Trading Day: live markets coverage; Soaring Qantas leads ASX gains; plus analysis and opinion

Local stocks have closed at a 2-month high, while Qantas surged more than 8 per cent.

 

Welcome to the Trading Day blog for Wednesday, May 2.

Samantha Bailey 4.25pm: Stocks hit fresh 2-month high

The local share market finished the session firmly higher, hitting at a new two-month high, in the strongest four-day rise since June last year.

At the close of trade, the benchmark S & P/ASX200 had lifted 34.965 points, or 0.58 per cent, to 6050.199 points. The broader All Ordinaries index had gained 36.66 points, or 0.6 per cent, to 6136.7 points.

It came despite mixed leads from Wall Street and after US president Donald Trump’s decision to delay a final ruling on steel and aluminium tariffs on Tuesday, driving equity and commodity markets higher.

“The ASX 200 was above 6000 points, which we cracked through for the first time since March 12 yesterday and we added to those improvements today,” said CommSec market analyst Steven Daghlian.

“We seem to be building a little bit of momentum for the time being. The fact that Fitch, the ratings agency reaffirmed the AAA credit rating for Australia seemed to certainly not hurt and China had some better economic news on manufacturing which didn’t do too much damage either.”

The local bourse rose as much as 5.4 per cent in four weeks after falling 5 per cent in March.

ANZ edged 0.18 per cent higher to $27.52 while Commonwealth Bank turned up 1.9 per cent to $73.46. Westpac strengthened 0.34 per cent to $29.15 while NAB grew 0.44 per cent to $29.58.

BHP dipped 0.16 per cent to $31.20 while Fortescue added 1.49 per cent to $4.76.

Rio Tinto ticked up 0.39 per cent to $80.01 after its chairman denied any wrongdoing over ASIC allegations that the company and two former executive directors engaged in misleading and deceptive behaviour, ahead of the company’s $4 billion acquisition of Mozambique coal assets.

Elizabeth Redman 3.55pm: GPT warns on retail sector challenges

Diversified property group GPT has issued a warning on the challenges facing the retail sector, saying shoppers are closing their wallets in the face of spiralling energy costs and sluggish wages growth.

The landlord (GPT) also flagged competition from online retailers, which have been growing market share strongly in recent years, although avoided naming US juggernaut Amazon’s expansion into Australia.

The warning follows Scentre Group’s admission this week that the shopping centre landlord has contingency plans in place in case loss-making department store chain Myer collapses amid flatlining sales and a sliding share price.
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Supratim Adhikari 3.30pm: Unlimited data could pressure Telstra

Unlimited mobile data plans are shaping up as the next battleground in the mobile market and Telstra’s move to enter the fray could be mixed blessing for the incumbent telco, according to UBS analysts.

Telstra yesterday pipped rival Vodafone Hutchinson Australia to the post by launching an “unlimited” mobile plan to the market. However, the offers from both telcos come with caveats.

While consumers won’t have to pay extra for data they will see their speeds slowed down to 1.5 Mbps (megabits per second) once they go over their data caps.

Telstra is launching a $69 per month for 40 GB plan to the market, while Vodafone has countered with three offerings — a $60 plan for 40GB of uncapped speeds, an $80 plan for 70GB and a $100 plan for 120GB of uncapped speeds. Both telcos insist that 1.5 Mbps is enough for consumers to stream video in standard definition, listen to music and browse the web.

UBS analyst Eric Choi said local telcos, particularly Telstra, have finally taken a leaf out of the book of their US counterparts.
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Jared Owens 3.05pm: New Hope’s coalmine lifeline

One of Queensland’s most controversial coalmining projects has been thrown a potential lifeline by the state’s Supreme Court.

Justice Helen Bowskill this morning set aside a finding by the state’s Land Court that New Hope’s $900 million New Acland mine enlargement — on the Darling Downs, near Toowoomba west of Brisbane — should not proceed because of the risk posed to groundwater.

Justice Bowskill found that Land Court member Paul Smith overstepped his authority when he considered the potential impact on groundwater. The judge also upheld a complaint by New Hope relating to noise.
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Sarah-Jane Tasker 2.30pm: Medibank boss warns against Shorten’s plan

Medibank boss Craig Drummond has warned that Labor leader Bill Shorten’s plan to cap the annual increase in health insurance costs at 2 per cent is not sustainable.

The chief executive of the health insurance giant said today that the issue of affordability needed collaboration across the healthcare sector and not just “pointing the finger at one particular part of the segment”.

“Everyone needs to participate in this, including government, but it has to be sustainable and I don’t think the 2 per cent cap addresses the underlying issues,” Mr Drummond said at a Macquarie conference today.

Opposition Leader Bill Shorten has made it clear that attacking health insurers will form part of his campaign to be elected Prime Minister of Australia. He has promised to cut annual premium increases at two per cent for the first two years of a Labor government. Mr Shorten has also consistently highlighted the profit margins enjoyed by the large health insurers.

Bridget Carter 2.10pm: Healthscope shareholders to back takeover bid

Market analysts are betting that Healthscope’s shareholders will back the $4.1 billion takeover bid by BGH Capital, with the expectation being that the company’s board members will deliver their verdict on the offer by next week at the earliest.

At the Macquarie Australia investment conference in Sydney on Wednesday, institutional fund managers told DataRoom they believed that taking the offer from the Ben Gray-backed private equity fund was a better option compared to retaining the stock and facing the risk that shares would continue to underperform.

The stock (HSO) has traded below the $2.10 offer price of its 2014 initial public offering for much of the past year and the expectation among market observers is that the company faces operating headwinds in the years ahead.
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Bridget Carter 1.45pm: Nick Scali eyes up Steinhoff

Nick Scali Furniture managing director Anthony Scali says that the company is eager to buy the Australian operations of Steinhoff Asia Pacific and there is “a good chance” that the Freedom Furniture and Fantastic Furniture owner will be placed up for sale.

In a presentation to investors at the Macquarie Australia conference in Sydney today, Mr Scali confirmed a report in The Ausrtalian’s DataRoom suggesting that Steinhoff Asia Pacific was of interest to the listed furniture supplier.

“There is probably a good chance that the business will be put up for sale and of course we would be looking at that when it occurs,” Mr Scali said.

It comes after Mr Scali recently offloaded about 14 per cent of his stake to Nick Scali’s long-term furniture manufacturer in China, Kuka.

Kuka is the second largest manufacturer of lounges in China and is believed to be eager to expand into the Australian market.

Mr Scali said for Nick Scali Furniture, which was founded by his father, there was only a limited amount of earnings growth available, which was why the group needed to embark on acquisitions.

By selling down his holding, Mr Scali said he could support a capital raising for acquisitions in the future.

In terms of acquisitions, Mr Scali said that the company was looking at the United Kingdom, where there were some opportunities, but the preference was to embark on an acquisition in the domestic market.

An acquisition of Steinhoff Asia Pacific, which owns Freedom Furniture, Fantastic Furniture along with other brands such as Plush and Harris Scarfe, would offer major synergies.

Kuka was a furniture supplier not only to Nick Scali but to Steinhoff’s Plus and Freedom Furniture brands.

“On the supply chain side, I can see enormous synergies,” he said.

Mr Scali said trading had gone well in New Zealand where the group had opened its first store, but the environment remained volatile in Australia, with New South Wales and Victoria the best performing states.

12.55pm: Industrials push market higher

The Australian share market is higher at midday following a strong morning for the industrial sector, lifted by a more than 6 per cent surge for national carrier Qantas following expectations of a record full-year. The benchmark S & P/ASX200 was up 0.41 per cent, at 6039.6 points at 1200 AEST, while the broader All Ordinaries index was up 0.43 per cent at 6126.3 points. On Wall Street overnight, the S & P 500 edged 0.25 per cent higher, and the Dow Jones Industrial Average slipped 0.3 per cent.

The local energy producers were lower at lunchtime, Oil Search the weakest, down 4 cents, or 0.5 per cent, to $7.87.

Shares in Qantas hit their highest mark since November last year, rising 36 cents, or 6.2 per cent to $616 after the carrier flagged a record full-year underlying pre-tax profit between $1.55 billion and $1.60 billion. Woolworths also lifted in morning trade, up 24.5 cents, or 0.9 per cent, to $27.985 after its third-quarter food sales growth again outpaced supermarket rival Coles.

The sector’s other major, Wesfarmers gained 32 cents, or 0.7 per cent, to $43.89.

The big four banks were mixed at noon, Commonwealth Bank and ANZ down 0.2 and 0.4 per cent, while Westpac gained 0.2 per cent and NAB rose 0.4 per cent. The investment bank Macquarie was $1.12, or 1.0 per cent down at $106.60. Softer base metal prices left BHP Billiton flat at $31.25 and rival Rio Tinto was up 1.1 per cent, to $80.56 after its chairman again rejected allegations of fraud and bribery at its AGM in Melbourne, Wednesday morning. Fairfax shares posted solid gains, up by 4.25 cents or 6.0 per cent, to 75.25 cents, despite the publisher announcing further revenue declines in its newspapers and at its rebranded New Zealand business, Stuff.co.nz And Genworth lost seven cents, or 2.9 per cent, to $2.31 after the mortgage insurer announced a 84 per cent slide in first quarter profit amid tougher housing conditions.

The US dollar, strengthening ahead of a two-day US Federal Reserve policy meeting has pushed the Australian dollar under 75 US cents, its lowest mark since June 2017.

At 1200 AEST, the local currency was worth 74.92 US cents, down from 75.25 US cents on Tuesday.
AAP

Scott Murdoch 12.30pm: Target stores to close, rebrand

Wesfarmers chief executive Rob Scott has flagged more Target stores could be closed or rebranded to Kmart as part of the strategy to revive the struggling chain store.

In a speech to the Macquarie Connections Conference, Mr Scott conceded Wesfarmers remained disappointed with Target’s financial performance even though it is still profitable.

“There’s still a lot of work to go in Target,” he said.

“Our number one opportunity was to get our stores and our products aligned and there’s been some reasonable progress on that.

“I think it’s important to note that Target is a profitable business, we make a profit but unfortunately we don’t make a return we see as satisfactory.”

Turi Condon 12.00pm: Westfield spin-off in talks with competing centres

The Westfield technology spin off OneMarket was having discussions with competing shopping centre landlords to use its platform and will update the market ahead of a critical shareholder vote later this month, according to Westfield Corporation co-chief executive and OneMarket chairman Steven Lowy.

Mr Lowy told an investor briefing in Sydney that OneMarket is a technology company, not a real estate company and as a tech start up, carried higher risk.

Westfield shareholders will vote later this month on the $30 billion takeover offer for Westfield by French property giant Unibail-Rodamco with the OneMarket demerger from Westfield also subject to the meeting.

“I am personally committed to OneMarket through the role of chairman,” Mr Lowy told investors, noting the Lowy family’s investment in the start up.

11.45am: Fairfax shares hit two-month high

Fairfax shares have hit a two-month high despite a further decline in newspaper revenues.

Overall revenue dipped 1 per cent in the first 17 weeks of the second half, dragged down by a 2 per cent fall in the media company’s metropolitan papers, which include The Sydney Morning Herald, The Age and The Australian Financial Review.

Regional papers declined nine per cent while revenue at the company’s rebranded New Zealand business, Stuff, dropped 8 per cent.

But Fairfax’s real estate spin-off Domain, which listed as a separate company on the Australian Securities Exchange in November, grew revenue by 13 per cent. Radio broadcaster Macquarie Media, which is 54.5 per cent-owned by Fairfax, rose about four per cent.

Despite the overall decline in revenue, Fairfax shares rose 4.25 cents, or six per cent, to 75.25 cents at 1130 AEST on Wednesday.

Chief executive Greg Hywood said newspaper industry advertising revenue as a percentage of the total Australian advertising pie has shrunk from 23 per cent to just eight per cent between 2012 and 2018.

He said the publisher is now entering a new phase following years of “big decisions” around costs in light of that industry disruption. “Setting ourselves on the path of originating commercially-viable new media has proven correct,” Mr Hywood said.

“We are achieving our goal of sustaining independent journalism’s public good, while at the same time delivering shareholder value creation.”
AAP

Matt Chambers 11.20am: Rio coal exit linked to climate concerns

Rio Tinto chairman Simon Thompson has for the first time linked the company’s exit of the New South Wales thermal coal mines to climate change concerns, saying the decision was influenced by the implications of climate change on coal supply and demand.

The statements were made at the company’s Melbourne AGM this morning, where Rio faces shareholder resolutions brought by the Australasian Centre for Corporate Responsibility to review its membership of business lobby groups, such as the Minerals Council of Australia, based on their climate change positions.

10.55am: Genworth shares slide on profit drop

Genworth shares have dropped 11 cents, or 4.62 per cent, to $2.27, in early trade after the company recorded first-quarter net profit of $8.4 million, a drop of 84 per cent from $52.2m a year earlier.
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10.28am: Stocks hit 2-month high

Australia’s S & P/ASX 200 share index has jumped 0.3pc to a 2-month high of 6032.3 in early trading.

Despite mixed offshore leads the market seems to have taken a bullish lead from the after-hours surge in Apple.

But Apple was boosted by a buyback and dividend enhancement rather than signs of stronger economic growth.

Thus it’s unclear if the rise in Apple will have a lasting impact on the US share market despite its vast size.

Most sectors of the local market are up, with Tech, Industrials, Consumer Discretionary, Consumer Staples, Energy, Health and Utilities outperforming.

But the heavyweight Materials and Financials sectors are underperforming, with BHP down 0.4pc and the major banks down 0.7-1.2pc.

And JB Hi-Fi has been pummelled by a profit warning, falling as much as 10pc.

There’s still a chance that the index will close back below the downtrend line from the January peak, at 6013.

10.15am: JB Hi-Fi shares plunge 10pc

JB Hi-Fi shares have fallen 10pc to a 5-month low of $23.06 on a profit warning.

The consumer electronics giant was forced to rein in its profit outlook for fiscal 2018, after intensive price competition in the home appliances category linked to unfavourable weather conditions crunched the earnings for its Good Guys business.

Presenting at the Macquarie Australia Conference, the company said Good Guys is suffering from tough trading conditions, which will now see total group net profit be around $230 million against previous guidance of $235m to $240m — so a downgrade of 4.2pc at most. “The Good Guys performance has been impacted by challenging conditions in the home appliance market, due to unfavourable weather conditions coupled with heightened price competition”, the company said. But the early fall seems like an over-reaction.

Shares last down 7.5pc at $23.70.

10.05am: S & P/ASX 200 likely to shy off downtrend line

Expect the S & P/ASX 200 to retreat from the downtrend line drawn from the January peak after closing on that line yesterday at 6015.

The index has surged 5 per cent in 4 weeks but now faces uncertainty about the outcome of US-China trade talks on Friday.

There’s also the risk of a stronger rise in US bond yields amid increasing signs of US inflation, while the stronger dollar could trim commodities.

Wall Street bounced back last night but it was driven by technology stocks, with DJIA declines beating advances 2 to 1.

Apple is up 3.5 per cent in after-hours trading after announcing a $US100b buyback and enhanced dividend but not clear if this will boost the broader market.

Matt Chambers 10.00am: Rio chairman denies Mozambique wrongdoing

Rio Tinto chairman Simon Thompson has admitted the big miner’s Mozambique legal action from US and Australian authorities and a Guinea bribery probe from Britain has hit the company’s reputation.

But he denied the company did anything wrong in delaying an impairment on Mozambique, as alleged by the Australian Securities and Investments Commission yesterday.

“We strenuously deny these allegations and will vigorously defend ourselves in court,” Mr Thompson said of both the ASIC action and a fraud case on the same matter brought by the US Securities and Exchanges Commission.

Mr Thompson was speaking at Rio’s annual general meeting in Melbourne this morning.

“Over the past two years, our reputation has been called into question, by allegations of accounting fraud in relation to former assets in Mozambique and of bribery in Guinea,” he said.

On Guinea, where Britain’s Serious Fraud Office is investigating a $US10.5 million payment to a consultant in 2011, Mr Thompson repeated statements made at last month’s London AGM.

“After an independent investigation, the board concluded that the proper internal procedures had not been followed in relation to this payment,” he said.

9.35am: Genworth profit plunges 84pc

Genworth has forecast the country’s housing market to moderate in 2018 as it reported a sharp drop in quarterly profit.

Genworth, a provider of insurance to lenders against the risk of borrowers defaulting, said housing market conditions should continue to ease as macro-prudential measures take effect and new supply comes onto the market.

The company recorded first-quarter net profit of $8.4 million, a drop of 84 per cent from $52.2m a year earlier.

Stripping out the aftertax impact of unrealised gains and losses on its investment portfolio, Genworth’s earnings fell 71 per cent to $19.9 million for the three months through March. That came as its net earned premium dropped by 38 per cent to $67.4m.

Still, the company said it was making good progress in a strategic overhaul and announced an on-market share buyback of up to $100m.

Genworth provides lenders with insurance against a loss if borrowers default on their home loans, allowing a borrower who doesn’t have a large down payment to buy a home sooner or to borrow a higher portion of the purchase price. It remains majority owned by Genworth Financial.

Australia’s biggest banks have tightened lending standards in recent years, clamping down on interest-only mortgages and loans with a high loan-to-valuation ratios to comply with restrictions imposed by regulators.

Last week, the prudential regulator said it would remove a 10 per cent cap on investor loan growth that was introduced in 2014 and replace it with permanent measures aimed at strengthening lending standards, including policy limits on debt-to-income levels for individual borrowers.

“We continue to be focused on ensuring we have an optimal capital structure,” said Georgette Nicholas, Genworth’s chief executive and managing director.
Dow Jones

9.30am: Qantas flags record pre-tax profit

Qantas Airways expects to post record underlying pre-tax profit for the full year, after posting strong revenue growth in the third quarter.

The airline is eyeing underlying pre-tax profit of between $1.55 billion and $1.6bn after group revenue rose 7.5pc to $4.25bn in the third quarter.

Qantas has also ordered six more Dreamliners from Boeing, allowing it to retire its six remaining Boeing 747s by the end of 2020. The new Dreamliners will begin arriving in the first half of fiscal year 2020 and will bring the Qantas-brand international Dreamliner fleet to 14. The airline announced the retirement of its five oldest 747s, from a fleet of 11, when it ordered its first eight Dreamliners in 2015.

Qantas chief executive Alan Joyce said the Dreamliners are more efficient than the old 747s and that the planes will “open up new network options.”

Qantas in March began non-stop service between Perth and London, and switched its hub from Dubai to Singapore for its second London service. It also recently renewed a partnership with Emirates.

Qantas embarked on an aggressive cost-cutting program in recent years after a costly price war with main domestic rival Virgin Australia Holdings Ltd. ate into profits.

Mr Joyce said the company would post strong full-year results even though the airline’s fuel bill is expected to increase by $200 million in the fiscal year.

Dow Jones

9.20am: Broker rating changes

ANZ restarted at Buy; $30 target price — Shaw & Partners

Xero raised to Neutral; target price raised 72pc to $42.50 — UBS

ANZ target price cut 3.4pc to $28; Neutral rating kept — UBS

Link Administration started at Neutral; $8.17 target price — JPMorgan

Clean TeQ holdings restarted at Outperform; $0.94 target price — Macquarie

9.15am: JB Hi-Fi lowers FY18 profit forecast

Australian electronics retailer JB Hi-Fi has lowered its expectations for net profit this fiscal year due to challenging conditions in the home-appliance market and unfavourable weather.

The company, which said the challenges centred around its home goods chain The Good Guys, estimated group net profit would be around $230 million. It previously expected net profit between $235m and $240m.

Despite the challenges at The Good Guys, the company reaffirmed its group sales guidance for the current fiscal year at $6.85 billion. It said its core JB Hi-Fi business continues to perform strongly and is in line with expectations.

Some analysts and investors expect JB Hi-Fi to face further competition in the coming months and years as Amazon.com Inc. improves its retail offer in Australia. The e-commerce giant launched its full retail website in Australia in December.

In the fiscal year third quarter, total sales at JB Hi-Fi brand stores grew 6.8pc while comparable sales grew 4pc. At The Good Guys, total sales declined 1.3pc and comparable sales declined 2.9pc.

Year to date, total sales at JB Hi-Fi brand stores grew 9pc and comparable sales grew 6.3pc. At The Good Guys year to date, total sales grew 1.2pc and comparable sales grew 0.3pc.

Dow Jones

9.10am: Amcor flags earnings hit as costs rise

Amcor expects to be hit with its biggest earnings impact in seven years, as rising raw material costs weigh on its Flexibles business.

The company, which in February flagged climbing costs, says prices continue to increase for some materials and forecast an impact of at least $US15 million ($20 million) to its Flexibles segment in the second half of the financial year — the most significant hit since 2011.

Amcor has already bumped up prices across the business in response, but the global packaging company said the costs will take time to recover.

AAP

8.55am: Woolworths’ food sales outpace Coles

Woolworths has lifted third-quarter food sales by 4.0 per cent, again outpacing fierce supermarket rival Coles.

Woolies says comparable food sales at its Australian supermarkets grew to $9.57 billion for the 13 weeks to April 1 after adjusting figures for the timing of Easter, exceeding Coles’ 1.3 per cent like-for-like third-quarter growth. Discount department store chain Big W reported a 1.2 per cent Easter-adjusted decline in like-for-like sales, as Woolworths’ total sales from continuing operations grew 3.6 per cent to $14.24 billion.

AAP

8.35am: Stocks to watch

Qantas — Qantas releases its third quarter trading update on Wednesday.

Rio Tinto — Resources heavyweight Rio Tinto holds its annual general meeting on Wednesday. Woolworths — Retail giant Woolworths releases its third quarter trading update on Wednesday. Woodside, Santos, Origin, Oil Search — Oil prices have fallen more than 1 per cent, as the greenback stays strong, making the commodity more expensive for holders of other currencies.

8.00am: Copper prices slip to four-week low

Copper prices hit their lowest in nearly four weeks on Tuesday due to worries about demand from top consumer China and a stronger US dollar ahead of a monetary policy decision from the US Federal Reserve.

Benchmark copper on the London Metal Exchange ended down 0.9 per cent at $US6,745 a tonne from an earlier $US6,710, its lowest since April 4. Chinese demand for industrial metals typically picks up in the second quarter ahead of construction activity over the summer months.

“We think construction activity is going to be more subdued this year because of the curbs on lending by the Chinese government to control the property market bubble,” Capital Economics analyst Caroline Bain said.

Reuters

7.56am: Goldman to pay $US110m to settle forex case

Goldman Sachs will pay roughly $US110m to settle claims that it failed to supervise foreign exchange traders who put clients at a disadvantage by inappropriately sharing information about their market positions with rivals.

The firm will make payments of $US54.75 million to both the Federal Reserve Board and the New York Department of Financial Services, the regulators said Tuesday.

Between 2008 and early 2013, the bank’s traders used electronic chat rooms to share confidential customer information and to discuss potentially co-ordinating trading activity, the New York agency said.

Dow Jones

7.40am: Apple beats quarterly earnings forecasts

Apple has turned in another quarterly beat, with revenue up 16 per cent to $US61.1 billion and earnings per share up 30 per cent — and announced a whopping $US100bn share buyback program.

(AFP PHOTO/Don EMMERT)

Apple shares were up 4 per cent in after-hours trading on Tuesday after reporting earnings for the quarter ended March 31. The company reported net income of $US13.82 billion, up 25 per cent year over year, or earnings of $US2.73 per diluted share.

The tech giant topped Wall Street’s lowered expectations. Analyst consensus estimates had forecast revenue of $US60.82 billion and adjusted EPS of $US2.67 for the period, Apple’s fiscal second quarter of 2018.

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7.28am: Stocks set to tick higher at open

The Australian share market is expected to open slightly higher after a mixed performance on Wall Street and falls in base metals prices.

At 7am (AEST) on Wednesday, the Australian share price futures index was up seven points, or 0.12 per cent, at 6,000 points.

In the US, the S & P 500 edged higher on optimism that the North American Free Trade Agreement could be renegotiated, following comments from US and Mexico government officials.

In equities news on Wednesday, Rio Tinto holds its annual general meeting, Woolworths issues its third quarter sales update, and Qantas is also releasing a third quarter trading update.

Late on Tuesday night, it fell as low as 74.88 US cents, its lowest level since June 2017.

AAP

6.40am: Dollar slides to near one-year low

The Australian dollar has fallen to its lowest level in almost a year after metals prices lost ground overnight.

At 6.35am (AEST), the local currency was worth US74.90c, down from US75.25c on Tuesday. Copper prices hit their lowest in nearly four weeks due to worries about demand from top consumer China and a stronger dollar ahead of a monetary policy decision from the US Federal Reserve.

AAP

6.35am: Wall Street ends mixed

Wall Street’s S & P 500 pared early losses on Tuesday after a Trump administration official said he hoped to further open China’s economy to US companies, though manufacturing data stoked concerns of rising costs that could cut corporate profits.

US stocks came off the day’s lows after US Trade Representative Robert Lighthizer said he did not desire to change China’s economic system but wanted to limit the damage it causes to the United States and encourage more foreign competition.

The Dow Jones Industrial Average fell 64.10 points, or 0.27 per cent, to 24,099.05, the S & P 500 was up 6.75 points, or 0.25 per cent, to 2,654.80 and the Nasdaq Composite added 64.44 points, or 0.91 per cent, to 7,130.70. Earlier on Tuesday, US Commerce Secretary Wilbur Ross said the Trump administration was prepared to levy tariffs on China if an American delegation heading to Beijing did not reach a settlement on trade imbalances.

AAP

6.25am: UK shares tick higher

British shares traded higher on Monday as the planned merger between Sainsbury’s and Asda, the UK arm of Walmart, sent shockwaves through British retail stocks as investors sought to adjust to a potentially game-changing overhaul of the industry.

Britain’s FTSE was up 0.15 per cent at 7520.36 points but all eyes were on Sainsbury’s shares, which surged up to 20 per cent and were set for their highest ever rise.

“Traders will be bracing themselves for volatility in the retail sector and particularly in Sainsbury,” London Capital Group said in a research note. “Given that shorting retailers has been a huge trade over the past two years, news of potential tie up between Sainsbury, the UK’s 2nd biggest supermarket and 7th most shorted stock, and Walmart subsidiary Asda could see many caught on the wrong side of the bet in early trade on Monday,” the broker explained.

AAP

6.18am: Fed meets as markets seek inflation hints

The Federal Reserve on Tuesday began a periodic two-day monetary policy meeting with markets eager for clues to how aggressively the central bank plans to raise interest rates this year.

The first rate hike of the year was adopted in March and the Fed is widely expected to hold its fire this time.

The Marriner S. Eccles Federal Reserve Board Building in Washington. (AP Photo/Andrew Harnik)

But futures markets on Tuesday afternoon gave about a 50 per cent chance the Fed would raise rates again in June, September and December — a prospect that has gnawed at investors since February.

Wall Street finished split, with the Dow Jones Industrial Average falling a third day under pressure from earnings disappointments and geopolitical and trade worries but also concerns on the Fed’s coming moves.

Recent economic statistics offer increasing reason to believe policymakers may feel compelled to bump up benchmark lending rates this year, perhaps even faster than the three increases so far forecast by the Fed.

AFP

6.13am: Oil prices slip as US taps record

Oil prices fell to a two-week low Tuesday, weighed down by rising US crude production, a strengthening dollar and debate over whether America will pull out of the Iran nuclear deal.

Light, sweet crude for June delivery declined $US1.32, or 1.9 per cent, to $US67.25 a barrel on the New York Mercantile Exchange, its lowest close since April 17. Brent, the global benchmark, fell $US1.56, or 2.1 per cent, to $US73.13.

The rally that brought US oil futures near $US70 this year has stalled, wavering as traders have focused on whether the US administration will decide to scrap the 2015 international agreement to curb Iran’s nuclear program or keep the deal intact.

Dow Jones