ASX poised to open higher on renewed US/China trade optimism

Stock Markets

Australian shares are poised to open higher today after US and European stocks rallied on Friday, bolstered by a report on progress in US/China trade talks which acted to lift sentiment. On Friday, Chinese state media reported that Washington and Beijing had made 'concrete progress' on the text of their trade pact, thus increasing investor hopes that a deal will be struck soon. Further news claiming that Chinese Vice Premier Liu He spoke with US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer further acted to lift investor US/China trade optimism.  

Wall Street's major indexes rallied on Friday on renewed US/China trade optimism that the US and China were making progress on a trade agreement. The Dow Jones climbed 138.93 (+0.54%) points, assisted by a 1.5% jump in Boeing Co in response to a report that the plane-maker is set to roll out a software upgrade to address safety issues. Similarly, the S&P 500 and NASDAQ 100 closed well into positive territory, with the indexes gaining 14 (+0.50%) and 57.62 (+0.76%) points respectively.

The benchmark S&P/ASX200 index closed down 28.6 (-0.5%) points on Friday amid Brexit and US/China trade uncertainty. ASX listed gold miners performed well last week as investors hedged themselves against the uncertainty lingering in the market. Newcrest Mining, Evolution Mining, St Barbara, and Saracen Minerals were among some of the gold miners that largely benefitted from the increased demand for gold stocks, closing the week up 0.9%, 4.6%, 7.9%, and 8.6% respectively.  

ASX 200 futures are currently up 35 points. 

Commodities and Currencies

Oil prices have experienced a slight retrace, with Brent and WTI crude currently sitting at US$67.16 (-0.15%) and US$58.52 (-0.15%) respectively. OPEC is building a case for extending supply cuts beyond June to stop any new glut, these continued supply cuts are expected to support oil prices over the year.

Iron ore further extended the modest rally in their prices on news claiming that some steel mills in China were being allowed to resume sintering operations. The implied increase in the demand for the core element in steel making saw iron ore prices rise 0.5% to US$88.00 per tonne.

The spot price of gold is currently up 0.48% at US$1302.35.

The AUD is currently flat at US70.85¢.

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