ASX to rise, US central bank in focus

Australian shares are poised to rise, bolstered by more gains on the S&P 500 and Nasdaq. The Dow slipped in late trade as investors turned cautious ahead of the conclusion of the latest US Federal Reserve policy meeting.

ASX futures were up 33 points or 0.6% to 5930 near 5.45am AEST. The local currency edged up, holding above the US73¢ mark; it peaked overnight at US73.43¢.

In late trade in New York, the Dow edged lower. A more than 200 point opening advance faded through the day.

The S&P 500 and Nasdaq were holding gains heading into the close.

Investors were seen to be turning somewhat cautious ahead of a policy decision from the Federal Reserve, to be released at 4am Thursday AEST.

“The global economy has been steadying faster than many expected,” said LPL Financial chief investment officer Burt White. “But we still have a long way to go, and central banks will still be focused on risk, which means the story of the week from central banks will likely be all about steady support for as long as it’s needed.”

Today’s agenda

Local: Westpac leading index August; NZ current account second quarter

Overseas data: Euro zone July trade balance; UK August CPI; US July business inventories and Total net TIC flows, August retail sales, NAHB housing market index September, Federal Reserve policy decision at 4am AEST Thursday

Market highlights

ASX futures up 33 points or 0.6% to 5930 near 5.45am AEST

  • AUD +0.2% to 73.05 US cents (Overnight peak 73.43)
  • On Wall St near 3.50pm Dow flat S&P 500 +0.3% Nasdaq +1%
  • In New York: BHP +1.1% Rio +2.4% Atlassian +0.7%
  • Tesla +5.3% Apple -1% Netflix +3.5% Facebook +1.8%
  • In Europe: Stoxx 50 +0.5% FTSE +1.3% CAC +0.3% DAX +0.2%
  • Spot gold flat at $US1956.13/oz at 3.04pm New York time
  • Brent crude +2.7% to $US40.68 a barrel
  • US oil +3.2% to $US38.44 a barrel
  • Iron ore -1.3% to $US128.52 a tonne
  • 2-year yield: US 0.14% Australia 0.18%
  • 5-year yield: US 0.27% Australia 0.33%
  • 10-year yield: US 0.68% Australia 0.86% Germany -0.48%
  • US prices as of 3pm New York time

From today’s Financial Review

PM’s gas plan ‘overkill’ for market: Gas and energy suppliers say threatened interventions will distort the market and demonstrates once more the need for a settled energy policy.

Chanticleer: ASX sees the light on COVID capital raising rules: ASX has again updated its rules allowing super-sized COVID-19 share placements. But not before IOOF got away with a raising clearly against the spirit of the rules.

Research tests computer-driven crash theory: Automated high frequency trading fell during and after the COVID-19 crash, according to new research, suggesting it was not the reason the crash was the steepest on record.

United States

“The correction has probably run its course and markets are now back to focusing on some of the positives,” said John Praveen, portfolio manager at QMA.

“Some positive news on the vaccine front and economic data suggest this global recovery after the COVID recession is on track, and the markets are supported by a very friendly Fed.”

US slams WTO as ‘inadequate’ after panel sides with China: A World Trade Organisation panel ruled that Trump’s 2018 tariffs on more than $300 billion of Chinese goods were breaches of trade law.

Europe

British court deals setback to QBE in payouts battle: The Australian insurer won some, lost some in the British regulator’s test case on COVID-19-related business interruption insurance claims.

The STOXX 600 index rose 0.7% to close at its highest since August 27, as robust industrial output data from China boosted mining and luxury stocks, while Sweden’s H&M surged after reporting a profit rebound.

Shares in the world’s second-biggest fashion retailer jumped 10.8%, recording their biggest daily rise in almost six months. The retail index rose 2.3%, leading sectoral gains in Europe.

Miners rose 1.7%. In London, BHP advanced 1.9%, Rio added 2.7%.

China-reliant luxury stocks like LVMH, Kering and Hermes also gained, boosting the STOXX 600.

The ZEW economic research institute said investor sentiment in Germany rose unexpectedly in September, signalling confidence in a recovery from the coronavirus crisis.

The Bank of England is also set to meet on Thursday.

Asia

Why China is interested in Australia’s judges: Many of Australia’s most senior judges have been included on the list of influential figures compiled by Chinese military contractor Zhenhua Data.

    Why RBA’s Lowe and Debelle are on China’s social warfare database: The true rationale behind Reserve Bank governor Philip Lowe and his deputy Guy Debelle’s inclusion on a Chinese military contractor’s social warfare database may take years to fully understand.

    The blue-chip CSI300 index rose 0.8% to 4688.48, while the Shanghai Composite Index gained 0.5% to 3295.68

    The Hang Seng index ended up 0.4% at 24,732.76, while the China Enterprises Index closed 0.2% higher at 9829.07 points.

    China’s central bank injected 600 billion yuan worth of medium-term loans into the banking system to supplement liquidity.

    Sentiment was also aided by news that coronavirus vaccines being developed in China may be ready for use by the general public as early as November.

    Currencies

    Commodities

    Peru’s economy shrank 11.71% in July versus the same month a year earlier, the Andean country’s government said, the fifth straight month of contraction due to the impact of the coronavirus pandemic, though shallower than previous months.

    July’s drop was slightly better than a 12.2% contraction forecast by analysts and improved from an 18% fall in June, a 32.7% drop in May and a historic decline of 40.5% in April, when mining activity stalled for the world’s No. 2 copper producer.

    More than a quarter of US offshore oil and gas production was shut and key exporting ports were closed on Tuesday as Hurricane Sally churned off the US Gulf Coast, flooding coastal cities and pelting states with heavy rains.

    Sally continued to weaken Tuesday afternoon to a Category 1 hurricane on Tuesday and largely stalled offshore with sustained winds of 80 miles per hour (128 kph). It is expected to bring life-threatening flooding through Wednesday from Mississippi to Florida, the US National Hurricane Center said.

    The storm’s trajectory takes it through the prime US offshore production areas on a path toward western Alabama, sparing some larger Gulf Coast refineries from high winds.

    The Trump administration said on Tuesday it will remove 10% US tariffs on raw Canadian aluminum as long as imports of the metal stay below levels that are expected to “normalise” over the next four months.

    In a statement, the US Trade Representative’s office said the decision came after consultations with the Canadian government determined that aluminum imports during the September-December period of 2020 were expected to fall 50% from the January-July period.

    Australian sharemarket

    The Australian sharemarket closed flat on Tuesday and energy companies underperformed following the federal government’s announcement it would back gas pipeline construction and a new gas-fired power station.

    The S&P/ASX 200 Index dipped 4.7 points, or 0.1 per cent, to close at 5894.8.

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