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  • Australia Stocks mixed amid trade-deal skepticism
  • October 15,2019  09:40
  • Headline indices of the Australian share market were edge higher in lacklusture trade on Tuesday, 15 October 2019, as risk sentiments were subdued amid lack of clarity over the first phase of U.S.-China trade negotiations. Investors Around late afternoon, the benchmark S&P/ASX200 index grew 9.02 points, or 0.14%, to 6,651.60, while the broader All Ordinaries added 5.24 points, or 0.08%, to 6,763.10.

    Investors risk sentiments were subdued amid fading hopes that recent trade negotiations between the United States and China would bear fruit, as China indicated further talks were needed and U.S. Treasury Secretary Steven Mnuchin said the next round of tariffs on Chinese imports are on track to go into effect on Dec. 15 if a deal has not been reached by then.

    Investors were sceptical that an agreement hammered out between the U.S. and China last week would do little to restore business investment or revive manufacturing after the imposition of import tariffs in the past two years disrupted global supply lines and raised input costs. While a rise in U.S. tariffs on Chinese imports due Tuesday was shelved after President Trump announced a partial deal late Friday, no White House decision has been made yet on a planned new 15% tariff set to go into effect on Dec. 15 on about $160 billion in annual Chinese imports. U.S. Treasury Secretary Steven Mnuchin told on Monday that if a deal isn't in place by December, those tariffs will go ahead, but he also said, “I expect we will have a deal.

    As part of the U.S.-China trade deal, the U.S. postponed a planned tariff increase on $250 billion in Chinese imports to 30% from 25%, originally set to take effect Tuesday, in exchange for Chinese promises to buy $40 to $50 billion in American agricultural products annually though that would be double the $24 billion China bought in 2017. The world's two largest economies have imposed tariffs on billions of dollars' worth of one another's goods since the start of 2018, battering financial markets and souring business and consumer sentiment.

    Investors also were eyeing developments in negotiations over Britain's exit from the European Union, after optimism that a deal could be reached rose Friday following productive negotiations between U.K. Prime Minister Boris Johnson and Irish Prime Minister Leo Varadkar on the difficult question of the customs border between Britain's Northern Ireland and the Republic of Ireland.

    Most sectors were mixed, with healthcare, industrials and consumer staples were notable gainers while resources and media sectors were notable losers. Qantas (QAN) was a standout with a jump of 3.2%, buy-now pay-later firm Afterpay Touch was up 2.5%, briefly hitting fresh all-time highs. Telstra (TLS) rose 1.1% as it holds its AGM today.

    The resource sectors were the main constraint on the broader market with some heavy declines for base metal prices and crude oil. Iron ore also saw a fall of more than 1% as investors digest trade developments. Heavyweight miners were leading losses. BHP Group (BHP) was down 1.7%, Fortescue Metals (FMG) was 3.4% weaker and Rio Tinto (RIO) suffered a loss of 1.5%.

    Media stocks were also underperforming. Southern Cross Media (SXL) declined 19% on a trading update where earnings (EBITDA) guidance has been downgraded for FY20 to between A$60 and A$68 million, down 24% on the year before. Nine Entertainment (NEC) was down 5.6% as the company is in the process of finalising its takeover of Macquarie Media (MRN) via its Fairfax subsidiary.

    CURRENCY NEWS: The Australian dollar inclined against greenback on Tuesday, as the Reserve Bank of Australia's October policy meeting minutes were released, where the central bank left the door open for further rate cuts to “reach full employment and achieve the inflation target” over time. The Australian dollar, sensitive to shifts in broader risk appetite, changed hands at $0.6784, climbing from an earlier level of $0.6767.

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