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Market Opener – 15 Jun 2018
Local Markets Commentary
Taking its cue from the Nasdaq, which rallied 0.9% overnight, the Australian stock market was set to rise this morning with ASX Futures up 33 points prior to opening.
Australian banks were suffering the roll-on effects of the U.S. Federal Reserve rates increases this week with higher lending costs now increasing the banks’ tab by up to $4.4 billion a year.
The seventh consecutive U.S. rates hike announced this week lifted the central bank’s key policy rate to 1.75% to 2%. The U.S. bank remains on track to reduce the US$4.5 trillion bonds it had acquired post the global financial crisis.
The Reserve Bank of Australia has kept the cash rate at 1.5% for 20 board meetings.
As a result of a further gulf between U.S. and Australian interest rates, the Australian dollar shed more than 1% overnight and was trading at US$74.70 early this morning. This Australian dollar has now lost 4.1% to the greenback this year.
Australia’s iron ore industry received a stimulus with BHP Billiton approving a new $3.8 billion iron ore mine in the Pilbara.
The mining giant announced that it would fund 85% of the South Flank project in partnership with Japan’s Itochu and Mitsui, who would pick up the balance of the project’s cost.
Overseas Market Commentary
U.S President Donald Trump was reportedly preparing to decide on a range of tariffs set to impact 800 to 900 Chinese exports after meeting with advisors, CNBC reported in a move that could spark retaliations from Beijing.
The U.S. now faces the prospect of tit-for-tat trade tariff reactions on two fronts, from China and also the European Union, Canada and Mexico following Trump’s standoff with traditional allies at a G7 summit in Canada earlier in the week.
Complicating any trade war hostilities is the U.S. Administration’s reliance on China to help enforce a de nuclearization deal with North Korea following Trump’s historic meeting with Kim Jong Un in Singapore and a commitment to securing peace in the Korean peninsula.
Meanwhile positive consumer confidence in the U.S. was reflected in retail figures up 0.8% for May with second quarter data forecast to reveal GDP growth of close to 4%, almost double that of the first quarter.
The European Central Bank announced plans to scale back its stimulus program and said a US$3 trillion bond buying initiative would end in December.
The bank flagged steady interest rates in the short-term, lowered its growth forecasts and forecast increased inflation over the next two years.
Trade tension with the U.S. ramped up, however, after Reuters reported that the European Union had unanimously decided to slap Washington with US$3.3 billion worth of taxes on U.S. exports. The Euro subsequently fell against the dollar.
In Britain Rolls Royce announced that it would slash 4600 jobs over the next two years to drive profits, representing the biggest cuts at the aircraft engine and car manufacturer since the airline crisis post 9/11 in New York.
Rolls Royce said it plans to cut 10% of its workforce to drive annual savings of $710 million by 2020. Two thirds of the layoffs will occur at the RR factory in Derby, UK, where the company employs almost 16,000 people.
In Beijing China reported weaker than anticipated industrial output, investment and retail sales figures for May, signalling a slowdown in the economy.
Fixed-asset investment cooled to 6.1% for January-May, reflecting the slowest activity since early 1996.
Retail sales increased at the slowest pace in 15-years and the National Bureau of Statistics said May industrial output had increased by 6.8%, trimmed from a 7% rise in April.
Private sector fixed-asset investment, representing almost two-thirds of investment in China, rose 8.1% in the January-May period - 0.2% lower than in the first four months of the year.
Growth in infrastructure spending slowed from 12.4% in the January-April period to 9.4% in the first five months of 2018.
In Japan industrial production figures exceeded expectations with a month-over-month climb of 0.5% in April - the third consecutive monthly increase surpassing the 0.3% that had been forecast.
In March industrial production grew 1.4% and on a yearly basis industrial production increased by 2.6% in April.
Taking its cue from the Nasdaq, which rallied 0.9% overnight, the Australian stock market was set to rise this morning with ASX Futures up 33 points prior to opening.
Australian banks were suffering the roll-on effects of the U.S. Federal Reserve rates increases this week with higher lending costs now increasing the banks’ tab by up to $4.4 billion a year.
The seventh consecutive U.S. rates hike announced this week lifted the central bank’s key policy rate to 1.75% to 2%. The U.S. bank remains on track to reduce the US$4.5 trillion bonds it had acquired post the global financial crisis.
The Reserve Bank of Australia has kept the cash rate at 1.5% for 20 board meetings.
As a result of a further gulf between U.S. and Australian interest rates, the Australian dollar shed more than 1% overnight and was trading at US$74.70 early this morning. This Australian dollar has now lost 4.1% to the greenback this year.
Australia’s iron ore industry received a stimulus with BHP Billiton approving a new $3.8 billion iron ore mine in the Pilbara.
The mining giant announced that it would fund 85% of the South Flank project in partnership with Japan’s Itochu and Mitsui, who would pick up the balance of the project’s cost.
Overseas Market Commentary
U.S President Donald Trump was reportedly preparing to decide on a range of tariffs set to impact 800 to 900 Chinese exports after meeting with advisors, CNBC reported in a move that could spark retaliations from Beijing.
The U.S. now faces the prospect of tit-for-tat trade tariff reactions on two fronts, from China and also the European Union, Canada and Mexico following Trump’s standoff with traditional allies at a G7 summit in Canada earlier in the week.
Complicating any trade war hostilities is the U.S. Administration’s reliance on China to help enforce a de nuclearization deal with North Korea following Trump’s historic meeting with Kim Jong Un in Singapore and a commitment to securing peace in the Korean peninsula.
Meanwhile positive consumer confidence in the U.S. was reflected in retail figures up 0.8% for May with second quarter data forecast to reveal GDP growth of close to 4%, almost double that of the first quarter.
The European Central Bank announced plans to scale back its stimulus program and said a US$3 trillion bond buying initiative would end in December.
The bank flagged steady interest rates in the short-term, lowered its growth forecasts and forecast increased inflation over the next two years.
Trade tension with the U.S. ramped up, however, after Reuters reported that the European Union had unanimously decided to slap Washington with US$3.3 billion worth of taxes on U.S. exports. The Euro subsequently fell against the dollar.
In Britain Rolls Royce announced that it would slash 4600 jobs over the next two years to drive profits, representing the biggest cuts at the aircraft engine and car manufacturer since the airline crisis post 9/11 in New York.
Rolls Royce said it plans to cut 10% of its workforce to drive annual savings of $710 million by 2020. Two thirds of the layoffs will occur at the RR factory in Derby, UK, where the company employs almost 16,000 people.
In Beijing China reported weaker than anticipated industrial output, investment and retail sales figures for May, signalling a slowdown in the economy.
Fixed-asset investment cooled to 6.1% for January-May, reflecting the slowest activity since early 1996.
Retail sales increased at the slowest pace in 15-years and the National Bureau of Statistics said May industrial output had increased by 6.8%, trimmed from a 7% rise in April.
Private sector fixed-asset investment, representing almost two-thirds of investment in China, rose 8.1% in the January-May period - 0.2% lower than in the first four months of the year.
Growth in infrastructure spending slowed from 12.4% in the January-April period to 9.4% in the first five months of 2018.
In Japan industrial production figures exceeded expectations with a month-over-month climb of 0.5% in April - the third consecutive monthly increase surpassing the 0.3% that had been forecast.
In March industrial production grew 1.4% and on a yearly basis industrial production increased by 2.6% in April.