Wall St. Hits New Highs On Earnings Optimism, Data

Swedish retailer ICA dropped 4.9 per cent after reporting second-quarter earnings which missed expectations and warning a drought could hurt meat supply.

Shares in Dutch marine and engineering company Boskalis fell 3 per cent after it reported first-half earnings that missed estimates due to loss-making transport activities at its offshore energy division.

German pharmaceuticals group Bayer lost another 4.6 per cent, the top DAX faller, taking losses this week to more than 17 per cent after a ruling against subsidiary Monsanto over alleged links between a weedkiller and cancer.

The fresh blow to the stock came from a report in WirtschaftsWoche saying farmers in Arkansas and South Dakota have filed class action lawsuits against Monsanto.


Asian shares hit fresh one-year lows on Thursday, weighed by worries about China's economic slowdown and Turkey's currency crisis, though news of renewed trade talks between Washington and Beijing helped markets trim some of these losses.

In an ongoing dispute with Turkey, which has roiled financial and currency markets, the United States on Wednesday ruled out removing steel tariffs, even if Ankara frees a US pastor, as Qatar pledged $US15 billion in investment to Turkey, supporting a rise in the Turkish lira.

Japan's Nikkei 225 index fell 0.1 per cent to 22,192.04 and the Hang Seng in Hong Kong lost 0.7 per cent to 27,144.46. 

In China, the Shanghai Composite index sank 0.6 per cent to 2,706.01. South Korea's Kospi reopened from a holiday and tumbled 0.8 per cent to 2,240.80. Australia's S&P ASX 200 edged 0.1 per cent lower to 6,323.20. Shares fell in Taiwan and Southeast Asia.

Investors were still digesting the unexpected drop in profits for Chinese tech giant Tencent, which added to recent concerns about the health of China's economy. Tencent, a gaming and messaging company, is the most valuable technology company in China. Jefferies & Co. analyst Karen Chan said Tencent's revenue was also disappointing, mostly because of weak results from its mobile gaming business. Tencent's stock fell 3.2 per cent in Hong Kong.

That knocked other Asian tech firms with South Korea's Samsung Electronics, Asia's third-largest company by market cap, down to a one-year low.

Earlier this week, reports on growth in factory output, consumer spending and retail sales in China were all slower than expected. But there was encouraging news in Beijing's announcement that it 

Turkey's currency fell 2.9 per cent to 5.79 to the US dollar. The country has imposed $US500 million in tariffs on US goods as tensions between the countries increase. There is also no sign that Turkey's president will let the central bank raise interest rates, which economists say it should do urgently to support the currency.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 per cent, after shedding as much as 1.1 per cent to hit its lowest since Aug. 11, 2017.

Japan's Nikkei average closed 0.1 per cent lower in choppy trade, with the benchmark falling as much as 1.5 per cent before a brief swing into positive territory on China news.

The announcement by the Chinese commerce ministry of the planned meeting in late August comes after a lull in talks between the two sides. The last official round of talks was in early June when US Commerce Secretary Wilbur Ross met Chinese Vice Premier Liu He in Beijing.

Despite the modest reprieve, markets remain vulnerable as signs of a slowdown in the Chinese economy and Turkey's volatile currency keep investors on guard.

"The news (of the China-US trade talks) triggered short-covering but I think fundamentally it is of limited significance," said Yasuo Sakuma, chief investment officer at Libra Investments.

Sakuma said Turkey's market swings reflect the fact that it is one of the more vulnerable parts of the global economy at this stage in the interest rate cycle, as the Federal Reserve seeks to normalise its monetary policy.


The US dollar slipped below a 13-1/2 month peak on Thursday, while the Chinese yuan recovered from its weakest level since January 2017 on news of the new bilateral trade talks.

The development between the world's two biggest economies offered hope for investors who have been rattled by tit-for-tat tariffs between Beijing and Washington this summer. Still, doubts persist over whether the talks would help the nations resolve their trade issues.

"I would say I'm very cautious whether this next round of talks would go anywhere," said Kristina Hooper, chief global strategist at Invesco in New York. "But the market is looking for anything to hold on for a kernel of hope." 

The dollar's stalling near its multi-month high came while President Donald Trump praised its recent strength on Thursday, even though he had said a strong greenback puts US exporters at a disadvantage.

"Money is pouring into our cherished DOLLAR like rarely before," Trump tweeted.

Earlier on Thursday, White House economic adviser Larry Kudlow told CNBC television a strong dollar was a sign of confidence. 

The ICE index that tracks the greenback against six major currencies fell as much 0.4 per cent before ending 0.06 per cent lower on the day at 96.637. It reached 96.984 on Wednesday, which was the highest since June 2017.

The yuan in offshore trading gained 1.1 per cent to 6.8714 per $US, rebounding from Wednesday's 6.9587, its weakest level since Jan. 4, 2017, EBS data showed. 

Market optimism was also stoked by a further recovery in the Turkish lira, whose four-day plunge spurred a flight out of other emerging market currencies and touched off a selloff in the euro due to fears about European banks' exposure to Turkey. Turkey's lira rose for a third straight day, gaining 2.4 per cent to 5.8101 after Finance Minister Berat Albayrak's presentation to assure international investors.

The lira reduced its earlier gains after US Treasury Secretary Steven Mnuchin said the United States is prepared to impose more sanctions on Ankara if detained American pastor Andrew Brunson is not released. 

The lira's bounce on Thursday helped boost the Brazilian real and Mexican peso but did little for the Indian rupee and South African rand. The euro was up over 0.1 per cent at $US1.13575, edging up from a 13-month low of $US1.13010 set on Wednesday. German Finance Minister Olaf Scholz told Albayrak on Thursday that Germany has an interest in an economically stable Turkey. 

On Wednesday, Qatar pledged $US15 billion ($20.7 billion) in investments in Turkey, stoking the lira's recovery from a record low. Concerns remain about President Tayyip Erdogan's policies to combat Turkey's double-digit inflation and his row with Washington over the release of Brunson.

The euro recovered on Thursday from its weakest since late June 2017 and the dollar fell after news that a Chinese delegation will meet American officials to discuss trade, with investors buying back into currencies hit hard in the recent sell-off.

Many emerging market currencies also rose, clawing back some of Wednesday's losses thanks to easing fears over the knock-on effects from a slide in the Turkish lira.

"That China and the US are beginning to talk again is supporting the market," said Commerzbank currencies strategist Thu Lan Nguyen. "As the (Turkish) lira did not depreciate further, that has taken out some tension from the market."

She also emphasised that the currency crisis in Turkey is far from over because authorities have yet to tackle the root causes.

The euro rose 0.2 per cent to $US1.1367, away from Wednesday's low of $US1.1301.

China's yuan, which has fallen in recent months on concerns about the impact on its economy of the trade conflict with the United States, gained 0.7 per cent in offshore markets to 6.9005 .

Emerging market currencies bounced across the board, including the South African rand, the Mexican peso and Russian rouble.

Turkey's lira rallied about 3 per cent to 5.7923 before a presentation by Finance Minister Berat Albayrak to investors, but is still down 34 per cent against the dollar this year.

Despite Thursday's calm, analysts remain cautious about the outlook for markets, particularly those outside of the United States that have looked vulnerable whenever investors get nervous.

Simon Derrick, chief currency strategist at BNY Mellon, said "a seeming disconnect between US markets and those elsewhere is becoming increasingly obvious", given the performance of US equities and the dollar in 2018.

"The risk is that the apparent calm in US markets may be giving US investors a false read about how volatile the next few months might prove for global markets," Derrick said.

The yen paused after its recent run, with the dollar gaining 0.1 per cent to 110.84 yen.

Norway's crown fell slightly against the euro after the Norwegian central bank kept interest rates on hold and reiterated it planned to hike in September. It was largely unmoved against the dollar, up 0.6 per cent on the day.


Chinese coke futures surged nearly 4 per cent to their highest in seven years on Thursday amid worries China's push to curb output as part of its anti-pollution campaign would tighten supply of the steelmaking raw material.

The rally in coke - the processed form of coking coal - followed a recent surge in steel prices to six-year peaks. China's smog war has seen its cities restricting industrial production this year, including of steel and coke, ahead of tighter curbs this winter.

The most-traded January coke on the Dalian Commodity Exchange closed up 3.6 per cent at 2,565 yuan ($US371) a tonne, just off the day's peak of 2,567 yuan, its strongest level since August 2011.

Coking coal futures cut intraday losses to end 0.2 per cent lower at 1,264.50 yuan per tonne, after falling as much as 2.4 per cent.

Iron ore closed 2.1 per cent weaker at 493.50 yuan a tonne, but off the day's trough of 482.50 yuan, a two-week low. Construction steel product rebar on the Shanghai Futures Exchange gained 0.2 per cent to 4,163 yuan a tonne.

On Wednesday, spot iron ore for delivery to China's Qingdao port fell 1.2 per cent to $US67.21 a tonne, the lowest since Aug. 2, according to Metal Bulletin.

Oil rose slightly as global markets steadied on Thursday, recovering some of the previous day's 2 per cent slide, though a weakening outlook for crude demand kept prices in check.

The oil market slid on Wednesday as data showing a large build in US inventories fed concern about the fuel demand outlook, while crude was also pressured by broader selling of industrial commodities such as copper.

"There's still an overhang from the report yesterday," said John Kilduff, a partner at Again Capital Management in New York, citing surging imports that boosted inventories despite high refinery run rates.

China and the United States have implemented several rounds of tariffs and threatened further duties on exports worth hundreds of billions of dollars, which could knock global economic growth.

The crisis gripping the Turkish lira has rattled emerging markets and reverberated across equities, bonds and raw materials.

Brent crude oil futures settled 67 cents higher at $US71.43 a barrel, while US crude futures rose 45 cents to $US65.46 a barrel.

Earlier, US crude had hovered around its 200-day moving average of $US65.18 a barrel, an important technical benchmark. Moving below that level could trigger a further surge downward.

"The growth story is now more or less a US growth story. The rest of the world isn't playing along any longer," said Saxo Bank commodities strategist Ole Hansen.

"It also really reflects how the theme in the commodities market has so quickly changed from being one where the worry was about supply, with Iran sanctions for oil or Chilean (miner) strikes for copper, and now the focus is on demand."

On the supply front, US data on Wednesday showed crude output rose by 100,000 barrels per day (bpd) to 10.9 million bpd in the week ending Aug. 10. Crude inventories increased by 6.8 million barrels, representing the largest weekly rise since March last year.

"As the end of the summer driving season approaches, crude oil processing is likely to have peaked and should decrease from now on. Net crude oil imports therefore need to decline steeply so that crude oil stocks do not rise any further," Commerzbank said in a note.

Asian demand is showing signs of slowdown as trade disputes and a stronger dollar drag the economies of some of the world's largest oil buyers.

Gold clawed back from a 19-month low on Thursday on short-covering and as the US dollar softened following news that Beijing will hold trade talks with Washington late this month.

A Chinese delegation led by Vice Minister of Commerce Wang Shouwen will meet with US representatives led by Under Secretary of Treasury for International Affairs David Malpass, the Ministry of Commerce said, offering a glimmer of hope for progress in resolving a conflict that has set world markets on edge.

The news moved the dollar further away from a 13-month peak as risk aversion eased. Spot gold was up 0.1 per cent at $US1175.07 an ounce. US gold futures were, however, down 0.2 per cent at $US1182.1.

Earlier in the session, amid a broad commodity sell-off and some stop-loss selling spot prices fell as much as 1.2 per cent to $US1,159.96, the lowest since January 2017, traders said.

"We expect interest in the precious metal to rekindle as the strength in the USD fades. But that might be a bit of a while yet," said John Sharma, an economist at National Australia Bank.

Gold prices, which have largely been pressured by a strong dollar and rising US interest rates, have shed nearly 10 per cent in 2018.

Meanwhile, spot silver was up 0.7 per cent at $US14.52 an ounce after earlier hitting the lowest since February 2016 at $US14.30.

Platinum was 1.8 per cent higher at $US776.50, after earlier sinking to its lowest since October 2008 at $US751.25.

Australian Sharemarket

The Australian sharemarket shook off a global commodity plunge, closing the day flat despite continued uncertainty in emerging markets. The S&P/ASX 200 index closed just 0.7 points, or less than 0.1 per cent, lower at 6328.3, rallying from a 45 point loss at the open.

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with Reuters, Bloomberg, AAP

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