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Market Opener – 05 June 2019

 
Local Markets Commentary
The Australian market commences mid-week trade following an overnight US equities risk-sentiment bounce, ahead of influential domestic economic indicators and new China data this morning. 

Locally today, March quarter GDP growth is due 11.30am AEST.

Pre-trade, the AiG releases its May services sector activity index.

May new vehicle sales are also expected today.

In addition, JHX trades ex-dividend. Please see pp4-5 for details.

Regionally, Caixin releases its May services PMI for China 11.45am AEST.

In overnight commodities trade, oil turned to record its first positive settlement in five sessions.

US gold futures (August) settled slightly higher.

Iron ore (China port, 62% Fe) swung back above $US100.35/t. 

LME copper extended Monday’s gain and aluminium turned higher. Nickel continued to pull lower.

The $A appreciated to ~US69.90c after trading beyond US69.80c early yesterday evening.

Overseas Market Commentary
Major European equities markets opened lower overnight, but soon commenced a trend higher.

Key US indices traded higher from the start, sentiment never looking threatened, amid reassuring comments from the Federal Reserve and ongoing pressure to resolve US trade battles. 

US Federal Reserve chair Jerome Powell unequivocally laid the groundwork for attendees at a monetary policy conference to entertain the possibilities of rates back at zero per cent and renewed bond purchases, should international trade hostilities look like definitively damaging the US economy.

The chairman assured current implications were being watched closely, but that it remained uncertain whether trade differences could be resolved.

His comment that the ‘unconventional’ tag be perhaps removed from policy which included bond purchases did not go unnoticed, indicating a more-likely-than-not at least short-term expectation of deteriorating economic conditions.

“We know that tools like these are likely to be needed in some form in the future,” the chairman offered.

Yesterday, China’s Ministry of Foreign Affairs warned China companies and citizens to be on the watch for potential harassment in the US. The Ministry of Culture and Tourism was also reported to have warned of US safety issues.

In the meantime, China’s Commerce Ministry continued to espouse the line that respectful consultation remained the republic’s preferred way to achieve a trade agreement with the US.

In addition, an official described China’s rare earths as a ‘strategic resource’, amid speculation exports to the US were about to be severely restricted, and reports the US administration was actively encouraging US companies to develop a semi-conductor industry to the extent it could become independent of the US.

Late-Monday meanwhile, the US commerce secretary had confirmed early-week talks with Mexico officials, and underscored the US view that Mexico needed to do more to prevent US import tariffs being imposed from next week.

Overnight, the US president commented from the UK, that he expected at least the initial 5% tax to be implemented.

In new data releases, the euro zone’s initial May year-on-year CPI growth fell to 1.2% following 1.7% for April.

April employment slipped 0.1% to 7.6%.

In the UK, a construction PMI fell by 1.9 points to a contractionary 48.6.

In the US, the ISM’s New York business activity index shocked, tumbling to 48.6 from 77.3. 

April factory orders dropped 0.8% following a 1.3% March rise. 

The March report had initially estimated a 1.9% jump in orders, the revision effectively altering some March quarter GDP expectations. 

Year-on-year, April orders represented a 1.6% increase.

Tonight in the US, the Fed Reserve’s district-by-district economic summary ‘beige book’ report, a private sector employment report, the ISM’s services sector activity index and weekly mortgage applications are due.

Several Federal Reserve officials also speak publicly, including governor Michelle Bowman, who will meet with a Senate banking committee.

Elsewhere, the US president continues his UK visit.

American Eagle Outfitters and Campbell Soup are among the more high-profile stocks scheduled to report earnings or provide trading updates.
 
5/06/2019 8:00:00 AM

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