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Global Market Report - 11 June

Glenn Freeman  |  11 Jun 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after US stocks continued to climb on Monday, boosted by the administration's reversal of plans to impose tariffs on Mexican goods and a small number of multi-billion dollar deals.

The Dow Jones yesterday achieved its longest daily winning streak in more than a year, while the S&P 500's increase of 0.5 marked its fifth successive daily gain. This suggests a positive opening for Australia's benchmark S&P/ASX200 on Tuesday.'

The Australian stock exchange was closed on Monday for the Queen's Birthday public holiday.

On Wall Street, the Dow Jones Industrial Average rose 78.74 points, or 0.3 per cent, the S&P 500 gained 0.47 per cent, to 2,886.73, and the Nasdraq Composite was up 1.05 per cent to 7,823.17.

The Aussie dollar is buying 69.59 US cents from 69.70 US cents on Tuesday.

Asia

China stocks closed higher on Monday, ending a six-session losing streak, as worries over trade tensions eased after an agreement on tariffs was struck between the US and Mexico, and weak data boosted stimulus hopes.

The blue-chip CSI300 index rose 1.3 per cent, to 3,610.74, while the Shanghai Composite Index gained 0.9 per cent to 2,852.13.In Hong Kong on Monday, Hang Seng index futures were up 0.3 per cent and the Hang Seng index was up 2.3 per cent at 27,578.64 points. The China Enterprises Index gained 1.9 per cent to 10,526.92 points.

Around the region, MSCI’s Asia ex-Japan stock index gained by 0.97 per cent, while Japan’s Nikkei index closed up 1.2 per cent.

Europe

European shares rose on Monday largely due to strong China export data, and the US-Mexico deal on trade also provided some relief to markets worried about US President Trump's aggressive trade policies.

The STOXX 600 rose 0.3 per cent, with Britain's FTSE 100 gaining 0.43 per cent – but trading volumes were thin as markets in Germany, Switzerland, Australia and most Nordic countries closed for the Whit Monday holiday.

Stocks of European auto-makers were buoyed by that Fiat Chrysler Automobiles NV and Renault SA were looking for ways to resuscitate their collapsed merger plan and secure the approval of Nissan Motor Co.

Shares of tariff-sensitive auto makers and suppliers were up 0.6 per cent on the news of Trump's scrapping plans for a 5 per cent import tariff on Mexican goods in exchange for moves on immigrations. Fiat Chrysler and Renault were up 3 per cent and 1 per cent.

North America

Wall Street’s three major indexes were up on Monday, reaching their longest daily winning streak in 13 months on news US President Trump had dropped plans to impose a tariff on Mexican goods.

Mexico on Friday agreed to step up efforts to stem the flow of Central American migrants after Washington threatened to impose a 5 per cent import tariff on all Mexican goods starting on Monday.

This left the S&P 500 about 2 per cent higher than its early May record high.

A couple major deals also lifted US markets, including a US$121 billion agreement between United Technologies Corp and Raytheon Co.

Shares of United Technologies, however, dropped 3.1 per cent after President Donald Trump said he was a “little concerned” about the merger as it could reduce competition in the sector. Raytheon rose 0.7 per cent.

Salesforce.com Inc said it would buy data firm Tableau Software for $15.3 billion. Salesforce.com shares fell 5.3 per cent, while those of Tableau surged 33.7 per cent.

US automakers, which have long built vehicles in Mexico, traded higher, with General Motors Co gaining 1.5 per cent. Corona beer maker Constellation Brands, which has significant Mexico exposure, rose 1.9 per cent.

In currency, expectations the Federal Reserve will cut rates kept the dollar on the defensive after a weak jobs report from the US Labor Department.

Non-farm payrolls increased by 75,000 jobs last month, much smaller than the 185,000 additions estimated by economists in a Reuters poll.

Fed funds rate futures prices, down on Monday after the Mexico deal, were still pricing in more than two 25-basis point rate cuts by the end of this year, with one almost fully priced in by July.

The Federal Reserve's next policy meeting is set for next week, on 18-19 June.

is senior editor for Morningstar Australia

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