hang in there nonetheless.

The stronger greenback has the Aussie down -0.4% at US$0.7788 despite the strong trade data released yesterday.


The SPI Overnight closed up 14 points or 0.2%. If that proves accurate, we’ll once again be back around the mid-range point for the ASX200 of 5950.

China will release February inflation data today.

The Bank of Japan will hold a policy meeting and has hinted that maybe it might be time to start easing back on the easing.

The US jobs numbers are out tonight.

OZ Minerals ((OZL)) goes ex today in an otherwise quiet day on the dividend front.

The Australian share market over the past thirty days…

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