The Overnight Report: Trade Uncertainty Lingers

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World Overnight
SPI Overnight (Mar)	5992.00	+ 3.00	0.05%
S&P ASX 200	5996.10	+ 32.90	0.55%
S&P500	2783.02	– 3.55	– 0.13%
Nasdaq Comp	7588.32	+ 27.51	0.36%
DJIA	25178.61	– 157.13	– 0.62%
S&P500 VIX	15.78	+ 1.14	7.79%
US 10-year yield	2.87	– 0.02	– 0.83%
USD Index	89.91	– 0.21	– 0.23%
FTSE100	7214.76	– 9.75	– 0.13%
DAX30	12418.39	+ 71.71	0.58%

By Greg Peel

Not out of the woods yet

It was always going to be a solid session for the local market yesterday following the relief rally on Wall Street, in light of easing inflation fears courtesy of a weaker wage growth read, and confirmation over the weekend Australia would indeed be exempt from Trump’s tariffs on steel and aluminium.

The computers had the ASX200 up 63 points on the open but that seemed a bit overenthusiastic for the humans, who brought the index back from a 6026 high to the pivot level of 6000. We pretty much bobbed around that number for the rest of the session before late selling ensured a net gain of only 32 points.

The resources sector led the charge yesterday, driven by stronger base metal and oil prices, and despite ongoing falls in the iron ore price. Iron’s ore’s drift-back is being attributed to the steel tariff issue and the warning is watch out for coal – prices remain elevated so far but should also succumb.

Materials gained 1.2% and energy 1.6%, before a backdrop of easing geopolitical tensions now Kim Jong-un is prepared to break bread with Trump. The gain in materials might have been greater if not for a -4.6% fall in Newcrest Mining ((NCM)) – the worst ASX200 performance on the day – following news of a dam wall breach at the company’s Cadia mine.

The banks chimed in with a 0.5% gain despite the Royal Commission beginning in earnest yesterday, although presumably the Commission will remain simply as background noise as it plays out over the year up until the recommendations are tabled, unless some new revelation comes out of the woodwork in the meantime.

Telcos sat still while most other sectors enjoyed a fairly uniform, risk-on rally, but for the consumer sectors. Discretionary fell -0.2% with both APN Outdoor ((APO)) and Lovisa ((LOV)) going ex-dividend while staples fell -0.3% thanks to a -1% fall for Woolworths ((WOW)). A groundswell of public anger is building towards poker machines in Australia, and pokie king Woolies is in the firing line.

We are probably going to see some work needed to be done around the 6000 mark given that while Australia may be exempt from tariffs – hooray for us – it remains to be seen who isn’t. Canada and Mexico no doubt will be, and China no doubt won’t be. In the middle we have the EU, which one might presume might count as a US ally, but given the significant number of EU members, it’s not that simple.

US steel manufacturers have accused two countries of being the leading dumpers of steel into the US at market-destroying prices. China is one, and the other is Turkey.

Uncertainty will thus linger until we learn the final details of Trump’s tariff plan – who’s in and who’s out – ahead of speculation of what sort of tit-for-tat responses may ensue. How destructive will the trade war be?

Those sorts of questions were being asked on Wall Street last night.

Who Will Suffer?

The Nasdaq hit a new all-time high last night. At one point the Dow was down over -180 points having been up over 100. The disparity highlights just what a rollercoaster US indices were on last night.

The Goldilocks jobs report on Friday was sufficient to float all boats but the issue of trade still lingers. Last night saw the Dow heavily impacted by big falls in Boeing and Caterpillar — both significant exporters of their products to the world. China buys lots of planes and heavy machinery.

Tech stocks nevertheless went the other way, despite Big Tech also being significant exporters. Given the FANGs have failed to make much of an inroad in China, being blocked by Beijing to allow Chinese copy-cats to dominate the local market – presumably a trade war is not going to make much difference.

So the indices spent all day flying up and down, but in the end a -0.1% close for the broad market S&P500 suggests the uncertainty rather nets itself out. There will be winners and losers. Or losers and not losers.

There remains the issue of the CPI number for February being due tonight. Friday’s jobs report may have sparked a relief rally but Wall Street still remains on edge with regard inflation concerns.

It was also suggested Wall Street was not too convinced over the man tipped to be in the front running to replace the much beloved Gary Cohn. CNBC contributor, and one time host of his own show on that network, Larry Kudlow, was declared by fellow CNBC personality Jim Cramer, through his sources, to be the man most likely to replace the outgoing national economic advisor.

Apparently the news helped trigger the selling mid-session. The outspoken, and quite elderly, Kudlow once advised Reagan, but is perhaps not Wall Street’s first choice.

Commodities

Spot Metals,Minerals & Energy Futures
Gold (oz)	1322.90	– 0.30	– 0.02%
Silver (oz)	16.51	– 0.06	– 0.36%
Copper (lb)	3.11	– 0.02	– 0.71%
Aluminium (lb)	0.94	– 0.01	– 1.27%
Lead (lb)	1.07	– 0.02	– 1.39%
Nickel (lb)	6.19	– 0.08	– 1.29%
Zinc (lb)	1.47	– 0.02	– 1.01%
West Texas Crude (Apr)	61.35	– 0.76	– 1.22%
Brent Crude (May)	64.96	– 0.59	– 0.90%
Iron Ore (t)	69.00	– 1.25	– 1.78%

Iron ore continues its slide. Analysts have for a while been forecasting lower prices for iron ore, but not because of tariffs.

Having shot up on Friday night, base metal prices all came back to earth somewhat last night despite the US dollar index falling -0.2%. Aluminium production is set to restart in China this week after the forced winter ban, and traders are concerned over already high levels of stockpiles.

Oil prices rallied on Friday on a dip in the US rig count but fell back last night on weekly US production data which showed yet another increase, fewer rigs or not. OPEC is reported to now be fracturing into two camps with regard its own production cuts – those enjoying the higher prices production quotas bring and those fearing US shale is going to send prices crashing once more, regardless.

Today

The SPI Overnight closed up 3 points.

I neglected to mention yesterday that the US went onto summer time over the weekend. This means the NYSE now closes at 7am Sydney time, as does the SPI Overnight.

The US CPI numbers are out tonight.

Australia sees housing finance data and the NAB business confidence survey.

News Corp ((NWS)) and Sims Metal Management ((SGM)) are among the bigger ex-divs to day while Sino Energy & Gas ((SEH)) reports earnings.

Rudi will connect with Sky News Business via Skype at around 11.15am to discuss broker calls and the share market.

The Australian share market over the past thirty days…

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