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Market Opener – 20 Jun 2018
Local Markets Commentary
The Australian stock market was set to buck the global trend on the opening of the ASX this morning as the Australian dollar dived in early morning trade to 73c, its lowest level in over a year.
Mining stocks were bracing for a bumpy ride after BHP Billiton and Rio Tinto both sustained big losses overnight of 3% and 4% respectively.
The U.S. dollar is at an 11-month high with currency traders betting on increasing inflation as a result of more expensive imports and further interest rate hikes.
ABS figures showed that residential property prices fell 0.7% in the March quarter led by the first quarterly price decline in Melbourne in over five years and Sydney’s first slump in six years.
On a national basis house prices remain 2% up on the March quarter a year ago.
Overseas Market Commentary
The Dow Jones posted a six-day loss, its longest dip in 16 months, with all gains for 2018 wiped out as U.S. President Donald Trump ramped up trade war fears by threatening to identify a further $200 billion worth of Chinese good for additional tariffs of 10%.
Trump has reportedly told Apple CEO Tim Cook that the U.S. would ringfence iPhones assembled in China, according to the New York Times.
China responded with its Commerce Ministry stating that tariffs violated negotiations and consensus reached between the two superpowers.
Boeing, Dow DuPont and Caterpillar stocks were hit the hardest as the Dow fell 287 points to close at 24,700 and the S&P 500 dropped 0.4% to 2,762.
Chip makers, which are heavily exposed to China, also fell sharply. Qual comm and Nvidia both shed 0.9% and Morgan Stanley noted that semiconductor and semiconductor equipment companies had a 52% revenue exposure to China.
Ford, which is similarly connected to China, lost 0.8% with Caterpillar and Boeing dropping 3.5%.
Meanwhile industrial giant General Electric has dropped out of the Dow after 120 years after its stock fell more than 55% in the past year and 25% in 2018. It will be replaced on the blue-chip index by pharmaceutical Wal greens Boots.
The Shanghai Composite Index was down almost 5% at one stage as 1023 stocks – over one in four – shed 10% of their value as the index slid below 3000 for the first time since market crashes in 2015 and 2016.
Trade war contagion fears spread to Europe markets where the FTSE 100 lost 0.4% in a third straight decline to its lowest since May 8.
China is the world’s biggest importer of copper and shares in copper producer Antofagasta plunged 1.8%. Iron ore was also hit with BHP Billiton shedding 2.2% and Rio Tinto 3.2% with mining stocks comprising 87% of the basic materials sector on the FTSE 100 and carrying a 9% weighting.
Similarly, the DAX was down 1.5% with carmakers bearing the brunt of the fallout. BMW was down 1.3%, Daimler shed 1.9% and Volkswagen 2%.
Japan’s Nikkei fell 0.74% to a two-week low of 22,482.89.
The Australian stock market was set to buck the global trend on the opening of the ASX this morning as the Australian dollar dived in early morning trade to 73c, its lowest level in over a year.
Mining stocks were bracing for a bumpy ride after BHP Billiton and Rio Tinto both sustained big losses overnight of 3% and 4% respectively.
The U.S. dollar is at an 11-month high with currency traders betting on increasing inflation as a result of more expensive imports and further interest rate hikes.
ABS figures showed that residential property prices fell 0.7% in the March quarter led by the first quarterly price decline in Melbourne in over five years and Sydney’s first slump in six years.
On a national basis house prices remain 2% up on the March quarter a year ago.
Overseas Market Commentary
The Dow Jones posted a six-day loss, its longest dip in 16 months, with all gains for 2018 wiped out as U.S. President Donald Trump ramped up trade war fears by threatening to identify a further $200 billion worth of Chinese good for additional tariffs of 10%.
Trump has reportedly told Apple CEO Tim Cook that the U.S. would ringfence iPhones assembled in China, according to the New York Times.
China responded with its Commerce Ministry stating that tariffs violated negotiations and consensus reached between the two superpowers.
Boeing, Dow DuPont and Caterpillar stocks were hit the hardest as the Dow fell 287 points to close at 24,700 and the S&P 500 dropped 0.4% to 2,762.
Chip makers, which are heavily exposed to China, also fell sharply. Qual comm and Nvidia both shed 0.9% and Morgan Stanley noted that semiconductor and semiconductor equipment companies had a 52% revenue exposure to China.
Ford, which is similarly connected to China, lost 0.8% with Caterpillar and Boeing dropping 3.5%.
Meanwhile industrial giant General Electric has dropped out of the Dow after 120 years after its stock fell more than 55% in the past year and 25% in 2018. It will be replaced on the blue-chip index by pharmaceutical Wal greens Boots.
The Shanghai Composite Index was down almost 5% at one stage as 1023 stocks – over one in four – shed 10% of their value as the index slid below 3000 for the first time since market crashes in 2015 and 2016.
Trade war contagion fears spread to Europe markets where the FTSE 100 lost 0.4% in a third straight decline to its lowest since May 8.
China is the world’s biggest importer of copper and shares in copper producer Antofagasta plunged 1.8%. Iron ore was also hit with BHP Billiton shedding 2.2% and Rio Tinto 3.2% with mining stocks comprising 87% of the basic materials sector on the FTSE 100 and carrying a 9% weighting.
Similarly, the DAX was down 1.5% with carmakers bearing the brunt of the fallout. BMW was down 1.3%, Daimler shed 1.9% and Volkswagen 2%.
Japan’s Nikkei fell 0.74% to a two-week low of 22,482.89.