US stocks rebound amid escalating US/China trade tensions

Stock Markets

Australian shares are poised to open higher today after US stocks rebounded overnight following a pullback of more than 5.5% so far in May on investor concerns about a protracted US/China trade war amid increasing tensions between the two global powerhouse economies. However, gains in US stocks were limited by conflicting comments from Washington and Beijing which acted to raise concerns about a prolonged trade war harming global growth. Bloomberg reported that China has halted soy purchases from the US. The 10-year Treasury yield was at 2.21% late Thursday, with this weeks' unexpected drop in yields indicating that investors are moving defensively into Treasury's and steering away from equities. The Commerce Department reported that the US economy grew at an annual pace of 3.1% during the first three months of the year which was in line with economists' expectations.

Wall Street's major indexes closed higher on Thursday, as stocks showed signs of stabilizing by paring some losses made during the week. The Dow Jones, S&P 500 and Nasdaq gained 43.47 (+0.17%), 5.84 (+0.21%) and 20.406 (+0.27%) points respectively.

The benchmark S&P/ASX200 index closely followed the US and European markets, closing 47.901 (-0.74%) points lower as escalating US/China trade tensions continued to dampen market sentiment. The telecommunication services sector was the only GICS sector the close in positive territory, with the sector up 1.14%.

ASX 200 futures are currently up 19 points.

Today's data releases:  New Zealand ANZ consumer confidence May; China manufacturing and non-manufacturing PMI May; Japan jobless rate May, Industrial production April; Euro zone CPI May; UK GfK consumer sentiment May; US personal income April; US Personal spending April; US PCE core inflation April; US Chicago PMI May; US University of Michigan consumer sentiment May

Commodities & Currencies

Oil prices fell sharply on Thursday on a smaller-than-expected decline in US crude inventories and fears of a global economic slowdown due to the US/China trade war. WTI and Brent crude are currently sitting at US$56.53 (-0.11%) and US$66.87 (-3.71%) per barrel respectively.

Iron ore prices are currently down 2.2% at US$103.87 a tonne.

The spot price of gold is currently up 0.67% at US$1288.28 an ounce.

The AUD is currently flat at US69.12¢.

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.