US Markets Have Strong Rebound

US stock markets closed decisively higher in a session that started strong and continued that strength until the close. The Dow closed up 0.9% and the S&P 500 almost 1%, both reversing some of the losses that occurred over the prior week. The rally may be due to reduced political tensions but there is also talk that president Trump is making progress on his intended tax reforms.

Crude oil was volatile overnight following the release of weekly inventory data from the American Petroleum Institute (API) which showed that although crude inventories declined (for the eighth week in a row), gasoline stocks rose unexpectedly. The decline in crude was as expected and continues a general downtrend that has existed for the past five months. Notwithstanding the gasoline build, the rebalancing of the oil market appears to be well underway and it is a little surprising that prices aren’t responding accordingly. WTI oil has been stuck below $50 per barrel for the most part since May.

Earnings season continues on the ASX with BHP announcing yesterday that shareholder capital returns would increase in the coming year. The miner has bowed to activist shareholder pressure and announced its intention to divest its onshore US oil and gas assets although it claims it came to the decision independently. Woolworths (WOW) reported this morning a 3.6% decline in underlying net profit although much of the hardship came from losses from Big W. WOW has done a great job in turning around its grocery business and is once again a major threat to Coles in this area.

Data Releases:

–    Euro Flash Manufacturing PMI 6:00pm AEST  

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This article was written by William O’Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.