Australian shares poised for flat open

ASX futures were up 1 point at 8am AEDT, after trading lower earlier. The S&P;/ASX has risen for seven consecutive sessions, advancing 2.6 per cent in that time.

The Australian dollar rebounded 0.6 per cent to retop the US71¢ mark.

The Aussie's advance reflected in part the much stronger than expected Australian retail sales February print (+0.8% vs 0.3% NAB 0.2%) and better than expected trade surplus increasing from $4.4b in January to $4.8b (market: $3.7b; NAB: $3.5b), NAB's Rodrigo Catril said.

There were some unusual moves in the underlying retail sales number suggesting an overstatement in the Department Store Sales (+3.5% m/m against a trend -0.2% in the series) and Food Retailing (+0.8% m/m against a trend of 0.4%), he said: "So we think caution is needed when interpreting the numbers."

"More of the same will be required in order to give the RBA and the market some reassurance that household spending could bounce over the coming months," Mr Catril also said.

"We would also add that data the does little to change the view that household consumption is coming under pressure from house price declines and subdued income growth. Although we have seen a pullback in RBA rate cut expectations in recent days, the markets is still pricing a 25bps rate cut by September this year."

SPI Asset Management's Stephen Innes said both the Aussie and Kiwi dollars have seen "a significant unwind of bearish bets reflecting a case where the market has gotten far too ahead of itself pricing in rate cuts and suggesting both currencies could have plenty of room to play catch with the surging China markets as trade hopes build".
"
The one caveat, however, is the extremely high level of optimism currently baked into China asset markets that could leave latecomers to the party holding the bag on any domestic growth disappointments especially after the latest favourable run of economic data in China," Mr Innes said. \

"But activity in China services sectors is on the rise as government-controlled stimulus is most definitely kicking in and quieting the global economic doom and gloomers at least for the start of the week."

Perhaps also bolstering the currency, the spot price of iron ore retopped $US90 a tonne. Analysts see some short-term bullishness though the medium and longer-terms point to rising global supply and slowing demand for the steelmaking material in China.

On Wall Street, shares closed higher, though off their session peaks. The  S&P; 500 closed in positive territory for a fifth day, equaling the longest winning streak in two months.

A rally among chipmaker shares provided a boost to the broader market on growing hopes of a trade deal between Washington and Beijing.

In New York, Atlassian touched a record high at $US116.70, though it ended the day down 0.2 per cent.

No local data

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Shares of chipmakers, which rely heavily on China for revenue, especially benefited. The Philadelphia Semiconductor index jumped as much as 3% to a record high. The index ended 2.3% higher.

Advanced Micro Devices shares gained 8.5%, the most on the S&P; 500, and Intel shares rose 2.0% after Nomura Instinet started coverage of both the stocks with “buy” ratings.

“It’s the push-and-pull hope of a trade deal versus the stark reality of disappointing economic news,” said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York.

LPL bets on bullish year: "The S&P; 500 was higher each of the first three months of the year for the first time since 2013."

“You may not think so, but when the S&P; 500 has been higher each of the first three months to kick off a year, the returns the rest of the year actually got better,” LPL senior market strategist Ryan Detrick said. “This won’t be an easy ride, and we fully expect some volatility, but this is definitely a bullet point for the bulls in 2019.”

The Institute for Supply Management came out with its US services sector PMI for March, which was below estimates and at its lowest since August 2017.

Earlier, the ADP National Employment Report showed US private employers added 129,000 jobs in March, below economists' estimates.

TD's view on the ADP data and Friday's March jobs report: "The ADP employment report surprised expectations to the downside with a fairly weak showing in March, as private-sector jobs only increased by 129k during the month (vs consensus at 175k). Surprisingly, the prior month's ADP print was revised up 14k to 197k, despite the paltry nonfarm payroll number for February.

"ADP's weak March read was concentrated in goods (-6k) whereas services were firmer at 135k. Given the March disappointment, the report suggests downside risk for the March payrolls report published on Friday."

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Stocks in Europe climbed for a fourth straight session, propped up by positive sentiment about a potential US-China trade deal, hopes of a smoother Brexit and strong economic data in China and the euro zone.

The pan-European STOXX 600 index rose 1 per cent to its highest level in nearly eight months, aided by gains on bourses across the continent.

Positive sentiment was supplemented by data showing retail sales in the Euro zone were stronger than expected in February, while activity in China's services sector hit a 14-month high in March.

"Clearly the market is in a more positive mood," said Elwin de Groot, head of macro strategy at Rabobank.

"At least for the coming months, we are going to see a pickup in growth certainly in the Euro area."

Germany's DAX rose for a fifth straight session. The trade-sensitive index added 1.7 per cent on Wednesday in its best performance in more than half a month.

London's FTSE 100 rose 0.4 per cent, but did not match advances seen on most European bourses as a firmer pound capped gains. The profits of a significant number of the benchmark's firms are dented by a stronger pound due to the companies' reliance on overseas earnings.

Germany's leading economic institutes have revised down their 2019 growth forecast for Europe's biggest economy to 0.8 per cent from a previous estimate of 1.9 per cent, Reuters reported.

The Hang Seng index rose 1.2 per cent to 29,986.39, while the China Enterprises Index gained 1.4 per cent to 11,705.16, its highest close since June 15, 2018.

Activity in China's services sector picked up to a 14-month high in March as demand improved at home and abroad, a private business survey showed on Wednesday, adding to signs that government stimulus policies are gradually kicking in.

The findings were largely in line with those of an official gauge on the non-manufacturing sector released on Sunday, which showed services activity picked up in March as new orders rose more quickly.

China's central bank is expected to cut banks' cash reserve requirements again soon to bolster financial system liquidity as it looks to support the slowing economy, analysts said, as market speculation over another policy move grows.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 1 per cent, while Japan's Nikkei index closed up 1 per cent.

TD on the pound: "Wednesday's service PMIs were broadly positive, but the UK stands out as a downbeat exception as Brexit concerns have started to bite into the sector.

"Developments there may have taken a turn for the better recently, but risks are high and timelines are short. Cable has edged higher, but its tepid reaction suggests any good news is now fully priced. We will need to see further positive developments to push us above 1.3270 at this stage."

Britain still faces an "alarmingly high" risk of a no-deal Brexit, which could happen suddenly and by accident without politicians fully intending it, Bank of England governor Mark Carney warned on Wednesday.

The idea, promoted by some Brexit supporters, that Britain could effectively trade on World Trade Organisation terms with zero tariffs after a no-deal Brexit was "absolute nonsense", Carney added in the interview with broadcaster Sky News.

Carney said that as long ago as August last year, he had described the chance of Britain leaving the European Union without any transition deal as uncomfortably high.

"It's alarmingly high now," he said.

Marex Spectron's Hui Heng Tan on the outlook for ferrous metals: "Short-term supply conditions remain bullish. Tight forward supply remains in place, which along with smaller arrivals into China should support prices.

"Such a sharp decline in arrivals is due to the recent supply disruptions in Brazil and Australia which are filtering into the market. These levels are more significant than those seen during weeks 5-6 2019 when Cyclone Riley struck.

"Although restocking remains lackluster, the rates seem to have stabilised and spot supplies continue to tighten. We expect such weak restocking developments to be transitory as margins rise and mills typically step up production during this time of the year. However, there is still a risk of potential sintering curbs with pollution spikes."

Benchmark copper on the London Metal Exchange (LME) closed up 1 per cent at $US6492 a tonne, near last month's eight-month high of $US6555.50.

Metals prices have been stuck in a narrow range since late February, but strong Chinese purchasing managers' index (PMI) data and positive signals from trade talks are lending support, BMO analyst Kash Kamal said.

"Pessimism is dissipating," he said.

Cash copper on the LME has flipped from a $US70 premium to the three-month contract last month to an $US8 discount, suggesting a supply shortage has eased.

"The overall picture is of a (copper) market in significant surplus and therefore lacking fundamental support in the first quarter of this year," Barclays analysts said in a note, pointing to a build-up in inventories in China that has offset a decline in LME warehouses.

They said however that demand would likely improve, forecasting an average copper price of $US6230 this year and $US6350 in 2020.

Australian shares extended their gains into a seventh straight session on Wednesday as continued market optimism and a positive federal budget helped the market to a more than six-month high.

The S&P;/ASX 200 Index rose 42.6 points, or 0.7 per cent, to 6285 while the broader All Ordinaries advanced to 6368.7, up 40.9 points, or 0.7 per cent.

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