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Market Opener – 09 July 2018

Local Markets Commentary
The Australian market opens a new week’s trade on positive overnight Fridayinternational equities leads, but also several indications of growing international disquiet.

Over the weekend:

• North Korea has bemoaned the US stance in talks with the US Secretary of State regarding North Korea’s nuclear plans;

• the US has been accused of baiting China as US warships travelled through the Taiwan Strait; 

• China vowed to keep on opening international trade opportunities; 

• a second major shipping company announced it would no longer service Iran due to US sanction threats; and

• Iran’s oil minister labelled US calls for OPEC to move to reduce prices as ‘insulting’.

In overnight Friday commodities trade, WTI crude turned higher, but Brent continued to pull back.

Iron ore (China port, 62% Fe) swung higher. 

LME copper was pushed yet lower. Nickel swung and fell. 

The $A was pushed towards US74.30c after appreciating beyond US74.10c early Fridayevening.

Locally today, a weekly capital city residential property price report is due.

Regionally, China is expected to publish June foreign reserves, likely post-ASX trade.

In Japan, Bank of Japan governor Haruhiko Kuroda is scheduled to speak publicly, ~10.30am AEST.

Overseas Market Commentary
Trade across major European and US equities markets varied markedly overnight Friday, belying the ultimate gains for all major indices as the $US traded at three-week lows.

Notably, the tech sector regained favour, but in addition to overnight Friday currency moves and data releases, investor considerations included:

• the status of US relations with North Korea, China, the European Union and Middle East allies;

• a new earnings reporting season commencing this week; and

• a batch of influential economic indicators out of China over the next few days.

Among overnight Friday data releases, the US June employment report exceeded expectations with the number of jobs created (213,000).

Unemployment rose by 0.2% to 4.0%, but this was put down to more people registering to be looking for work. The ‘participation rate’ was calculated 0.2% higher, at 62.9%.

The key average wages rate rose 0.2% to $US26.98/h, placing the annual advance at 2.7%. Wages had risen by 0.3% in May.

Positive data continued to flow in Germany, May industrial production improving 2.6% following a 1.3% drop in April.

In the UK, the PM’s proposal for European Union (EU)-separation arrangements, introduced to major government members Friday, appeared to gain acceptance in that it was perceived as being ‘business-friendly’, but was also criticised for seeming to be too concessional to EU demands.

Immediate responses from EU members varied, but appeared to indicate the plan and associated negotiations remained early-stage and would likely fall short of gaining the union’s favour.

In addition, overall support for the PM’s plan from her fellow Tories, including key ministers, was viewed as remaining fluid.

Tonight in the US, consumer credit and inflation expectation reports are due. 

In overnight Friday corporate news, Samsung warned profit growth would slow, due to softer phone sales, despite surging chip business. 

Ford Motor reported China sales had dropped 38% year-on-year during June. Ford also announced it would not raise luxury vehicle prices in China, despite the increased export taxes.

Germany’s BMW revealed profitability would require the group to charge more for vehicles made in the US and exported to China.

Meanwhile, Deutsche Bank benefited from reports JP Morgan and the Industrial & Commercial Bank of China were interested in stake holdings. JP Morgan has since denied any interest.

Biogen was pushed almost 20% higher following positive results from a clinical trial for a proposed Alzheimer’s drug under development with Tokyo-headquartered Eisai Co.
9/07/2018 8:00:00 AM

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