ASX poised to start the week higher as Wall Street extends its' rally

Stock Markets

Australian shares are poised to open higher today after Wall Street closed higher on Friday, thus breaking a three-day streak of losses as US/China trade optimism countered lacklustre US and China manufacturing data. On Friday, US President Donald Trump stated that he has asked China to "immediately remove all tariffs" on US agricultural products, and increased US/China trade optimism by adding that the US/China trade discussions are "moving along nicely".

The Dow Jones, S&P 500 and the NASDAQ 100 closed in positive territory on Friday as the indexes were bolstered by gains in the health care (+1.41%) and the consumer discretionary (+0.92%) sectors. The indexes gained 110.32 (+0.43%), 23.74 (+0.38%) and 62.82 (+0.83%) points respectively.

ISM data also showed US manufacturing activity for February dropped to its lowest since November 2016. In addition, the University of Michigan survey showed consumer sentiment fell short of expectations in the month. A private survey showed China's manufacturing activity contracted for a third straight month in February, though at a slower pace, thus implying a marginal improvement in domestic demand as a flurry of policy stimulus kicked in from late last year.

The Australian Industry Group's Performance of Manufacturing Index released on Friday indicates there was expansion in the food and beverages sub-sector last month but a worsening trend contraction in two areas relating to building caused by a sharp drop in demand for building-related products and furnishings since the mid 2018 as residential construction activity slows.

The benchmark S&P/ASX200 index rose 29.4 (+0.4%) on Friday with the index closing at its' highest level since September 2018.  Most sectors closed higher with property trusts and tech stocks with the best daily performance. Energy, materials and industrial stocks were down.

ASX 200 futures are currently up 18.0 points. 

Today's data releases: MI inflation February, Business indicators fourth quarter, Building approvals January, ANZ job ads February, Euro zone PPI January; US construction spending December

Commodities and Currencies

Oil prices retraced on Friday, following an extended rally on plunging oil stockpiles in the US and indications that OPEC will not steer away from their objective to drain oversupply. Brent and WTI crude and are currently sitting at US$65.07 (-1.87%) and US$55.80 (-2.48%) respectively.

Iron ore prices are up 0.88% to US$81.61 per tonne.

The spot price of gold is down 1.52% and is currently hovering around US$1293.40.

The AUD is currently up 0.24% at US71.11¢. 

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.