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Morning Market Wrap: Optimism over imminent trade deal drive Wall Street higher

14 Jan 2020
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Trade sensitive companies were the best performers overnight as most market participants took up bullish positioning with global equity markets ahead of the US-china meeting, set for tomorrow…

Stock Markets

US markets recovered from losses seen a session earlier as the trade sensitive NASDAQ led gains with a 1.04% advance. The Dow Jones and S&P500 moved 0.29 and 0.70 percent higher as broad gains were recorded and as investors awaited the planned signing of a “phase one” U.S.-China trade deal later in the week and prepared for fourth-quarter earnings season to move into full swing.

Apple Incorporated (AAPL), Facebook Incorporated (FB), Netflix Incorporated (NFLX) and Microsoft Corporation (MSFT) were the top boosts to the S&P 500 and Nasdaq with gains of 2.14, 1.77, 3 and 1.20 percent. Google-owner Alphabet Incorporated (GOOGL) rose 0.77% and currently sits approximately $US7 billion shy of joining Apple and Microsoft in the exclusive $US1 trillion club.

Another major contributor to the NASDAQ advance was Tesla Incorporated (TSLA), which surged 9.77% and broke above the $US500 mark for the first time closing at $US524.86. TSLA has continued to advance since announcing a surprisingly profitable quarter in October and most recently also showed evidence of a strong entrance into the Chinese market. Tesla began deliveries of its Model 3 sedan in China at the end of 2019 and has reportedly ramped up production at the new Shanghai factory to more than 1,000 vehicles per week. The company is up more than 20% in 2020, has more than doubled in price over the past 3 months and now holds a market cap of approximately $94.6 billon, which is more than that of General Motors and Ford combined.

Markets appeared to add to early gains after news reports indicated the US plans to withdraw its designation of China as a currency manipulator and as further evidence indicated that both the US and China are committed to organising semimanual talks aimed at pushing reforms in both nations and resolving disputes.

 

ASX200 closed 25 points lower at 6,903 as local markets priced in declines seen by global markets.

All sectors, except Information Technology, closed lower with Health Care and Energy experiencing significantly sharper declines after giving up 1.12 and 1.14 percent respectively. The losses seen by Health Care are thanks to a 1.60% decline by CSL Limited (CLS) and Energy names suffered from a continued decline in oil prices, which recorded the biggest weekly retracement since July as investors bet improved US-Iran relations would ensure no disruption to oil supplies. For the week, Brent crude declined 5.3% to $US64.98 a barrel and US crude slid 6.4% to $US59.04.

The information technology sector was the only sector to close in the black as Afterpay Limited (APT) led tech stocks higher with a 4.50% gain, while Appen Limited (APX) and Nearmap Limited (NEA) followed suit and advanced 3.27 and 3.08 percent respectively.

The index dipped early in the session as market heavy weights CSL, BHP Group Limited (BHP) and Commonwealth Bank of Australia (CBA) declined 1.60, 0.93 and 0.024 percent respectively. CBA dropped as low as $81.73 before clawing back some of the losses in the final hours of trading to close at $82.48. The big-four banks followed CBA lower with Australia and New Zealand Banking Group (ANZ) giving up the most ground with a 0.44% decline.

The ASX all Ordinaries Gold Index (XGD) rose 0.57% following a 1.81% advance by Resolute Mining Limited (RSG), which jumped on the back of strong 2020 guidance. While gold prices did advance marginally in the most recent trading period, a reasonable portion of gold producers appeared to be weighed down by the broad market declines. Along with RSG, Northern Star Resources Limited (NST), Evolution Mining Limited (EVN) and Regis Resources Limited (RRL) appeared to move as a herd and close 1.57, 2.79 and 1.44 higher respectively.

*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.

Commodities and Currencies

Gold gave up gains seen a day earlier and closed 0.62% lower at $US1,547.89 an ounce as global equity markets displayed bullish movements ahead of the US-China preliminary trade meeting.

Declines seen last week by global oil prices appeared to accelerate as US oil and Brent crude declined 1.1 and 0.9 percent respectively to $US58.40 a barrel and $US64.39.

Advances seen by Iron ore overnight appeared to reflect bullish growth expectations in 2020 as the raw metal climbed 2.1% higher to $US95.93 a tonne.

This article was written by Thomas Brunton – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3633.

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