ASX poised to open higher – The Australian Financial Review

TD Securities sees three scenarios: “35 Conservative MPs against the deal implies something is workable over the near-term. 35 to 100 Conservative rebels indicates some form of deal can be reached by end-March. 100+ rebels could spell doom for the government.”

On Wall Street on Friday, US stocks ended slightly lower, snapping their recent rally. Citigroup kicks off the latest reporting season on Monday. Earnings expectations have been in retreat and investors will be keen to see if the reset in many stock prices better matches the outlook.

BlackRock portfolio manager Russ Koesterich said stocks are “cheap(ish)”.

“My logic is that the last 12 months are best characterised as a rolling bear market. In other words, investors have successively punished various segments, starting earlier in the year with emerging markets.

“Interestingly, it was the most beaten up segments, notably emerging markets and Europe that outperformed during December’s carnage. As such, select EM equities or perhaps European energy companies look particularly cheap and interesting. At the same time, some of the segments investors have been flocking to, notably defensives, still look a long way from cheap.”

Today’s Agenda

Local data: MI inflation December

Overseas data: China December trade data; Euro zone industrial production November

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Market Highlights

SPI futures up 15 points

AUD +0.4% to 72.15 US cents

On Wall St: Dow flat S&P 500 flat Nasdaq -0.5%

In New York, BHP -0.7% Rio -0.2% Atlassian +0.2%

In Europe: Stoxx 50 -0.2% FTSE -0.4% CAC -0.5% DAX -0.3%

Spot gold +0.3% to $US1290.25 an ounce on Friday in New York

Brent crude -2% to $US60.48 a barrel

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US oil -1.9% to $US51.59 a barrel

Iron ore +0.1% to $US73.45 a tonne

Dalian iron ore -0.2% to 507 yuan

LME aluminium -1.3% to $US1836 a tonne

LME copper +0.2% to $US5942 a tonne

2-year yield: US 2.54% Australia 1.83%

5-year yield: US 2.53% Australia 1.98%

10-year yield: US 2.70% Australia 2.30% Germany 0.23%

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US-Australia 10-year yield gap: 40 basis points

From Today’s Financial Review

Banks push APRA on $75b debt burden

Economic ‘storm clouds’ ahead, PM warns

The motley crew picking the 10 best-in-show super funds

United States

Trump border wall: US government shutdown fix a line in the sand for conservatives: Donald Trump is snookered over his signature promise to supporters and is now contemplating an extreme fix to end a near-record government shutdown and fund his border wall.

Wall Street dipped slightly on Friday, breaking a five-session rally, as energy shares declined and investors looked ahead to earnings season, which kicks off next week with Citigroup, JPMorgan and other big banks.

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The S&P 500 on Friday ended down just 0.01 per cent after recovering from a loss of 0.7 per cent earlier in the session.

Citigroup, which will report earnings on Monday, rose 0.4 per cent after agreeing to give shareholder ValueAct Capital more access to its books and board of directors.

JPMorgan Chase & Co, which reports on Tuesday, declined 0.5 per cent. Some bargain hunters are betting on a stronger 2019 for banks after the S&P 500 bank index fell 18.4 per cent in 2018.

Analysts expect S&P 500 companies’ earnings per share to grow by 6.4 per cent this year, compared with 23.5 per cent in 2018, when they were supercharged by newly enacted corporate tax cuts, according to IBES data from Refinitiv.

For the week, the S&P 500 rose 2.5 per cent, the Dow added 2.4 per cent and the Nasdaq picked up 3.4 per cent.

Netflix rose 4 per cent, bringing its gain in 2019 to 26 per cent, helped by analysts’ optimistic forecasts for subscriber growth ahead of its earnings this week.

Europe

European shares closed higher on Friday after hitting one-month highs as investor appetite for assets considered risky remained firm, despite caution over trade and ahead of earnings season.

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The pan-European STOXX 600 ended 0.1 per cent higher on its fourth straight day in the black – its longest winning streak since November.

But Frankfurt, Paris and London all ended in negative territory.

China-sensitive autos and parts suppliers led the falls, down 1 per cent. Valeo dropped 6.4 per cent, the biggest faller on the CAC 40, while Continental and Volkswagen were among the biggest DAX decliners.

Still in the first full trading week of 2019, the STOXX 600 gained 1.7 per cent as investors regained their appetite for risk.

Equity funds drew inflows of $US6.2 billion, the biggest in 11 weeks, BAML said.

Asia

What Chinese consumers want: As a trade war with the United States threatens to upset decades of economic growth and with nationalism on the rise, tastes in the world’s biggest consumer market are changing fast.

Shares in Hong Kong ended higher on Friday on signs of progress in Sino-US trade negotiations and as US Federal Reserve Chairman Jerome Powell reiterated that the Fed would be patient about interest rate hikes.

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At the close of trade, the Hang Seng index was 0.6 per cent higher at 26,667.27 points. The Hang Seng China Enterprises index rose 0.6 per cent to 10,454.95.

US Treasury Secretary Steven Mnuchin said Thursday that Chinese Vice Premier Liu He will “most likely” visit the US capital later in January for trade talks.

China’s main Shanghai Composite index closed up 0.7 per cent at 2553.83 points, while the blue-chip CSI300 index ended up 0.7 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.3 per cent, while Japan’s Nikkei index closed up 1 per cent.

Currencies

The US dollar rose against the euro on Friday, boosted by technical factors after the single currency hit key resistance levels, even as the greenback’s outlook remained bleak amid cautious signals from the Federal Reserve about further rate hikes.

“It seems like we’re getting some model and stop-loss buying on the dollar after the euro hit resistance on the upside,” said John Doyle, vice president of dealing and trading at Tempus Inc in Washington. “The sharpest move was in euro/dollar and it has become this across-the-board buying of the dollar,” he added.

The pound jumped on Friday on growing expectations that Britain will seek to delay its scheduled departure date from the European Union.

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A denial by Prime Minister Theresa May’s spokeswoman of a newspaper report knocked sterling off highs but it remained up on the day, with analysts citing a growing sense among some investors that Britain will not be leaving the EU on March 29.

On Friday sterling rose as much as 0.6 per cent to $US1.2851, its highest since late November, before settling around $US1.28.

“I can see a scenario where we fall to $US1.10 and I can easily see a scenario when we move to $US1.45,” said Fahad Kamal, chief market strategist at Kleinwort Hambros.

“The range is massive and the conviction is little. There’s nobody in the world who would surmise how this will turn out.”

Commodities

Oil prices fell nearly 2 per cent on Friday as investors worried about a global economic slowdown, snapping a nine-day winning streak.

Brent crude futures dropped $US1.2 to settle at $US60.48 a barrel, a 2 per cent loss. US West Texas Intermediate (WTI) crude futures were down $US1 to settle at $US51.59 a barrel, or 1.9 per cent.

Still, both benchmarks saw their second week of gains, with Brent rising about 6 per cent and WTI up about 7.6 per cent.

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Russia has reduced its oil production to 11.38 million barrels per day (bpd) on average on January 1-10 from a record high of 11.45 million bpd last month, a source familiar with the data told Reuters on Friday.

Lower oil exports from Iran since November, when U.S. resumed sanctions against the OPEC producer, have also supported crude.

Copper prices rose on Friday on hopes for a thaw in a trade dispute between Washington and Beijing, as the two sides prepared for more talks to resolve their issues.

US officials expect China’s top trade negotiator to visit Washington this month, signalling that higher-level discussions are likely to follow last week’s talks with mid-level officials in Beijing.

Three-month copper on the London Metal Exchange (LME) ended 0.2 per cent higher at $US5942 per tonne, logging its biggest weekly gain since mid-November.

Aluminium fell 1.3 per cent to $US1836 per tonne, zinc gained 1.3 per cent to $US2492, lead rose 1.3 per cent to $US2002, and tin added 0.8 per cent to close at $US20,300 after touching a six-month high.

Australian Sharemarket

Share market opportunities for active investors: It’s not all doom and gloom, say market watchers, but you’ll need to be strategic about sectors and stocks.

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Future Fund could manage your super: The Morrison government is actively considering allowing a federal institution such as the Future Fund to offer low-fee superannuation accounts.

The S&P/ASX 200 closed down 0.36 per cent on Friday, a loss of 20.7 points taking the index down to 5774.6 points.

This ends the four day winning streak for the index.

The biggest winner of the day was Treasury Wine Estates, up 4.25 per cent.

Regis Resources was the biggest loser, falling 4.25 per cent.

ASX snaps winning streak but up for the week: Retail sales data book-ended a positive week for shares, lifting hopes that the confession season ahead of February’s results will be relatively benign.

Street Talk

Asian buyout bigwig PAG eyes a slice of Retail Food Group

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Healius, Jangho chairmen clear the air, agree to keep talking

Chunky capital concerns over big four banks’ Kiwi arms

with Reuters, Bloomberg, AAP

Comments? Questions? Let us know what you think of Before the Bell: timothy.moore@fairfaxmedia.com.au

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