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Global Market Report - 12 August

Lex Hall  |  12 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after a negative lead from overseas at the end of last week including renewed jitters over trade.

The SPI200 futures contract was down 22 points, or 0.34 per cent, at 6,499.0 at 7am Sydney time, suggesting a dip for the benchmark S&P/ASX200 on Monday.

On Friday, the Australian share market finished with modest gains to close out its worst week since November.

The benchmark S&P/ASX200 index closed up 16.3 points, or 0.25 per cent, to 6,584.4 points, while the broader All Ordinaries finished up 21.1 points, or 0.32 per cent, to 6,663.4 points.

On Wall Street on Friday, the Dow Jones Industrial Average finished down 0.34 per cent, the S&P 500 was down 0.66 per cent and the tech-heavy Nasdaq Composite was down 1.0 per cent.

The Aussie dollar is buying 67.84 US cents from 68.16 US cents on Friday.

Asia

China stocks reversed earlier gains to fall on Friday, posting their biggest weekly decline since early May, as weak factory data and lingering trade worries weighed.

The blue-chip CSI300 index fell 1.0 per cent, to 3,633.53, while the Shanghai Composite Index slid 0.7 per cent to 2,774.75.

For the week, CSI300 was down 3 per cent, while SSEC shed 3.2 per cent, both logging their steepest weekly declines in three months.

Hong Kong stocks skid on Friday to post their third straight week of losses, weighed by protests and weak data on the mainland, while Sino-US trade worries lingered.

The Hang Seng index fell 0.7 per cent, to 25,939.30, while the China Enterprises Index lost 0.5 per cent, to 9,993.84.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.21 per cent, while Japan’s Nikkei index closed up 0.44 per cent.

Europe

European shares slid on Friday with Italian stocks 2.5 per cent lower on political uncertainty, while comments by US President Donald Trump that he was not going to make a trade deal with China also weighed on sentiment.

Italy's main index touched a two month low with its bank index tumbling 4.5 per cent after the leader of the ruling League party, Matteo Salvini, pulled his support for the country's governing coalition on Thursday and called for fresh elections.

Italy’s budget crisis and prospect of ultra-low interest rates for longer have already damaged bank stocks’ valuations and the fresh political concerns sent the bank index to its lowest since September 2016.

Italian 10-year government bond yields were set for their biggest weekly rise this year.

Along with drops of more than 1 per cent in most other major indexes, including trade-sensitive German stocks, the pan-European STOXX 600 index gave up 0.8 per cent, in line with a move lower in world stocks.

Trump’s remarks on a trade deal with China followed a report that said Washington was delaying a decision to allow some trade between US firms and China’s telecom equipment maker Huawei again.

This added to worries about an escalation in trade tensions between the world’s two biggest economies, which has seen the STOXX 600 give up 1.7 per cent over the week as investors worry over a prolonged impact on global economic growth.

Sectors most exposed to China and trade issues, such as technology, basic materials and automakers, led losses in Europe along with banks.

However, losses on London's FTSE were limited by a rally in healthcare stocks and a 7.2 per cent surge in advertising company WPP after it reported improved second-quarter trading.

The rise in the healthcare index came after strong results from Hikma Pharma and Carl Zeiss and was also helped by a 2.6 per cent rise in Bayer.

The pound was hit by data showing Britain’s economy experienced a shock contraction in the second quarter in a severe hangover from a pre-Brexit stockpiling boost, boding poorly for Prime Minister Boris Johnson as he gears up to leave the EU in October with or without a departure agreement.

North America

US stocks have fallen following renewed jitters over the US-China trade war, capping a week of trading that saw big swings and high volume.

President Donald Trump said on Friday the US and China were pursuing trade talks but he was not ready to make a deal, fanning fears over the impact of the trade war on the global economy.

Trump also said the US would continue to refrain from doing business with Chinese telecoms equipment giant Huawei Technologies.

The week was marked by wild swings, but indexes finished nearly flat on the week. This week's volume on US exchanges was also the biggest weekly total of the year, exceeding 41 billion shares.

On Friday, all three indexes were down more than 1 per cent in early trading and rebounded later in the session, with the Dow briefly turning positive at one point. This left a 315-point swing between the blue-chip index's high and low of the day.

Shares of chipmakers and other tariff-sensitive technology companies fell, with the Philadelphia SE Semiconductor index down 1.8 per cent.

The Dow Jones Industrial Average on Friday fell 90.75 points, or 0.34 per cent, to 26,287.44; the S&P 500 lost 19.44 points, or 0.66 per cent, to 2,918.65; and the Nasdaq Composite dropped 80.02 points, or 1 per cent, to 7,959.14.

Shares of Amgen jumped 5.9 per cent after news that a US judge said patents relating to the Amgen's blockbuster rheumatoid arthritis drug Enbrel were valid, denying a challenge by Novartis.

Uber Technologies shed 6.8 per cent after the ride-hailing company reported a record $US5.2 billion ($7.7 billion) quarterly loss and revenue that fell short of Wall Street targets.

Nektar Therapeutics shares also plunged, a day after the drug developer flagged manufacturing issues with its experimental cancer drug bempeg.

is content editor for Morningstar Australia

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