Morning Notes

08/03/2018 Argonaut Morning Note

Market Update & Important Indicators
The Dow Jones Industrial Average fell Wednesday after economic adviser Gary Cohn's resignation from the White House led to renewed concerns over a possible trade war and its impact on global growth. Some investors saw Mr. Cohn's resignation as a sign that President Donald Trump was pushing forward with the steel and aluminium tariffs he announced last week and were worried that protectionist trade policies could spread. Treasury Secretary Steven Mnuchin said in an interview with Fox Business that the White House will move forward with the tariffs. Global trade disruptions could lead to ripple effects for a wide range of commodities and products, some fear, resulting in higher costs for companies and consumers and ultimately slower economic growth. The concerns about trade come after worries about higher interest rates sent the Dow to its worst month in two years in February. The Dow industrials fell 0.3%, erasing some of their gains from earlier in the week. The S&P 500 declined by 1 point, and the Nasdaq Composite was recently up 0.1%. Stocks rose to start the week after prominent members of the Republican party pushed back against the tariffs, fuelling bets that a widespread trade war was unlikely. A number of companies and other countries have also voiced concerns in recent days with full details still yet to be announced and uncertainty surrounding negotiations over the North American Free Trade Agreement. The U.S. gold price traded lower overnight, falling 0.7% to finish at 1324.90 US$/oz.

European shares gained as Wall Street got off to a better start than was promised by futures trading. The Stoxx Europe 600 gained 0.36%, or 1.34 points, to 372.71 as the Dow Jones Industrial Average shrugged off fears of impending trade wars to stand 132 points down in early deals. The DAX rose 1.0% and the CAC-40 gained 0.2%. The UK’s FTSE was 0.2% higher at 7,158.

In Asian trading, Japan's Nikkei Stock Average ended the session down 0.8% with the yen climbing and commodities-related stocks, banks and auto makers sagging. Hong Kong's Hang Seng and the commodities-heavy S&P/ASX 200 in Australia both fell 1%. South Korea's Kospi fell 0.4% as optimism about North Korea being open to talking about giving up its nuclear weapons was offset by worries about global trade.

Australian stocks were among Asia-Pacific's worst performers today as the region reversed yesterday's wide rebound following word of Cohn resigning as Trump's top economic adviser. Down for a 5th day in 6, the S&P/ASX 200 dropped 1% to 5902 as major banks were down by as much as 1.6% and the energy sector retreated 1.4% on falling oil prices. But following the overnight jump in gold prices, Newcrest rose 1.8%.

The London Metal Exchange’s 3-month copper contract traded lower overnight, giving back 0.7% to close at $6,950/t. The other base metals all finished lower. Tin prices closed down 0.3% to 21,442/t, whilst Zinc prices reduced by 1.5% to close at 3,257/t. Aluminium prices dropped 2.5% further to close at 2,076/t. Lead prices were weakest, losing 2.6% to 2,370/t, whilst Nickel prices gave up 0.7% to finish at 13,534/t.

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