Buffett wades into Japan, NASDAQ hits record high, ASX futures down 58 points

By Trevor Hoey. Published at Sep 1, 2020, in Market Wrap

After being in positive territory for most of Monday, the S&P/ASX 200 index (XJO) fell away in the last hour to close down 13 points at 6061 points.

The big four banks all finished in the red, and given their index weightings that would have been enough to drive the XJO into negative territory.

With most overseas markets falling overnight the ASX could be set to deliver its third consecutive day of losses, and the ASX SPI200 index is certainly pointing in that direction, down 58 points to 5972 points.

24 hours

Japan dominated news in the Asia-Pacific yesterday, and this was largely responsible for the outperformance of its markets with the Nikkei 225 the only major index in that region to finish in the black.

A key development was the announcement by Warren Buffett’s Berkshire Hathaway that it had acquired stakes of at least 5% in five leading Japanese stocks with his investment valued at approximately US$6 billion.

Most of the companies are household names - Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co., and Sumitomo Corp.

They are largely involved in importing a range of commodities into Japan including metals, energy and consumer goods, seemingly a solid strategy given the resource starved country is heavily reliant on imports.

Many in the market would see this as another Buffett masterclass, suggesting we should see further money flowing into Japan.

Meanwhile, the Nikkei 225 gained 257 points or 1.1% to close at 23,139 points.

The Hang Seng and the Shanghai Composite fell 1% and 0.2% respectively, closing at 25,177 points and 3395 points.

The mood was decidedly negative in Europe with the FTSE 100 coming off 36 points to close at 5963 points, a decline of 0.6%.

The DAX also finished down about 0.6% at 12,945 points, while the CAC 40 experienced a stronger sell-off as it closed down 1.1% at 4947 points.

In the US, the S&P 500 finally took a breather as it shed 0.2% to close at 3500 points.

The Dow fell 223 points or 0.8% to 28,430 points, but the ever resilient NASDAQ finished up 80 points despite a significant sell down in the last half hour of trading.

However, this wasn’t before the juggernaut had notched up another record high of 11,829 points.

The Brent Crude Oil Continuous Contract started the day strongly, increasing more than 1% to hit US$46.53 per barrel, but all of these gains plus some were lost in the afternoon before it closed in the vicinity of US$45.50 per barrel.

While gold had a relatively flat day, it consolidated last week’s gain of about US$50 per ounce to finish close to US$1980 per ounce.

Iron ore increased marginally to US$124.50 per tonne.

There was little movement in copper and nickel prices, although the latter is now less than 1% shy of US$7.00 per pound, a level it hasn’t traded at since 2019.

Lead was flat while zinc gained nearly 2% to finish at US$1.15 per pound - it looks increasingly likely to push up to mid-2019 levels of US$1.20 per pound.

The Australian dollar continued to strengthen against the US dollar, falling just shy of US$0.74.

The announcement in the US of fiscal stimulus packages appears imminent, a development that would place downward pressure on the US dollar.

It appears that currency traders have already started to factor in this scenario.

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