ASX Surges Amidst Easing US-Iran Tensions and Optimistic Trade Surplus Data

The Australian benchmark index, S&P/ASX 200 closed the trading session 0.8 per cent higher on 9th January 2020 at 6874.2 points. This was a record high closing level for the index, that surpassed the previous close high of 6863.99 observed in November.

Take a look the top five gainers and losers on the ASX:

The S&P/ASX 200 index followed the gains witnessed by the Wall Street indexes a day before, with the Dow Jones Industrial Average Index closing 0.56 per cent higher at 28,745.09 points, S&P 500 Index ending 0.49 per cent higher at 3,253.05 points and Nasdaq Composite Index concluding the trading session with a rise of 0.67 per cent on 8th January 2020.

What Caused a Surge in the Equity Markets?

The gains in the equity markets occurred after tensions appeared to ease between the US and Iran with the US President, Mr Donald Trump confirming that the US will not retaliate to Iran’s missile attacks on American bases in Iraq.

To recall, Tehran launched ballistic missile strikes at US troops in Iraq’s two military bases on Wednesday, retaliating to the US drone strike that led to the death of Iranian military commander, Mr Qassem Soleimani. Post killing the military commander, US threatened to target 52 Iranian sites if Iran retaliated to the drone strike.

In response to the aggravating tensions between the US and Iran, the gold prices jumped to USD 1,600 per ounce on Wednesday, leading to a sharp rise in share prices of gold stocks. The major gold miners benefitted on Wednesday, including Newcrest Mining Limited (ASX:NCM), Regis Resources Limited (ASX:RRL), OceanaGold Corp (ASX: OGC) and St Barbara Ltd (ASX:SBM).

The Australian stock market fell sharply during the beginning of session on Wednesday after news broke out that Iran has fired ballistic missiles on the US Iraqi military bases. However, the market rebounded strongly in the afternoon after optimistic building approvals data and strong performance of oil and gold stocks.

Against the market expectations, the US President issued a statement to not take any further military action, which eased regional tensions. Also, the missiles fired by Iran produced no causalities and did little damage to the US Iraqi military bases.

Investors’ worries over escalating geopolitical tensions also eased with the Trump’s statements, resulting in a surge in equity markets.

Australia’s November 2019 Trade Surplus Data Supported ASX Gains

In addition to easing Middle East tensions, the trade surplus data recently announced by the ABS supported the gains in the stock exchange on Thursday.

The country recorded a seasonally adjusted trade surplus of $5,800 million in November 2019, which was $1,725 million higher than the trade surplus in October 2019. Market experts were anticipating a trade surplus of $4.1 billion for November 2019.

The country achieved seasonally adjusted trade surplus for the 23rd consecutive month, owing to a rise in exports of coal, iron ore and gas. Also, there was not much effect on the nation’s trade with China and the US despite the long-standing trade war between the two countries.

However, in trend terms, the trade surplus fell by $455 million to $5,392 million in November 2019, relative to October 2019.

The export of goods and services improved by $706 million or 2 per cent to $40,893 million in seasonally adjusted terms in November, driven by gains in both rural goods (increased by $718 million) and non-rural goods (rose by $9 million).

On the other hand, the imports of goods and services dropped by 3 per cent or $1,020 million to $35,093 million in seasonally adjusted terms.

The fall in imports was driven by declines in consumption goods (fell by 7 per cent or $610 million), capital goods (slip by 4 per cent or $259 million) and intermediate and other merchandise goods (plunged by 1 per cent or $102 million).

It seems there has been a good start for the Australian economy in 2020, with the ABS reporting better than expected figures for job vacancies, dwelling approvals and trade surplus. Amidst the existing scenario, it would be interesting to keep a watch on the RBA’s monetary policy decision expected next week.

Also Read Australia’s 2020 Predictions Here


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