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12 July 2018 07:44 AM
Overseas Market ReportCurrent
PreviousChangeDaily %
Monthly %
Dow Jones Industrial Average24,70024,920-219.00-0.88-2.45
S&P 5002,7742,794-20.00-0.71-0.46
FTSE 100 Index7,5927,692-100.00-1.30-1.45
DAX 3012,41712,610-193.00-1.53-3.31
CAC 40 Index5,3545,434-80.00-1.48-1.82
Nikkei 225 (Japan)21,93222,197-265.00-1.19-4.14
SSE Composite Index2,7782,828-50.00-1.76-9.81
S&P/TSX Composite Index16,41716,549-131.00-0.790.79
NZ 508,9679,001-34.00-0.380.09
US Volatility (Vix)14
Overseas Market Report

US sharemarkets traded lower on Wednesday on heightened trade war concerns. The Dow Jones fell by up to 250 points during the session. Shares of industrials' including Boeing (-1.8%), Caterpillar (-3.1%) and Dow DuPont (-2.4%) were a drag on the Dow. The S&P 500 energy (-2.2%) and materials (-1.7%) sectors also fell on global growth concerns. And the Philadelphia semiconductor index fell by 2.6%. Media company Twenty-First Century Fox shares fell by 3.9% after it raised its offer for Sky. The Dow Jones fell by 219 points or 0.9%. The S&P 500 index fell by0.7% and the Nasdaq fell by 42 points or 0.6%.

Global oil prices plunged on Wednesday. The Brent crude oil price fell by the most in two years. Libya's National Oil Company announced that it would re-open its ports closed since late June. OPEC forecast that global demand for oil would decline in 2019 by 760,000 barrels per day to 32.18 million. But EIA data showed US crude inventories fell 12.6 million barrels last week. Brent crude fell by US$5.46 or 6.9% to US$73.40 a barrel and the US Nymex fell by US$3.73 or 5.0% to US$70.38 a barrel.

Base metal prices fell on the London Metal Exchange (LME) on Wednesday. Copper (-3.0%), zinc (-2.6%) and lead (-5.3%) sunk to their lowest levels in around a year as speculators sold down positions as the US-China trade conflict escalated.

The gold futures price fell by US$11.00 an ounce or 0.9% to $1,244.40 an ounce. The spot gold price was trading near US$1,242 an ounce in late US trade. Iron ore fell by US50 cents or 0.8% to US$62.70 a tonne.

PreviousChangeDaily %
Monthly %
Oil Brent73.4078.86-5.46-6.92-4.00
Oil - West Texas crude70.5770.380.190.276.34
Gold Spot $/OZ1,243.001,242.000.800.07-4.11
Silver Spot $/OZ15.8015.800.000.00-6.27
Iron Ore59.2059.100.000.05-4.90
Thermal Coal Newcastle117.90117.500.500.383.10
Coking Coal FOB ECP AUS197.80200.80-3.00-1.49-0.85
Aluminium ($US/t)2,0982,116-19.00-0.90-8.90
Copper Mar-18 ($US/lb)2.732.73-9.50-3.36-16.07
Lead ($US/t)2,1802,303-123.00-5.33-11.31
Nickel ($US/t)13,78514,057-272.00-1.93-9.44
Zinc ($US/t)2,5862,655-69.00-2.60-19.99
Tin ($US/t)19,45619,840-384.00-1.94-8.49
Uranium ($US/lb)23.0023.000.000.65-1.07
Australian Market ReportCurrent
PreviousChangeDaily %
Monthly %
ASX All Ords6,3006,343-43.00-0.672.20
S&P/ASX 2006,2166,258-42.00-0.682.66
ASX 24 Futures6,166
Australian Market Report

Wednesday 12 July - close. The Australian share market and the Aussie dollar have both come under pressure after the US ramped up its trade war with China. US President Trump instructed the US Trade Representative to draft a list of US$200 billion worth of Chinese imports to attract a 10% tariff and China promising retaliation against the latest moves. The benchmark S&P/ASX200 index was down 42.5 points, or 0.68 per cent, at 6,215.6 points, extending Tuesday's 0.44 per cent drop, while the broader All Ordinaries fell 42.6 points, or 0.67 per cent, at 6,300.2 points. 

Ashanti Headlines

US-China trade war. What are the implications for Global Mining & Commodities?

On July 10, the US government announced the list of $200bn imports from China on which it plans to impose 10% tariffs. The USTR stated that the escalation is a modification & extension of the first action (25% tariffs on $50bn of imports) under Section 301, meaning implementation could occur before the end of September. 

China is expected to strongly protest the new US trade actions, but not respond proportionally, partly because China imports only about $150bn from the US. As a result, the expectation is that this escalation becomes reality, but don't see it degenerating soon into an all-out trade war. 

China's response is important. Potential loosening of tight monetary policy may ease credit constraints on local government funded infrastructure projects, boosting domestic demand to partly offset against lower exports. Base metals have borne the brunt of negative sentiment so far, given higher exposure to trade. Bulks have been resilient, reflecting supportive supply side & tight demand and supply. 

We expect to see continued volatility in commodities as the market comes to grips with the on-going trade tensions between the US and China. Despite the noise we remain upbeat around commodities in the medium to long term.

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