Australian trading day preview

Australian equities are looking at an overdue pull back this morning, falling into line with moves in global share markets overnight, as simmering fears around full-blown trade wars begin to cast a shadow over global growth prospects.

Market data
Source: Bloomberg

The ASX continued its push higher yesterday, adding to the day prior’s rally and building upon Aussie equity’s new 10-year high. The index shrugged off bearishness in Asian ex-Japan stocks, to register gains across all sectors, with the notable exception of telecommunications stocks, which still seem impaired by falls in the price of Telstra, and utilities stocks, which were effectively flat. The day ahead looks a little less rosy for local investors, with the market looking like it will begin to fall in line with global themes. SPI futures are indicating a drop of 30 points at today’s open, as traders eye the weekend with trade war risks at front of mind.

Yesterday’s winners and losers

The recovery in bank stocks led the way again yesterday, boosting investor sentiment and paving the way for strong activity in the overall index. The big mining stocks joined the party and began to carry their weight, with RIO and BHP each adding 0.7% for the session. The high-flyer for the day was APN Outdoor Group, which rallied 12% consequent to news that the company received a $1.1Bn bid from JCDecaux Group; while the lowlier for the session was Ramsay Health Care Group, which fell 7.53% after the company slashed its earnings guidance.

The little Aussie battler

The AUD has benefited from a modest pull back in the greenback last night, recovering ~0.2% against its US counterpart to currently trade 0.7378. The USD is showing signs of exhaustion, after a week of strong buying off-the-back-of growing risk aversion and a favourable yield advantage. The AUD/JPY remains relatively weak owing to the same dynamic, seemingly propped up by an intersection of support around 81.10 and 80.95. Further global volatility could place pressure on these levels, and open-up the year-to-date low for the pair at around 80.50.

The data day

It’s another light day for high impact economic data, so expected global themes to direct trading today. Trade war fears have intensified over the last 24 hours, following hostile remarks from Chinese officials in response to US President Trump’s blustery tariff threats on Tuesday, and a press release from automotive company Daimler that it’s downgrading profit forecasts due to the impact of US tariffs. Energy stocks will also be under the microscope as today’s meeting between OPEC evolves, with a potential fall in oil prices presenting possible risks to the sector.

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