ASX 200 set for a bumpy ride – U.S. and China are set to sign historic trade deal THIS WEEK

January 13, 2020 - 7 months ago
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It was a wild week for the ASX after news of the death of top Iraqi military leader General Soleimani in a U.S. airstrike sent shockwaves across the global markets.

The local share market is expected to open the week on a softer tone following a retreat on Wall Street in late trade on Friday.

The ASX futures slipped -52 points or -0.8% and finished 6,817 at the close of New York.

U.S. stocks tumbled from their record heights on Friday after a report showed U.S. job hiring was a touch weaker than expected last month.

According to the U.S. Bureau of Labor Statistics, on Friday, the December’s payroll and wage growth missed expectations, with the Non-Farm payrolls adding 145,000 jobs across the country in December, short of the 162,000 that economists forecast, while the unemployment rate remained steady at a 50-year low 3.5%.

In addition to the slow payroll growth, average hourly earnings rose by just 2.9%, below the 3.1% projection. December marked the first time that wage gains were below 3% on a year-over-year basis since July 2018.

With just only seven-full trading days posted, the ASX bulls weren’t missing out on the ‘bullish party’ on Friday, as they happily joined in on Wall Street bullish celebrations, the Australian share market mirrored the three major U.S. stock indices and headed into uncharted territory in the Sydney session on Friday with the posted intraday at a new all-time high of 6,933.20.

With the Middle East tension easing, investors turned their focus on the progress on the trade pact with China, which is due to sign this week, which could again inspire renewed upside interest on the ASX 200.

China’s Vice Premier Liu He, head of the country’s negotiation team in China and U.S. trade talks, will sign the so-called “Phase-One” deal in Washington this week, the commerce ministry said last Thursday.

Gao Feng, a spokesman at the commerce ministry said, Liu, will visit Washington on Jan. 13-15.

Negotiating teams from both sides remain in close communication on the particular arrangements of the signing, Gao told reporters at a regular briefing.

U.S. President Trump said on Dec. 31 that the “Phase-One” deal with China would be signed on Jan. 15 at the White House. Trump also said he would sign the deal with “high-level representatives of China,” and that he would later travel to Beijing to begin talks on the next phase.

Trump cancelled plans to impose tariffs on US$160 billion (S$216 billion) in Chinese merchandise in mid-December – including hot consumer items such as mobile phones – but punishing tariffs remain on about US$250 billion worth of goods, including machinery and many electronic items.

U.S. Trade Representative Robert Lighthizer has said China committed to a minimum of US$200 billion in increased purchases over the next two years from U.S. manufacturers, farmers, energy producers and service providers.

But Gao refused to confirm the figure on Thursday.

Daily outlook on the benchmark S&P/ASX 200

At the close in Sydney on Friday, the benchmark S&P/ASX200 index finished the first full weekly session of 2020 up +54.8 points, or +0.8%, to 6,929 points, while the broader All Ordinaries closed above 7,000 for the first time, finishing up +50.5 points, or +0.72%, at 7,041.9 points.

After a bumpy start to the week, the ASX 200 managed to climb an impressive +186.7-point, or +2.72% gains for the week, to which, by far, is the most substantial weekly gains seen since the ASX displayed back in early February 2019 after surging +200.8-point.

With the help of substantial gains overseas, the benchmark S&P/ASX 200 index, so far, to the start of 2020, is up +239.5 points, or +3.5%, after gaining a whopping +18.38% back in 2019.

The Materials sector rocked in and out of the red, however, eventually fell into negative territory after yesterday’s sharp drop in iron ore which pulled Titans BHP into the bearish trenches and ended to a loss of -0.32% to $39.90, while Fortescue Metals dropped -1.11%, to $10.70. Meanwhile, Rio Tinto managed to escape the loss and gain +0.23%, to $102.43.

After surging nearly to a 7-year peak of $1,611, the precious yellow metal plummeted mid-week, which sent Newcrest on a downward spiral and lost -1.4%, while Northern Star slipped -3.1% with Evolution plunging -6.0% after announcing its quarterly production would be at the lower end of guidance.

All of the “Fab Four” (banks) chalked up a healthy gain, with the Commonwealth Bank rising +1.2% to $82.50, with NAB closing to a gain of +0.4% to $24.93, while Westpac rose +0.7% to $24.65 and ANZ ended up +0.9% to $25.12.

Health care was up the most, gaining +2.1% with blood products giant CSL rising +2.8% to $299.30.

In the consumer sectors, supermarket giants Woolworths added +1.61%, while Coles climbed +2.89%, while Wesfarmers gained +1.4% to an all-time high of $43.90 and JB Hi-Fi advanced +2.2% to $40.94 after the Australian Bureau of Statistics released the retail sales figures for November which crushed the 0.4% forecast and surged to a 0.9% gain, with the previous reading at 0.0%.

The success of November’s Black Friday sales fuelled a better-than-expected retail turnover.

Consumers spent a seasonally adjusted $27.91 billion in November, according to Australian Bureau of Statistics data released on Friday, with department stores and clothing, footwear and personal accessory retailing leading the charge.

Elsewhere, Vocus surged +8.1% to $3.20, while Freedom Foods rose +5.5% after reporting it wasn’t disrupted by the bushfires and Objective Corp rising +5.2% after reporting a +24% rise in first-half profit.

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