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Posted: 2019-01-17 20:49:56

Updated January 18, 2019 08:54:00

Wall Street surged at the eleventh hour on the back of speculation the United States is considering easing billions of dollars worth of tariffs on Chinese imports.

Markets at 8:10am (AEDT):

  • ASX SPI futures +0.5pc at at 5,817, ASX 200 (Thursday's close) +0.3pc at 5,850
  • AUD: 71.9 US cents, 55.37 British pence, 63.1 Euro cents, 78.57 Japanese yen, $NZ1.06
  • US: Dow Jones +0.7pc at 24,370, S&P 500 +0.8pc at 2,636, Nasdaq +0.7pc at 7,084
  • Europe: FTSE 100 -0.4pc at 6,835, DAX -0.1pc at 10,919, CAC -0.3pc at 4,784, Euro Stoxx 50 -0.3pc at 3,069
  • Commodities: Brent crude -0.1pc at $US61.26/barrel, spot gold -0.2pc at $US1,291.96/ounce, iron ore +0.3pc at $US74.55/tonne

US Treasury secretary Steven Mnuchin had discussed rolling some of these tariffs during trade discussions with China, scheduled for January 30, according to a report by the Wall Street Journal, citing people familiar with the internal deliberations.

However, US trade representative Robert Lighthizer has resisted the idea, and the proposal had not yet been introduced to President Donald Trump, according to the Journal.

The Dow Jones index, which had drifted into negative territory, jumped 250 points (around 1 per cent) as its final trading hour began.

But investors quickly tempered their excitement after a Treasury spokesperson told CNBC that Mr Mnuchin had not actually made any such recommendations, causing the industrial-skewed index to lose most of those gains within 15 minutes.

The Dow ended its session 163 points higher, up 0.7 per cent at 24,370.

The tech-heavy Nasdaq index rose 0.7 per cent to 7,084.

The benchmark S&P 500 closed with a 0.8 per cent gain at 2,636. The S&P fell to a 20-month low on Christmas Eve but, after a recent rebound, it is now about 10.5 per cent away from its September 20 record close.

Wall Street was weighed down by financial stocks, particularly Morgan Stanley — which tumbled 4.4 per cent to $US42.53, after the investment bank reported a lower-than-expected quarterly profit.

Netflix shares fell by a steep 2.9 per cent to $US342.98, as it reported mixed results after the closing bell.

The company said it added 8.84 million paid global streaming subscribers in the fourth quarter, falling short of analysts' expectations (9.18 million subscribers).

Its earnings per share came in higher than expected (US30 cents versus the US24 cents expected by Wall Street).

However, Netflix's quarterly revenue of $US4.19 billion was slightly lower than expected (compared to market expectations of $US4.21 billion).

China's record cash injection

Concerns about the Chinese economy appeared to weigh on investor sentiment overnight.

On Wednesday, China's central bank injected a record $116 billion (560 billion yuan) into the nation's banking system — the highest-ever amount recorded in a single day.

The People's Bank of China (PBOC) said the cash injection was aimed at ensuring there are ample funds in the financial system, particularly as tax payments peak in mid-January and demand for cash picks up ahead of the Lunar New Year holidays (starting in early-February).

"The banking system's overall liquidity is falling rapidly," the PBOC said in a statement.

Unexpectedly weak December trade figures released earlier this week by Beijing, along with shrinking factory activity, are stirring speculation over whether more aggressive policy measures are needed to turn the world's second-largest economy around.

"The news is clear — the economy needs help," Trinh Nguyen, senior economist at Natixis, said.

Sizable injections are common this time of year ahead of the long Chinese holiday periods.

But the latest addition was much heftier than usual and follows a large cut in banks' reserve ratios announced this month — which is expected to free up $161 billion for new bank lending.

The first stage, a 50-basis-point cut, came into effect on Tuesday, while an equal-sized cut is scheduled for January 25.

Aussie dollar weakens against pound

The local share market is expected to begin the day with modest gains. ASX futures are indicating a 0.5 per cent rise in early trade.

The Australian dollar had risen by around 0.4 per cent to 71.9 US cents and 63.1 euro cents by 8:10am (AEDT).

However, the dollar fell 0.5 per cent to 55.37 pence. The British pound continues to strengthen as the prospect of the United Kingdom leaving the European Union with a deal by March 29 looks increasingly unlikely.

"So although for now the Australian dollar looks to be driven by offshore events, we think before the end of the month domestic issues will become the focus," Rodrigo Catril, NAB's senior foreign exchange strategist, said.

The Bureau of Statistics will release its latest inflation, or consumer price index (CPI), figures on January 30, and NAB is expecting a weak result.

"And if we are right about a soft CPI, the Australian dollar will struggle to perform in that environment," he said.

Meanwhile, European markets finished trading modestly lower as they were also impacted by ongoing Brexit uncertainty.

London's FTSE and Paris's CAC indices closed 0.3 and 0.4 per cent lower. Frankfurt's DAX finished slightly lower, down 0.1 per cent.

ABC/Reuters

Topics: business-economics-and-finance, markets, stockmarket, currency, australia

First posted January 18, 2019 07:49:56

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