Australian shares to lift on surging oil and metal prices, Wall Street turns cautious

Shares in Oasis Petroleum (NYSE:OAS) Purchased by Two Sigma Advisers LP
April 18, 2018
Corporate earnings boost most stocks, oil surges higher
April 18, 2018

Australian shares to lift on surging oil and metal prices, Wall Street turns cautious

By business reporter David Chau, wires

European stocks closed higher overnight with London’s FTSE rising 1.3 per cent.

Markets at 7:10am (AEST):

  • ASX SPI 200 futures +0.4pc, ASX 200 (Wednesday’s close) +0.3pc at 5,861
  • AUD: 77.82 US cents, 54.76 British pence, 62.86 Euro cents, 83.46 Japanese yen, $NZ1.06
  • US: Dow Jones -0.2pc at 24,748, S&P 500 +0.1pc at 2,709, Nasdaq +0.2pc at 7,295
  • Europe: FTSE +1.3pc at 7,317, DAX flat at 12,591, Euro Stoxx 50 +0.4pc at 3,493
  • Commodities: Brent crude +3.2pc at $US73.85/barrel, spot gold +0.2pc at $US1,348.92/ounce
  • Metals: Iron ore +2.1pc to $US65.88/tonne, aluminium +5.5pc to $US2,537/tonne, copper, +2.1pc to $US7,022/tonne, nickel +7.5pc to $US15,275/tonne

Soaring metals

Some of the best performing stocks in the US overnight were mining companies like BHP (+3.3pc) and Rio Tinto (+4pc), while in the UK, Glencore (+7.7pc) and Anglo American (+6.2pc) outperformed.

They were helped by a boost in commodity prices.

Iron ore and copper each gained 2 per cent, while aluminium (+5.5pc) experienced its biggest price jump in almost seven years.

Also hitting a milestone was nickel (+7.5pc), which had its best day in six years.

“Earnings continue to progress on the positive side and commodities are also on the rise; that should give the markets another boost,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Wall Street slows down

US markets ended their day with a mixed performance following two days of massive gains.

The Dow Jones slipped by 0.2 per cent to 24,748, while the S&P 500 and Nasdaq rose slightly (up 0.1 and 0.2 per cent respectively).

It was IBM that sunk the Dow, as the tech company’s stocks plunged 7.5 per cent after its quarterly profit margins missed Wall Street targets.

Energy was the best performing S&P sector by far (+1.6pc), driven higher by skyrocketing oil prices.

The price of Brent crude leapt 3.1 per cent to $US73.80 a barrel.

Morgan Stanley reported a 40 per cent jump in quarterly profit, driven by its trading business. Despite its share price jumping by 3 per cent, it ultimately closed higher by a more tepid 0.4 per cent.

Robust growth, despite tariff concerns

US stocks bounced around, and dipped after a Federal Reserve report said that robust business borrowing, rising consumer spending and tight labour markets showed the US economy is on track for continued growth, implying higher interest rates.

However, many businesses remain concerned about the Trump administration’s use of tariffs, the Fed said in its “Beige Book” (a report on current economic conditions, sourced from anecdotal information in twelve US districts).

“Contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs,” the Fed said in its report, which covered the period from March to early April.

In fact, the word “tariffs” appeared 36 times in Wednesday’s report after not appearing at all in the previous Beige Book, published in early March.

It was referenced as a factor affecting prices or as a potential concern for the outlook in 10 of the 12 regional banks’ activity summaries.

Bankers continue to be grilled

Mining and energy stocks are expected to post solid gains, boosted by the commodities rally.

Financial stocks may be pressured as the banking royal commission resumes its grilling of Marianne Perkovic, Commonwealth Bank’s head of private banking.

Ms Perkovic was criticised by Commissioner Kenneth Hayne for repeatedly failing to answer questions about CBA’s practice of charging customers fees, despite not providing them with financial services.

Today’s hearing begins at 9:30am (AEDT), and can be followed on ABC’s live blog.

Aussie dollar surges against the UK

In local economic news, the Bureau of Statistics will release its March job figures.

The market is expecting 20,000 new jobs to have been created, and unemployment reducing slightly to 5.5 per cent.

The Australian dollar strengthened against the greenback overnight — nearly reaching 78 US cents, before settling back at 77.8 US cents.

But its biggest gain was against the UK, surging 0.8 per cent to 54.8 British pence. The sterling fell in response to weaker-than-expected British consumer price index figures.

UK core inflation was 2.3 per cent year over year, falling below market expectations of 2.5 per cent. Headline inflation also disappointed at 2.5 per cent (versus estimates of 2.7 per cent).