ASX set to slip on global growth worries and trade tension

Stock Markets

Australian shares are set to open lower as shares on Wall Street and Europe extended their losses yesterday.  US stocks were particularly weak in the afternoon following the Financial Times reporting that the US rejected an offer of preparatory trade talks with China. However, US shares managed to recover a marginal part of yesterdays’ losses towards market close after White House advisor Larry Kudlow stated that the report was untrue. Despite the report being deemed as untrue, this has highlighted the difficulty that the US and China will face in trying to reach an agreement by a deadline of 1 March.  Worries about US/China trade tensions coupled with the IMF’s recent warning about the global economy weakening at a “faster than expected” rate, has triggered weakness in the markets. The Dow Jones and S&P500 both closed in the red, with the indices falling 301.87 (-1.22%) and 38.88 (-1.46%) points respectively. ASX 200 futures are currently down 29.2 points. 

Commodities and Currencies

Brent crude prices have benefited from hopes that OPEC will manage to achieve production cuts and easing trade tensions between the US and China. Brent crude is currently experiencing a small pullback after hitting a new recent high of US$63.13 on Tuesday and is sitting at US$61.48 (-0.02%).

The spot price of gold is up about $2 and is now hovering around US$1284.65. From a technical perspective, it still remains in its medium-term uptrend despite the recent pullback.

The AUD (against the USD) fell -0.6% to 71.18¢ yesterday and is currently at 71.25¢ (+0.04%). Any further news regarding the US lifting tariffs on Chinese imports will likely result in the AUD going up.

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.