ASX poised to edge lower on weak US construction spending data

Stock Markets

Australian shares are poised to edge lower today after Wall Street reversed from early gains to close lower overnight on an unexpected drop in December construction spending which triggered profit-taking and acted to offset US/China trade optimism. Wall Street’s main indexes rose early in the session on recent reports claiming that US President Donald Trump and Chinese leader Xi Jinping could reach a formal agreement at a potential meeting around March 27. However, the indexes pared early gains after the US Commerce Department reported a 0.6% fall in construction spending in December after a 0.8% rise in November, thus highlighting that the economy lost momentum towards late 2018. The Dow Jones, S&P 500 and the NASDAQ 100 closed in negative territory overnight, with the indexes losing 206.67 (-0.79%), 10.88 (-0.39%) and 17.79 (-0.23%) points respectively.

US/China trade optimism and a dovish Federal Reserve have triggered a strong run in stocks in 2019. The S&P 500 has surged nearly 11% this year and is now about 6% away from its 20 September record closing high.

The benchmark S&P/ASX200 index closed up 24.7 (+0.4%) points on Monday, bolstered by strong performance in the technology (+2.06%) and consumer staples (+1.17%) sectors. The index greatly benefited from renewed US/China trade optimism and a bounce in Australia’s building approvals in January.

ASX 200 futures are currently down 51.0 points. 

Today’s data releases: AiG performance of services February, Balance of payments fourth quarter, RBA policy meeting decision at 2.30pm AEDT

Commodities and Currencies

Oil prices rebounded on Monday after last week’s fall, bolstered by OPEC’s supply cuts and reports claiming that the US and China are close to reaching a formal agreement and thereby end the trade war that has limited global economic growth. Brent and WTI crude are both up overnight and are sitting at US$65.61 (+0.83%) and US$56.44 (+1.15%) respectively.

Iron ore prices are up 1.56% to US$82.88 per tonne.

The spot price of gold is currently flat at US$1286.71.

The AUD is currently down 0.03% at US70.90¢. 

This article was written by Mithun Fernando – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via mithun.fernando@rivkin.com.au or by phoning +612 8302 3633.