Morning Notes

11/07/2018 Argonaut Morning Note

Market Update & Important Indicators

U.S. stocks rose Tuesday, putting major indexes on track for their seventh session of gains in the past eight trading days, as investors looked ahead to what is expected to be another strong corporate earnings season. The Dow Jones Industrial Average was up 0.5% in the last hour of trading, while the S&P 500 added 0.3% and the Nasdaq Composite gained less than 0.1%. The blue-chip index had its best day in a month Monday, and all three indexes have climbed in recent sessions, despite uncertainty over trade threats with China. Two sectors that have underperformed this year -- utilities and consumer staples – led the way in the S&P 500. Financials were the only sector in the red. Many investors are looking ahead to the second-quarter earnings season, which unofficially kicks off Friday, when three of the biggest U.S. banks report results. Earnings for companies in the S&P 500 are expected to grow 20% in the second quarter from the year-earlier period, according to FactSet. The first round of tariffs between the U.S. and China went into effect Friday, but U.S. stocks have risen since then as there haven't been signs of escalating tensions yet. The US gold price fell 0.2% to 1,255.0 US$/oz.

European stocks scored a sixth-straight session of gains as traders put aside trade war concerns and instead looked ahead to what is expected to be a positive earnings season. U.K. politics were still in focus a day after two high-profile resignations from the cabinet sparked speculation about a fresh general election. The Stoxx Europe 600 index ended 0.4% higher at 386.25, its highest close since June 15, according to FactSet data. The U.K.'s FTSE 100 index added 0.1%, while France's CAC 40 index gained 0.7%. Germany's DAX 30 index ended up 0.5%.

In Asia, stocks continued to climb even as Chinese data showed an uptick in inflation led by increases in food and fuel prices. Core inflation remained unchanged. China's Shanghai Composite Index rose 0.4% while Hong Kong's Hang Seng was down slightly. Japan's Nikkei rose 0.7% and South Korea's Kospi climbed 0.4%. Shares in Chinese smartphone-maker Xiaomi closed up 13.1% after the company's disappointing market debut Monday.

Stocks in Australia pulled back, continuing to underperform Asia's rebound after benefiting while other markets fell amid trade worries. The S&P/ASX 200 shed 0.4% to 6258.1, ending at session lows. Eating into their recent recovery, the major banks led a broad retreat that saw only commodity stocks log gains. BHP Billiton, in particular, continued to attract buyers. "From a technical perspective, lower volumes to start the week suggest a tired ASX that could be looking for a short-term rest," said IG analyst Kyle Rodda

Base metal prices were mostly down on the London Metal Exchange. The 3-month copper contract lost 1% to 6,321/t while tin finished 0.9% higher at 19,840/t. The price of aluminium declined 1.4% to 2,117/t and nickel recorded a 0.4% decrease to 14,057/t. Zinc lost 2.2% to end at 2,655/t.

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