Trade Optimism Quell Fears of Economic Slowdown

Stock Markets

Australian shares are poised to open higher today as US indices further continued their rally yesterday. Dow Jones, Nasdaq100, and S&P500 all closed approximately +1%, with the Dow Jones gaining about 92 points. Seven of the eleven major sectors comprising the S&P500 ended Wednesday's session in positive territory, with the energy and information technology sectors closing with the highest percentage gains. The primary cause of this extended rally in the US indices is attributed to and the continued rally in oil prices and growing optimism regarding the US/China trade negotiations which have eased fears about the global economy. More good news was received overnight, subsequent to US/China trade talks being extended into an unscheduled third day; with the US Trade Representative stating that China pledged "to purchase a substantial amount of agricultural, energy, manufactured good, and other products and services" from the US.

Hard Currencies

The spot price of gold is now hovering around US$1294.60, from US$1285.90 on Tuesday. From a technical perspective, the strong uptrend in the spot price of gold is expected to continue along and is likely to retest recent highs of US$1300.40 this week.  

Commodities

Crude oil prices have benefited from OPEC production cuts and steadying equities markets, and are currently up a staggering 4.8% to US$52.17 per barrel; bringing the price of crude oil back to levels not seen since the 17th of December 2018. The steep downtrend still remains intact for now, although it is likely to be broken if crude oil prices continue to rise at this rate. 

Fiat Currencies

AUD (against the USD) has extended its rally in the wake of last week's flash crash which saw it drop to as low as 67.43¢ last Thursday and is currently 71.71¢, which is relatively low relative to historical levels. Weakness in the housing market and fears of an associated recession have been weighing on the AUD in recent months. 

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.