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Global Market Report - 10 May

Lex Hall  |  10 May 2019Text size  Decrease  Increase  |  
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Australia

Australian shares are expected to open lower after a negative lead from overseas and despite Donald Trump sounding an upbeat note on trade.

The SPI200 futures contract was down 9 points, or 0.14 per cent, at 6,263.0 at 8am Sydney time, suggesting a dip for the benchmark S&P/ASX200 on Friday.

Australian shares have finished higher despite weakness in the mining sector, as investors watch the US-China trade talks for a chance of a deal.

The benchmark S&P/ASX200 index closed up 26.2 points, or 0.42 per cent, to 6,295.3 points, while the broader All Ordinaries was up 25.5 points, or 0.4 per cent, to 6,377.3.

On Wall Street overnight, the Dow Jones Industrial Average was down 0.54 per cent, the S&P 500 was down 0.30 per cent and the tech-heavy Nasdaq Composite was down 0.41 per cent.

US stocks had fallen more than 1 per cent earlier in the session on Thursday but recovered much of those losses after US President Donald Trump said he had received a "beautiful letter" from Chinese President Xi Jinping.

The Reserve Bank of Australia is due to release its quarterly Statement on Monetary Policy at 1130am.

The Aussie dollar is buying 69.90 US cents from 69.78 US cents on Thursday.

Asia

China’s major stock indexes fell on Thursday to close at 11-week lows, as trade tensions escalated.

The blue-chip CSI300 index fell 1.9 per cent, to 3,599.70, while the Shanghai Composite Index declined 1.5 per cent to 2,850.95.

Shares in Hong Kong ended sharply lower on Thursday as investors worried over whether trade negotiators will be able to salvage a trade deal before a looming deadline for fresh US tariff hikes on Chinese goods.

At the close of trade, the Hang Seng index was down 692.13 points or 2.39 per cent at 28,311.07, its lowest close since 8 March. The drop brought losses for the index to 5.9 per cent for the week so far. The Hang Seng China Enterprises index fell 2.27 per cent to 10,845.06.

Around the region, MSCI’s Asia ex-Japan stock index lost 1.62 per cent, while Japan’s Nikkei index closed down 0.93 per cent. 

Europe

European shares dropped broadly on Thursday as investors shunned risky assets while waiting to see whether US and China can avoid a resumption of their trade war, which would damage the global economy.

As the world’s largest economies resume two-day trade talks on Thursday in Washington, investors were on the edge to see if a last-minute truce could avert a sharp increase of tariffs on $200 billion worth of Chinese goods on Friday.

More than seven major sectors lost above 1 per cent. Tariff-sensitive auto stocks slid 1.7 per cent while semiconductor stocks also lost ground.

Dialog Semiconductor’s forecast of a recovery in demand failed to enthuse investors while Intel Corp’s uninspiring full year outlook added to woes.

Shares of luxury goods, heavily exposed to Chinese demand, also sold off with Paris-listed LVMH, Hermes and Gucci owner Kering down between 1.3 and 2.5 per cent.

Losses in bank stocks weighed the most, with results from some of the biggest Italian banks in focus.

Italy’s third largest lender, Banco BPM dropped nearly 6 per cent after a slide in revenues dragged down its profits.

Meanwhile, the country’s biggest bank by assets UniCredit fell even after it reiterated its 2019 targets and posted a net profit above analyst expectations.

Among the biggest decliners were shares of ArcelorMittal after the world’s largest steelmaker cut demand forecast for its key markets and said it was facing the twin challenges of lower steel prices and reduced consumption in Europe.

German wholesaler Metro slid after reporting another quarter of falling sales at its Russian business and its Real hypermarkets, which the company is selling.

Investors sought safety in defensive stocks such as telecom, utilities and real estate which eked out the smallest losses.

Defensive stocks were a bright spot. Italy’s Leonardo and Germany’s Rheinmetall were top performers on STOXX 600 after both companies confirmed their outlook.

North America

Wall Street's main indexes have fallen ahead of critical trade negotiations between the US and China though they pared losses significantly after Trump said reaching a deal this week was possible.

Negotiators will meet at 5pm local time on Thursday, Trump said. They are set to continue talks through Friday.

Still, the US has not backed down from hiking tariffs on $US200 billion ($286 billion) worth of Chinese goods to 25 per cent on Friday. Trump also said that paperwork had been initiated to levy 25 per cent tariffs on a further $US325 billion worth of Chinese goods.

Even with the possibility of further tariffs going into effect, some investors remained optimistic that a trade agreement was within reach.

The Dow Jones Industrial Average on Thursday fell 138.97 points, or 0.54 per cent, to 25,828.36; the S&P 500 lost 8.7 points, or 0.30 per cent, to 2,870.72; and the Nasdaq Composite dropped 32.73 points, or 0.41 per cent, to 7,910.59.

The S&P 500 index briefly slipped below its 50-day moving average, a closely watched indicator of momentum, during the session but ended above that level.

Materials and technology stocks posted the steepest declines among the S&P 500's sectors, dropping 0.8 per cent and 0.7 per cent, respectively.

Shares of chipmakers, which get a large portion of the revenue from China, continued to slide, with the Philadelphia semiconductor index ending 1.2 per cent lower. The index has fallen 6 per cent so far this week and is on pace to post its biggest percentage weekly loss since December.

Chipmaker shares were also pressured by an underwhelming profit growth forecast from Intel; its shares fell 5.3 per cent and were the biggest drag on the S&P 500.

Trade-sensitive industrial bellwethers were also hit, with Boeing shares falling 1 per cent and 3M shares dropping 1.9 per cent.

The CBOE Volatility Index, a gauge of investor anxiety, rose for the fourth consecutive session and is at its highest level in more than three months.

In a bright spot, Tapestry shares jumped 8.5 per cent, the most among S&P companies, after the Coach handbag-maker beat quarterly profit estimates and announced a $US1 billion share buyback plan.

Chevron shares gained 3.1 per cent, providing the biggest boost to the Dow and the S&P 500, after the oil company said it would not raise its $US33 billion offer to buy Anadarko Petroleum.

 

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