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Market Opener – 18 Jun 2018

 
Local Markets Commentary
ASX futures were flat at 6100 and the market was poised to follow suit at opening this morning with no local data of major relevance being released today.

With wary investors cautiously eyeing potentially accelerated trade war hostilities between the United States and China, the big question is whether investors will trigger turnaround strategies - prompting short selling of sectors in the firing line which are most vulnerable to increased tensions between Washington and Beijing.

NAB says it expects to see a 1.5% decline in first quarter house when ABS data is released tomorrow as a result of weaker growth in Melbourne and Sydney.

Overseas Market Commentary
Increasing fear of a Donald Trump-fuelled global trade war is likely to see jittery markets opening at the start of the week with shipments at ports and airfreight terminals slowing worldwide and the price of raw materials rising.

CNBC reporting that orders for good from factories as far afield as Germany to Mexico were being cut and investments put on hold as the world awaits to see the next move in the United States administration’s push to force factory production back to home shores.

This followed Trump slapping Chinese goods with US$50 billion in new tariffs at the close of the working week. 

Beijing’s retaliation was swift. Within hours the Finance Ministry announced 545 product categories - representing about US$34 billion in U.S. exports – would be hit with additional 25% tariffs from July 6.

Agriculture bore the brunt of the burden with soybeans, corn, wheat, beef, pork and poultry all in China’s cross hairs. A second round of Chinese imposed tariffs would include coal, crude oil, gasoline and medical equipment.

All eyes are on Trump’s next move in his battle to reduce a trade deficit with China in which the U.S. imported US$506 billion worth of goods from China last year compared to US$130 billion in exports, according to Washington.

Collaboration between Saudi Arabia and Russia, the world’s two biggest crude oil producers, to cool the price of oil at an OPEC meeting in Vienna on Friday will be blocked by Venezuela, Iraq and Iran, according to Bloomberg.

OPEC’s cooperation agreement requires unanimity and any effort to increase production will be resisted, Iran’s Hossein Kazempour Ardebili, the country’s OPEC representative, said.

Russian Energy Minister Alexander Novak has flagged an increase of up to 1.5 million barrels a day and Saudi Arabia has suggested opening the spigots to increase output by 500,000 to 1 million barrels per day.

While Iran and Venezuela and other OPEC countries would battle to raise output, Trump’s administration is pushing for lower oil prices to boost mid-term election prospects in the United States in November.

The United States has enforced sanctions on Iran and Venezuela which will cost both countries about 30% of their oil production next year, according to the International Energy Agency.

Gold posted a weekly loss on Friday as the dollar rallied, despite rising global trade tensions that impacted equities and bond markets, with the metal sustaining its biggest loss in 18 months.

Nevertheless, rising inflation in the United States and a consumer price index climbing 2.8% in May at its fastest in six years, is being closely watched as a likely stimulus to gold in the longer-term.

London’s famous tube service will get a US$2 billion makeover with Germany’s Siemens winning a contract to design and build 84 new generation trains for the Piccadilly Line.

The award will be boost the local economy of Goole, East Yorkshire, where Siemens will construct a new factory to manufacture and build new trains, Transport London announced.

British Prime Minister Theresa May announced on Sunday that the National Health Service would receive increased funding of US$26.5 billion post-Brexit as a spinoff of tax hikes and money that would no longer be obligated to European Union coffers.

May said any new taxes next year would be “fair and balanced”. Pro-Brexit campaigners had claimed Britain was spending £350 million a week to the EU that could be better spent on the NHS. However, a post-Brexit Britain will be liable for payments of £39 billion pounds to Brussels over several decades.
 
18/06/2018 8:00:00 AM

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