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Australian shares have ended the week higher thanks to gains in financials and energy stocks, even as Friday's session was buffeted by an earlier slide in the Chinese yuan and concerns over escalating global trade tensions.
The benchmark S&P/ASX 200 index closed up 23.2 points, or 0.37 per cent to 6,285.9 points, while the All Ordinaries index finished the day 22.4 points, or 0.35 per cent, higher at 6,377.4 points.
The S&P/ASX200 finished the week 0.3 per cent higher and is again nearing a new 10-year closing high, after touching above 6,286 points earlier in the month.
A volatile day of trade for the yuan stoked fears that Beijing's currency management could become the next flash point in the trade dispute with the United States.
The Chinese currency managed to bounce in afternoon trade on suspected selling of dollars by state-owned banks.
Investors are keeping a wary eye on the European Union as it readies a set of retaliatory tariffs on US imports. Officials from the EU Trade Commission are due to arrive in Washington next week for trade talks.
"We are seeing our banks being bought as a safety trade coming out of global Asian markets and that's a dominating factor that's supporting our market at this point," said Mathan Somasundaram, a Blue Ocean Equities market portfolio strategist.
Financials, comprising of the benchmark's top constituents, drove the index higher, with Commonwealth Bank up 0.7 per cent at $75.90.
The Australian market has been fairly resilient in the face of intensifying global trade tensions, and has risen over the last few months even as many regional markets took a hit.
Commodity prices came under pressure overnight from fund selling amid concerns the trade dispute between the United States and China will spillover into lower demand for metals.
Bearing the brunt of the weakness in prices, the mining index slid 1.5 per cent, with BHP the biggest drag, falling 2.1 per cent to $32.91.
Gold prices slipped for a sixth session and hovered near a one-year low, as a stronger dollar and rising US interest rates pull investors away from the traditional safe-heaven.
Saracen Mineral Holdings and Northern Star Resources led the losses on Friday, down 3.9 per cent and 1.2 per cent, to $1.99 and $6.86 respectively.
At 1700 AEST the Aussie dollar was at 73.71 US cents, from 73.98 US cents on Thursday, losing ground as investors sold the local unit down on worries about US-China trade tensions and any resultant impact on Chinese economic growth.
ON THE ASX
* The benchmark S&P/ASX 200 index closed up 23.2 points, or 0.4 per cent, at 6,285.9 points
* The broader All Ordinaries index was up 22.4 points, or 0.4 per cent, at 6,377.4 points
* The SPI200 futures contract was up 13 points, or 0.2 per cent, at 6,225 points
CURRENCY SNAPSHOT AT 1700 AEST:
One Australian dollar buys:
* 73.71 US cents, from 73.98 US cents on Wednesday
* 82.81 Japanese yen, from 83.48
* 63.23 euro cents, from 63.66
* 56.59 British pence, from 56.71
* 109.06 NZ cents, from 109.35
GOLD:
The spot price of gold in Sydney at 1700 AEST was $US1,224.36 per fine ounce, from $US1,223.72 per fine ounce on Thursday.
U.S. stocks ended slightly lower on Friday as escalating trade anxieties driven by U.S. President Donald Trump’s latest tariff threats against China offset a string of robust earnings led by Microsoft.
The Dow Jones Industrial Average posted its third consecutive weekly gain, while the S&P 500 also rose for a third straight week after eking out a gain for the period.
Shares of Microsoft Corp (
MSFT.O) hit a record high and ended the session up 1.8 percent on the heels of a strong second-quarter earnings beat. The company narrowed the race with Apple Inc (
AAPL.O) and Amazon.com (
AMZN.O) in the race to be worth $1 trillion in market value.
Trump said he was ready to impose tariffs on all $500 billion of Chinese imports, the latest salvo in a series of protectionist moves that have prompted retaliatory measures from U.S. trading partners around the world.
“I think there’s a divided line on the Street,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York. “One side believes that (the trade dispute) is only going to lead to a global recession, where the other side believes that the president is trying to get the other side to negotiate.”
Trump also repeated his criticism of planned interest rate hikes by the Federal Reserve, writing in a Twitter post that tightening U.S. monetary policy would diminish any U.S. trade advantage.
Long-dated U.S. government bond yields rose on worries that the president’s comments would encourage Fed Chairman Jerome Powell to slow the pace of rate hikes by the U.S. central bank, which could increase inflationary pressure.
“The president can’t control interest rates,” Pavlik said. “He’s not a king. So I think the Street’s reaction to that is a major overreaction.”
As the second-quarter reporting season picks up steam, analyst forecasts have grown rosier. Earnings for S&P 500 companies are now estimated to have grown 22.0 percent in the quarter, compared with the 20.7 percent seen on July 1, according to Thomson Reuters I/B/E/S.
So far, 87 companies of the S&P 500 have posted results, of which 83.9 percent have beat consensus estimates.
The Dow Jones Industrial Average
.DJI fell 6.38 points, or 0.03 percent, to 25,058.12, the S&P 500
.SPX lost 2.66 points, or 0.09 percent, to 2,801.83 and the Nasdaq Composite
.IXIC dropped 5.10 points, or 0.07 percent, to 7,820.20.
Declining issues outnumbered advancing ones on the NYSE by a 1.12-to-1 ratio; on the Nasdaq, a 1.11-to-1 ratio favored decliners.
The S&P 500 posted 21 new 52-week highs and two new lows; the Nasdaq Composite recorded 109 new highs and 38 new lows.
Volume on U.S. exchanges was 6.00 billion shares, compared with the 6.42 billion-share average for the full session over the last 20 trading days.
The Australian share market is tipped for a modest decline upon opening, following weak leads from North America and Europe.
CommSec chief economist Craig James said the futures index was pointing to a loss of 18 points, while a firming Australian dollar would deter foreign investors putting their money to work in the local market.
"We've had some declines across Europe and the United States, so it doesn't set us up really positively," Mr James told AAP on Sunday.
"It's not going to be too negative for the longer-term outlook."
Mr James said the energy sector could provide some assistance to the market, following a lift in crude oil and base metal prices.
"If there's going to be an area of support, it will be the energy and mining sector," he said.
And while ongoing concerns of a trade war between the US and China may be weighing on the global economy, Mr James expects Australia to avoid most of the pain.
"Provided the US and China continue to grow, there is no major concern for us here in Australia," he said.
"In fact, some of their products are getting more expensive with higher tariffs so it could open opportunities here in Australia."
However, Mr James said talk of a full-blown trade war was unsettling for business.
The week ahead is all about prices, Mr James said, with the consumer price index expected to be released on Wednesday before export and import prices.
"It's all about measuring inflation," Mr James said, tipping the rate to hold close to two per cent.
"We're gradually seeing the
inflation rate edging a little bit closer to that two to three per cent target band.
Mr James said he still believes the Reserve Bank would keep interest rates on hold until at least 2019.
Source: Netwealth Morning Business Roundup
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