Trading Day: live markets coverage; Lowe laments ‘bad policy’ tariffs; plus analysis and opinion

The ASX ends sharply lower after the White House’s main economic adviser quit, while GDP fell shy of expectations.

Australian stocks are higher as concerns about a looming trade war fade.

That’s all from the Trading Day blog for Wednesday, March 7.

4.25pm: S&P/ASX 200 ends down 1pc after Cohn resignation

Australia’s S&P/ASX 200 finished down 1pc at 5902 despite overnight gains on Wall Street.

The sell-off which erased most of the previous day’s rise came after the resignation of US economic adviser Gary Cohn sparked renewed risk aversion in global markets.

US stock index futures were pointing to falls of more than 1pc on Wall Street.

Hawkish comments from FOMC voting member Lael Brainard were a potential drag although bond yields fell slightly amid safe-haven buying after Cohen’s resignation.

The S&P/ASX 200 underperformed most regional markets amid sharper falls in the consumer staples, energy, health care, financials and industrials sectors.

4Q GDP data missed expectations but 3Q GDP was revised higher.

Brambles, Blackmores, Treasury Wine, Qantas and Monadelpous, Qube Logistics, Select Harvests and Isentia were among stocks trading ex-dividend.

2.44pm: S&P/ASX 200 hits new intraday low; down 1.1pc

Australia’s S&P/ASX 200 share index has hit a new intraday low of 5897.1 amid sustained risk aversion in global markets after the resignation of Trump’s economic adviser Gary Cohn. Dow Jones index futures are down about 1.5pc after an intraday bounce, although the Australian market is fairing noticeably worse than regional share markets, with consumer staples, energy, utilities, financials and health care underperforming. Index last down 1.1pc at 5898.8

1.20pm: A$, shares pare declines; tracking offshore markets

The Australian dollar and shares have pared some of their early declines in choppy trading mostly tracking global markets. USD/JPY is down 0.4pc after falling 0.7pc and S&P 500 are down 0.8pc after falling .6 per cent after Gary Cohen’s resignation and hawkish comments from Lael Brainard. AUD/USD 0.4pc at 0.7798 after falling 0.7pc, while the S&P/ASX 200 is down 0.8pc at 5915 after falling 1.0pc. But it’s hard to see how Wall Street will avoid a sharp sell-off as Cohen’s resignation reinforces the view that Trump is taking a hard line on trade.

12.15pm: RBA likely to miss its GDP forecast — Capital Economics

Weaker than expected Q4 GDP was tempered by upward revisions to 3Q but even so the economy would need to step up a gear to hit the RBA’s forecast of 3.0pc growth for 2018, according to Capital Economics.

“Looking ahead, the outlook for business investment is better than these figures suggest, but dwellings investment will probably continue to decline and consumption may weaken again soon,” Capital Economics chief economist Paul Dales says.

“Indeed, the 0.1pc m/m rise in retail sales in January suggests consumption will struggle to rise by more than 0.4pc q/q in Q1. So while the RBA believes that GDP growth will step up from 2.3pc in 2017 as a whole to around 3.0pc in 2018, we think another year of growth of about 2.5pc is on the cards.”

In his view that suggests the RBA won’t raise interest rates until late in 2019.

11.35am: Q4 GDP +0.4pc vs. 0.5pc expected

Australia’s December quarter GDP rose 0.4 per cent quarter over quarter versus expectations of a 0.5 per cent lift, while year on year GDP rose 2.4 per cent versus the 2.5 per cent expected by economists. But third quarter growth was revised up to 0.7 per cent Q/Q and 2.9 per cent compared to the 0.6 per cent and 2.8 per cent first reported. The local dollar fell from US77.84c to an intraday low of US77.73c before bouncing to US77.86c. The S&P/ASX 200 share index also hit an intraday low of 5,907.2 points, while the Australian 10-year bond yield hit a 2-day low of 2.8406 per cent. AUD/USD was last down 0.6 per cent at US77.78c. 10-year bond down 4 bps at 2.842 per cent and the S&P/ASX 200 own 0.9 per cent at 5.906.2.

Read more

 

11.15am: Tokyo slides at open

Tokyo stocks opened lower on Wednesday, as the safe haven yen rose against the dollar after Donald Trump’s White House was rocked by the resignation of top economic adviser Gary Cohn.

The benchmark Nikkei 225 index fell 0.59 per cent to 21,291.26 in early trade while the broader Topix index was down 0.52 per cent, or 8.85 points at 1,707.45.

AFP

11.08am: ASX slides further as trade fears spike

Australia’s S&P/ASX 200 share index is down 0.9 per cent at 5908.1 as global risk aversion spikes after Gary Cohn’s departure.

DJIA futures fell as much as 1.5 per cent, threatening to erase two days of gains.

US 10-year bond yields dived 4 basis points to 2.84 per cent on safe haven buying.

11.05am: Fed’s Brainard eyes rate hikes

Federal Reserve governor Lael Brainard said Tuesday she has become more confident inflation will hit the central bank’s target, allowing officials to continue raising interest rates gradually.

She also sounded more upbeat about the economic outlook, saying factors that held back the US economy in recent years have reversed and now are offering a boost, in remarks prepared for a speech in New York.

Today’s economy “is the mirror image of the environment we confronted a couple of years ago,” Ms. Brainard said. “In the earlier period, strong headwinds sapped the momentum of the recovery and weighed down the path of policy. Today, with headwinds shifting to tailwinds, the reverse could be true.”

 

Dow Jones — Read more

11.01am: GDP due at 11.30am 0.5pc lift eyed

Australia’s December quarter national accounts data are due at 11.30am (AEDT) and the market is expecting a 0.5 per cent rise in GDP on a quarterly basis and 2.5 per cent year-on-year increase. Year-on-year growth hit a 15-month high of 2.8 per cent in the September quarter.

10.54am: Dollar dives below 200-DMA on trade jitters

The local dollar has fallen as much as 0.7 per cent to US77.75 cent today on escalating trade jitters after the resignation of Trump economic adviser Gary Cohn.

The currency is close to testing its 100-DMA at US77.71c after falling back below the 200-DMA at US77.91c.

 

A further slide from here could test the 50 per cent retracement of the Dec-Jan rise at US77.31c and the recent low of US77.13c, as the focus turns to domestic GDP data at 11.30am (AEDT). Currently the dollar is down 0.6 per cent at US77.83c.

10.45am: The Trading Day ahead

Join the conversation with our Trading Day experts for breaking news and analysis in financial markets here and on Sky News Business (Ch: 602)

NOW: Will Douglas — Morgans

11.15am: Ric Spooner — CMC Markets

11.30am: Steven Milch — Suncorp

11.45am: Adam Dawes — Shaw and Partners

Noon: Greg McKenna — AxiTrader

12.15pm: James King — AFEX Australia

12.30pm: Ed Blakely —

12.45pm: Andrew Ticehurst — Nomura

(All times in AEDT)

10.36am: Bank inquiry unveils appearance list

The Hayne Royal Commission into financial services has confirmed the organisations it will be calling as it kicks off hearings next Tuesday as it starts examining consumer lending practices. Significantly bank regulator Australian Prudential Regulation Authority will also be called along with ANZ, CBA, Citigroup, NAB and Westpac.

 

10.28am: Markets in panic over US trade

Global financial markets are starting to panic about US trade developments today says IG chief market strategist Chris Weston.

“First we get Cohn stepping down, which gives Trump full reign to target those countries which run trade imbalances with the US,” Weston says. “Cohn was the offset, he was free trade man, so the market is concerned at how aggressive he will now be with Cohn out of the mix. The headlines above have been widely noted here and it was always China that Trump was gunning for. Markets are in a panic.”

DJIA futures dived 1.3 per cent in early trading, spot gold rose 0.5 per cent to $US1,340.59, while the Australian dollar has slipped 0.4 per cent to US77.92 cents and the S&P/ASX 200 fell 0.7 per cent to 5,919.8.

10.22am: ASX slides at open

The Australian sharemarket has opened lower despite a positive tone on overseas markets thanks to news of a summit between North and South Korea, and hopes the US might not impose heavy tariffs on steel and aluminium.

At 10.12am (AEDT) on Wednesday, the benchmark S&P/ASX200 index was down 40.0 points, or 0.67 per cent, at 5,922.4, while the broader All Ordinaries index was down 37.9 points, or 0.63 per cent, at 6,023.6 points.

In futures trading, the SPI200 futures contract was down 44 points, or 0.74 per cent, at 5,910 points, after being in positive territory earlier in the morning.

AAP

10.07am: US reportedly mulling China moves, AUD drops

The US is said to be considering clamping down on Chinese investments in the US by slapping tariffs on a board range of its imports in response to alleged intellectual-property theft, Bloomberg reports, citing people familiar with the matter. The Australian dollar has dived from US79.25 cents to US78.93c in response to this report. It could also cause some broader risk aversion and a weaker-than-expected day on the share market.

Samantha Bailiey 9.50am: PM makes case for tax cuts

Speaking at a business summit this morning, prime minister Malcolm Turnbull reiterated his case for lower business tax, saying that about half of Australia’s workforce work for companies with a turnover of $50 million a year or less.

“And that’s where you’re seeing this strong growth in jobs at the moment,” he said.

“We’re backing businesses with lower tax rates.

“They’re in a better position to compete, to invest and, of course, take the opportunities of the big free trade deals.”

9.46am: Cohn quits White House over Tariffs

Gary Cohn, the White House National Economic Council director, resigned on Tuesday after less than 14 months in his role, following President Donald Trump’s decision last week to impose steel and aluminium tariffs that the economics adviser had opposed.

(AP Photo/Manuel Balce Ceneta, File)

Mr Cohn, a former Goldman Sachs Group executive, said in a statement: “It has been an honour to serve my country and enact pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform. I am grateful to the President for giving me this opportunity and wish him and the Administration great success in the future.”

Dow Jones — Read more

9.23am: RBA’s Lowe warns of potential trade war

RBA governor Philip Lowe has warned of a potential trade war following US tariffs on aluminium and steel. Asked about the US tariffs after a speech today he said it would be best if Australia didn’t respond to the US tariffs and that they represent “highly regrettable, bad policy” and that an escalation into a trade war could lead to a “global economic shock”.

Governor of the Reserve Bank of Australia, Philip Lowe, addresses a business summit in Sydney earlier today. (AAP Image/Dean Lewins)

It would be “helpful” if the Aussie dollar were lower as it would help lower unemployment and raise inflation to target, but the currency is, in any case, fairly close to fair value where it is The Aussie dollar is currently trading at US78.22 cents.

9.20am: Trump offers fresh tariff defence

President Donald Trump on Tuesday defended his planned tariffs following criticism from allies including the European Union, saying the US. had been “taken advantage of” for decades.

Mr Trump, speaking at a news conference alongside Swedish Prime Minister Stefan Löfven, said the tariffs were aimed at protecting the US steel and aluminium industries as a matter of national security.

President Donald Trump speaks during news conference with Swedish Prime Minister Stefan Lofven in the East Room at the White House. (AP Photo/Andrew Harnik)

“If a country doesn’t have steel, it doesn’t have a country,” Mr. Trump said. “This is more than just pure economics. This is about defence. This is about the country itself.”

Dow Jones — Read more

9.16am: Analyst rating changes

BHP added to High Conviction list — Morgans

Corporate Travel cut from High Conviction list — Morgans

CBA raised to Buy — BofAML

Westpac cut to Underperform — BofAML

Retail Food Group cut to Sell — UBS

Pact Group started at Buy — Goldman Sachs

Orora restarted at Buy — Goldman Sachs

8.50am: Next move in rates likely “up”: Lowe

RBA Governor Philip Lowe reiterates it’s “likely” the next move in official interest rates here “will be up, now down”, but progress in lowering unemployment and lifting inflation to target is “likely to be only gradual” and the RBA “does not see a strong case for a near-term adjustment of monetary policy”. Still the RBA will “keep that judgment under review at future meetings”. In other words if unemployment and inflation were to consistently improve, the RBA could start hiking fairly quickly. With the market currently expecting no hike until 2019 and positive surprises on unemployment or inflation could have a substantial impact on financial markets as they would quickly price in earlier rate hikes. AUD/USD is breaking above a bullish pennant pattern which targets 0.7910. It faces key downtrend line today at 0.7849, while support from the 200-DMA is located at 0.7891. GDP data due 1130 AEDT.

8.11am: Wall St inches higher

The S&P 500 climbed Tuesday, notching a third straight day of gains, as investors weighed signs of opposition in Washington to planned US tariffs on steel and aluminium imports.

Expectations for escalating trade tensions dragged down stocks around the world last week, as investors worried that rising materials costs and retaliatory trade measures could hurt companies’ bottom-lines.

The Dow Jones Industrial Average rose 9 points, or less than 0.1 per cent, to 24,884, recouping losses after declining more than 150 points earlier in the session. The S&P 500 rose 0.3 per cent, and the Nasdaq Composite advanced 0.6%.

Gains were broad, with nine of the 11 sectors in the S&P 500 posting advances for the day.

Shares of consumer discretionary companies rose 0.7 per cent in the S&P 500, with Leggett & Platt rising 3.6 per cent and Netflix rising 3.2 per cent.

Dow Jones

7.38am: ASX set to tick higher

Australian stocks are expected to inch higher at the open amid optimism about easing tensions between North and South Korea and as President Donald Trump faces pressure not to impose heavy tariffs on US metals imports.

At 7am (AEDT) on Wednesday, the Australian share price futures index was up five points, or 0.08 per cent, at 5,959.

The Australian share market on Tuesday posted a strong gains as investors speculated US President Donald Trump’s proposed tariffs on imported steel and aluminium may not be set in stone.

The benchmark S&P/ASX200 index closed up 67.4 points, or 1.14 per cent, at 5,962.4 points, while the broader All Ordinaries index was up 65.1 points, or 1.09 per cent, at 6,061.5 points In economic news on Wednesday, the Australian Bureau of Statistics will release national accounts figures for the December quarter, which includes gross domestic product.

Reserve Bank Governor Philip Lowe speaks at Australian Financial Review Business Summit, and the Ai Group releases its Performance of Construction Index. Meanwhile, the Australian dollar moved above 78 US cents for the first time in a week, helped by the improving market optimism.

At 7.39am (AEDT) on Wednesday, the local currency was worth US78.16 cents, up from US77.74c on Tuesday.

AAP

7.30am: Oil prices edge higher

Oil prices inched higher Tuesday, supported by moves in stock markets and currencies, even as investors continued to anticipate a massive increase in US crude output.

US crude futures settled up 3 cents, or 0.05 per cent, to $US62.60 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 25 cents, or 0.38 per cent, to $US65.79 a barrel on ICE Futures Europe.

World stocks have been particularly volatile since a rout in early February, with oil broadly tracking their moves.

“Oil and equities were trading very much hand-in-hand and basically equity markets were calling the shots in terms of direction and trading patterns,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets.

Mr. Schieldrop said he expects in the short term this trend will continue and that the sell-off in equities isn’t yet over.

Dow Jones

6.51am: Dollar higher as trade fears cool

The Australian dollar is higher, as the mood on financial markets further improves on the back of easing worries over a possible trade war sparked by the imposition of heavy tariffs by the US on metals imports.

At 6.35am (AEDT) on Wednesday, the local currency was worth US78.23 cents, up from US77.74c on Tuesday.

A Bloomberg report quoting a close ally of Donald Trump saying the president was open to changes to his proposed tariffs on steel and aluminium, was cited by traders as the reason for a jump in US stocks.

AAP

6.20am: Brussels slams ‘aggressive’ tax policies

Seven EU countries including the Netherlands and Hungary will on Wednesday face unprecedented criticism from Brussels for “aggressive” tax policies that undercut other member states, the bloc’s economic affairs commissioner said.

The European Commission, the EU’s powerful executive arm, will hand down the harsh judgment in its regular report on the economies of the union’s member states, Pierre Moscovici said on Tuesday.

“For the first time, the Commission is stressing the issue of aggressive tax planning in seven EU countries: Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and The Netherlands,” he said.

(European Union Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici. (AFP PHOTO)

“These practices undermine fairness and the level playing field in our internal market, and they increase the burden on EU taxpayers.” Many of the targeted countries serve as EU headquarters for global multinationals, offering complicated tax schemes that help companies — such as Google, Apple or Facebook — to shift profits and avoid big tax bills.

AFP

5.45am: Wall St lifts amid tariff pushback

US stocks climbed Tuesday, as investors weighed signs of opposition in Washington to planned US tariffs on steel and aluminium imports.

The Dow Jones Industrial Average rose 78 points, or 0.2 per cent, to 24,923, recouping losses after declining more than 150 points earlier in the session. The S&P 500 rose 0.3 per cent, and the Nasdaq Composite advanced 0.5 per cent.

Expectations for escalating trade tensions had dragged down stocks around the world in recent sessions amid concerns about rising materials costs for companies and harm to global exporters, but pushback from some senior Republicans has helped soothe investor nerves.

Dow Jones

5.38am: Auto stocks drive Europe higher

European stock markets closed modestly firmer Tuesday as fears faded over US President Donald Trump’s planned trade tariffs, and tensions appeared to ease in the Korean peninsula, dealers said.

Investors bet that Trump would not push through with extreme protectionist policies, and stocks in big European carmakers were the main beneficiaries of the relief rally.

“Stocks bounce despite trade war concerns,” Craig Erlam, senior market analyst at OANDA said, while Jasper Lawler at London Capital Group said that “risk-on trading” was making a return.

London’s FTSE 100 closed up 0.4 per cent, the DAX 30 in Frankfurt edged 0.2 per cent higher as carmaker Volkswagen jumped by more than three per cent, with Daimler and BMW also posting gains. The CAC 40 also inched 0.1 per cent higher as Renault and Peugeot posted session gains.

AFP