ASX poised to open lower as US/China trade optimism fades

Stock Markets

Australian shares are set to open marginally lower today after Wall Street’s main indexes edged lower on Wednesday after US trade representative Robert Lighthizer said that the US and China still had hard work ahead to reach a deal. Mr Lighthizer told lawmakers that the US will need to maintain the threat of imposing tariffs on Chinese goods for years even if a trade deal is struck since the issues that the US faces with China are “too serious” to be resolved by promises to purchase more US goods and structural changes by China is needed. The continued threat of tariffs would be disappointing news for industry and investors exposed to China and hoping for an end to the uncertainty and disruption caused by the trade war.

The Dow Jones and S&P 500 closed in negative territory on dented US/China trade optimism, with the indices losing 72.82 (-0.28%) and 1.52 (-0.05%) points respectively. Conversely the NASDAQ 100 closed marginally higher, gaining 5.21 (+0.07%) points. Seven of the eleven major S&P sectors closed lower, with a 0.39% percent fall in communication services stocks weighing the most.

The benchmark S&P/ASX200 index closed higher on Wednesday, finishing up 21.9 (0.36%) points as the index was bolstered by gains by big miners and banks amid the final week of reporting season.

ASX 200 futures are currently down 1.0 point. 

Today’s data releases: China February non-manufacturing and manufacturing PMIs; Japan industrial production January; UK GfK consumer sentiment February; US fourth quarter GDP; Private capital expenditure fourth quarter; Private sector credit January; NZ ANZ business confidence February

Commodities and Currencies

Brent and WTI crude prices surged overnight and are currently sitting at US$66.37 (+2.49%) and US$57.01 (+2.72%) respectively. The rise in oil prices came after Saudi Arabia appeared to be unfazed by recent pressure from US President Donald Trump urging OPEC to weaken its restrictions on crude production.

Iron ore prices are down 0.3% to US$83.54 per tonne.

The spot price of gold is down 0.59% and is currently hovering around US$1319.79.

The AUD is currently down 0.36% at US71.41¢. The Reserve Bank of Australia’s estimates of the exchange rate’s fair value show the currency last year fell further than the central bank expected as the economy slowed. The local currency was the worst performer amongst major currencies last year as the Federal Reserve hiked interest rates and growing concerns about US/China trade tensions.

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.