Australia Market gains 0.9% on materials, financials

Headline indices of the Australia stock market ended higher on Friday, 06 July 2018, following overnight rally on Wall Street, with local participant showing few signs of anxiety ahead of a US announcement on tariffs later in global day. Most of ASX issues inclined, with shares in materials were the most improved group, followed by energy, financials, realty, and telecom issues. At the close, the benchmark S&P/ASX 200 Index rose 56.77 points or 0.91% to 6,272.29. The broader All Ordinaries Index was up 52.76 points or 0.84% to 6,355.68.

Market topside was, however, capped as investors were concerns over the negative implications of the US set to impose tariffs on Chinese imports later in global day that many investors fear might trigger a full-scale trade war in a blow to the global economy.

 

The United States is due to impose the tariffs on Chinese exports on July 6. China's customs department informed markets on Thursday that China's retaliatory tariffs on US goods will take effect immediately after US tariffs on Chinese imports kick in. The Trump administration has levied a 25% tariff on $34 billion in Chinese goods, while the Chinese government has retaliated by announcing tariffs on the same value of U.S. goods.

Shares of materials and resources were major contributed to the index gains, despite base metal prices were mixed on the London Metal Exchange (LME) on Thursday. Shares of energy were higher, despite softer crude oil prices overnight. Crude oil prices fell on Thursday as US crude stockpiles rose by 1.3 million barrels last week according to the US EIA. Markets had a expected a 3.5 million decline. Brent crude fell by US85 cents or 1.1% to US$77.39 a barrel and the US Nymex fell by US$1.20 or 1.6% to US$72.94 a barrel. Base metal prices were mixed on the London Metal Exchange (LME) on Thursday. Zinc (-0.5%) fell to 12-month lows due to higher supply expectations. Lead rose by 1.4%.

Shares in Bluescope Steel (BSL) rose in anticipation of the US Department of Commerce formalising tariffs later today. BSL's operations in America centre around ownership of the North Star steel mill in Ohio, which would benefit from higher prices if tariff increases result in a decline in Chinese imports.

Shares of financials were higher, with top four lenders being notable gainer. ANZ led the big banks' charge, rallying 2% toA $28.99, followed by Commonwealth Bank, up 1.6% to A$75.67, while NAB rose 1.6% to A$27.96 and Westpac gained 0.9% to A$29.78.

Healthcare and industrial stocks declined. Healthcare stocks such as CSL, which have numerous overseas operations, come under pressure from a stronger Australian dollar.

Capilano Honey (CZZ) shares fell on press reports that Coles will no longer stock Allowrie products because the honey is sourced from China and Argentina and the grocer aims to support Australian producers. The same reports cite Woolworths (WOW) saying it would it continue to stock the Allowrie products in its range.

ECONOMIC NEWS: A survey by The Australian Industry Group and Housing Industry Association said that Australian Performance of Construction Index fell by 3.4 points to 50.6 in June. Construction nationally paused into the end of the financial year as residential activity saw apartment building moderate while housing construction remained stable in June. Employment fell in June for the first time in over a year.

Australia construction sector lost momentum in June with a Performance of Construction Index score of 50.6, the latest survey from the Australian Industry Group showed on Friday. That's down from 54.0 in May, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. The index has expanded now in 17 consecutive months.

CURRENCY NEWS: The Australian dollar was higher against greenback a n the back of a rise on Wall Street sparked by reports the US and the European Union may agree to withdraw auto tariffs. The Australian dollar is buying 73.80 US cents.

OFFSHORE MARKET: US share markets were closed higher on Thursday, on reports that the United States and the European Union might agree to drop auto tariffs. The Dow Jones Industrial Average .DJI rose 181.92 points,or 0.75%, to 24,356.74, the S&P 500 .SPX gained 23.39points, or 0.86%, to 2,736.61 and the Nasdaq Composite .IXIC added 83.75 points, or 1.12%, to 7,586.43.

European share markets rose on Thursday amid optimism that U.S. President Donald Trump could hold off on threats to slap tariffs on European cars. The STOXX600 index rose by 0.4%; German Dax rose by 1.2%; UK FTSE index rose 0.4%.

COMMODITY NEWS: Crude oil prices fell on Thursday as US crude stockpiles rose by 1.3 million barrels last week according to the US EIA. Markets had a expected a 3.5 million decline. Brent crude fell by US85 cents or 1.1% to US$77.39 a barrel and the US Nymex fell by US$1.20 or 1.6% to US$72.94 a barrel.

Base metal prices were mixed on the London Metal Exchange (LME) on Thursday. Zinc (-0.5%) fell to 12-month lows due to higher supply expectations. Lead rose by 1.4%.

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