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Fed Minutes show a worry over trade – U.S markets end mixed; Oil surges over 3% after inventories; AUD under pressure as political tensions intensify

Aug 23, 2018 | Market Updates

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Stocks ended lower on Wednesday as Wall Street measured renewed political worries surrounding President Donald Trump against strong corporate earnings. The Dow Jones lost  88 points, the S&P500 flat as energy stocks offset losses in other sectors. Gains from Netflix and Amazon helped the Nasdaq closed 29.92 points higher.

Michael Cohen, Trump’s former personal lawyer, pleaded guilty to eight counts related to tax fraud, campaign contributions, making false statements to a financial institution, and unlawful corporate contributions. Former Trump campaign manager Paul Manafort was found guilty on eight counts in a separate case. – CNBC “I’m not sure investors are going to care,” said Bruce McCain, chief investment strategist at Key Private Bank. “A lot of the conversation this morning is surrounding the fact that what they need to impeach is not there.” “There is going to be a controversy, some uncertainty … but a present it is a nonevent” compared to the other issues the market is dealing with.

The Federal Reserve released minutes they showed central bank officials are concerned that the ongoing trade war is the biggest threat to an otherwise “strong” economy. “It’s a tricky situation for the Fed,” said Anwiti Bahuguna, senior portfolio manager at Columbia Threadneedle Investments. “The trade war is a known issue for the market” but “the Fed knows it can only react to it; they can’t do much about it because it’s not their policy realm.”

Oil surged adding 3.1% post inventories as the data showed much larger than expected drop. The Energy Information Administration reported U.S. crude stocks fell last week by 5.8 million barrels, nearly four times more than analysts expected. USOUSD closed just below $78 after rallying 202 cents. Gold closed flat after starting the day lower only to fight back hitting a $6 rally during the London session. Sellers trimmed gains into the NY session. This morning price $2.80 lower.

Risk traded mixed to the USD overnight the AUD falling due to local instability while the EUR and GBP closed higher to the USD. The USD has rocketed to the Yen tading 56 pips higher from yesterday morning til this morning. The Japanese Yen is mainly weaker to majors but holding to the AUD due to local political issues.

This morning Australian political instability is pressuring the AUD and ASX200, The AUDUSD down 32 pips while the ASX200 is 12 pts lower as PM Malcolm Turnbull looks to be in an untenable position. Peter Dutton’s possible challenge to the Liberal party leadership has been brewing all week but this morning reports are coming out Scott Morrison is also looking at a leadership challenge. Turnbull has also lost further key supporter inside the party. Reports suggest Prime Minister Turnbull is expected to vacate his position as party leader to allow Morrison to nominate against Peter Dutton.

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Sources; CNBC – All times are AEST

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