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Global Market Report - 1 October

Lex Hall  |  01 Oct 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open flat, or slightly higher, ahead of the central bank’s decision on monetary policy.

At 7am the SPI200 futures contract was up 5 points, or 0.07 per cent, at 6,687.0, suggesting a steady or slightly positive start for the benchmark S&P/ASX200 on Tuesday.

The ASX closed lower yesterday ahead of a possible third cash rate cut by the Reserve Bank, with tech stocks leading losses.

The benchmark S&P/ASX200 index finished Monday down 27.8 points, or 0.41 per cent, to 6,688.3 points, while the broader All Ordinaries was down 23.5 points, or 0.34 per cent, to 6,800.6 points.

On Wall Street overnight, the Dow Jones Industrial Average finished up 0.36 per cent, the S&P 500 was up 0.50 and the tech-heavy Nasdaq Composite was up 0.75 per cent.

The RBA will announce its decision on the cash rate at 2.30pm. The market is priced for a 79 per cent chance of a rate cut of 25 basis points, taking the cash rate to from 1 per cent to 0.75 per cent.

The Aussie dollar is buying US67.49 cents from US67.54 cents on Monday.

Asia

Stocks in mainland China fell to their lowest in almost a month on Monday on news that the US may curb Chinese companies’ access to US capital markets, stoking fears of a major escalation in their year-long trade war.

At close, the Shanghai Composite index was down 0.9 per cent at 2,905.19, its lowest level since Sept. 2, while the blue-chip CSI300 index was down 1 per cent.

Hong Kong shares firmed on Monday, driven by AB InBev’s Asia-Pacific unit which rallied on its debut, but posted their worst quarter in four years as local unrest and Sino-US tariff war show no signs of easing.

The Hang Seng index closed 0.5 per cent higher at 26,092.27 points. The benchmark accumulated losses of 8.6 per cent over the past three months, marking its worst quarterly fall since the third quarter of 2015.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.1 per cent, while Japan’s Nikkei index closed down 0.6 per cent.

Europe

European shares rose on Monday, with a higher open on Wall Street bolstering gains later in the session, while exporters were helped by a decline in the value of the euro.

With Wall Street driven by a rally in iPhone maker Apple, investors seemed to shrug off fresh concerns about US-China trade negotiations and looming US tariffs on European imports.

The benchmark European index closed 0.4 per cent higher and clocked its best monthly gain since June. It rose nearly 2 per cent in the third quarter to bring year-to-date gains to around 16 per cent.

Euro-zone blue-chips rose 0.7 per cent on the day as companies that earn their revenue in dollars were boosted by a fall in the euro on concerns about euro zone growth.

Germany’s leading economic institutes have revised down their growth forecast for Europe’s biggest economy for this year, sources told Reuters on Monday, the same day data showed German annual inflation unexpectedly slowed for the third consecutive month in September.

Germany's DAX index rose for a third session, adding 0.4 per cent.

JPMorgan raised its rating on euro zone equities to “overweight”, saying the bloc’s battered stocks have been under owned and predicting an opportunity for them to bounce back.

Commodity-linked stocks and oil majors closed lower, weighing on London stocks, while all other major sectors in Europe ended higher.

There were, however, signs of underlying worries with defensive sectors such as utilities, real estate and food and beverage among the top gainers.

A report on Friday said the United States might limit Chinese company listings on its stock exchanges, fuelling more US-China trade angst ahead of critical negotiations next week.

However, White House trade adviser Peter Navarro on Monday dismissed reports that the Trump administration was considering delisting Chinese companies from US stock exchanges as “fake news.”

Equity markets rallied in September on monetary easing from the European Central Bank and the US Federal Reserve, and hopes of a resolution to the economically damaging trade war.

But gains have slowed substantially from the 12 per cent increase posted by European shares in the first quarter of the year as concerns linger about the health of the euro zone economy, as well as trade.

All eyes are now on an announcement by the World Trade Organization, which is expected to grant the US a record award allowing it to hit European imports with billions of dollars of tariffs in a long-running aircraft subsidy dispute.

GlaxoSmithKline gained 1.1 per cent after its maintenance therapy for a form of ovarian cancer reduced the risk of disease progression or death.

North America

US stocks climbed on Monday, helped by gains in Apple, Microsoft and Merck & Co, as investors set aside worries about the US-China trade war.

Shares of Apple Inc rose 2.4 per cent after chief executive officer Tim Cook told a German daily that sales of the company’s newest iPhones were off to a strong start, while JP Morgan raised its forecast for shipment volumes. Apple is struggling to reverse shrinking iPhone sales amid tepid global demand for smartphones.

Also helped by a 0.9 per cent rise in Microsoft Corp, the S&P 500 technology index added 1.0 per cent, leading other sectors.

Sentiment on Wall Street got an additional boost after White House trade adviser Peter Navarro dismissed reports that the Trump administration was considering delisting Chinese companies from US stock exchanges as “fake news.”

Concerns related to those reports had sent the S&P 500 and Nasdaq to a more than three-week low on Friday.

US-listed shares of Chinese firms Alibaba Group Holding and Baidu Inc rose 0.8 per cent and 1.5 per cent, respectively.

The next round of high-stakes trade talks between the world’s two largest economies is scheduled for October.

Wall Street’s main indexes are on course to end September with the weakest quarterly performance so far this year, rattled by a host of factors including an escalation in US-China trade tensions, the inversion of an important part of the US yield curve and political turmoil in Washington.

The Dow Jones Industrial Average .DJI rose 0.36 per cent to end at 26,916.83 points, while the S&P 500 gained 0.50 per cent to 2,976.73.

The Nasdaq Composite added 0.75 per cent to 7,999.34.

For the month, the S&P 500 rose 1.7 per cent, the Dow added 2.1 per cent and the Nasdaq gained 0.5 per cent.

For the third quarter, the S&P 500 and Dow moved up 1.2 per cent, while the Nasdaq dipped 0.1 per cent.

Merck & Co Inc gained 1.5 per cent as it presented promising data for its Lynparza cancer drug, which it developed in partnership with Britain’s AstraZeneca PLC.

Newell Brands Inc  jumped 2.9 per cent after SunTrust Robinson Humphrey upgraded the household goods maker to “buy.”

Investors this week will focus on economic reports, including a key jobs report and the September ISM purchasing managers index (PMI). August’s PMI data showed a contraction in the manufacturing sector.

is content editor for Morningstar Australia

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