ASX Expected to Open Flat Awaiting Tomorrow's RBA Meeting

Stock Markets

US:Last week saw the S&P 500 and Nasdaq record their worst week this year, falling 3.1% and 3.9% respectively. This was largely caused by an unexpected escalation in the US-China trade war. On Thursday President Trump wrote a series of tweets where he said the US would implement 10% tariffs on an additional $300 billion worth of Chinese goods. Technology companies with sizable revenue streams from China were hardest hit, falling 1.7%.The tumultuous week also saw US 10-year Treasury yields experience their steepest weekly decline in more than seven years and the US Federal Reserve cut interest rates by 25 basis points for the first time since 2008.

ASX:The Australian market it expected to open flat awaiting tomorrows RBA meeting which could see a third consecutive rate cut; however, expectation is that the cash rate will remain unchanged. Last week saw the ASX 200 reclaim its record high after more than 11 and a half years, however further uncertainty surrounding the US-China trade war saw the market retrace to Friday's close of 6,768.60.August sees the start of reporting season, with expected growth in the mining and resource sector. Industrial and banking stocks are expected to be hit hardest, with growing concern that elevated valuation and low rates may cause a potent combination. 

Commodities: Oil prices were up 3% on Friday after falling 7-8% on Thursday in response to the US tariff news. Gold futures rose by US$24.70 (1.7%) to US$1445.60 an ounce. Iron Ore fell by 4.8% to US$108.45 continuing its loss of 8.7% for the week after news from Vale starting up production in Brazil again.   

The spot price of gold is currently up 1.8% at US$1,441.53 per ounce. 

The AUD is currently up 0.06% at US$0.6849.

This article was written by Alex Single – Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3633.