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Global Market Report - 12 July

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

The Australian share market is expected to open lower following a mixed session on Wall Street overnight.

At 7am the SPI200 futures contract was down 26 points, or 0.39 per cent, at 6,628.0, suggesting a negative start for the benchmark S&P/ASX200.

The Australian share market rose for a second day yesterday, with gains across the board after US Federal Reserve Chairman Jerome Powell sent a strong signal overnight that the central bank was ready to cut interest rates.

The benchmark S&P/ASX200 index was up 26.3 points, or 0.39 per cent, to 6,716.1 points on Thursday, while the broader All Ordinaries was up 28.1 points, or 0.41 per cent, to 6,805.8.

On Wall Street, the Dow Jones Industrial Average finished up 0.85 per cent, the S&P 500 was up 0.23 per cent and the tech-heavy Nasdaq Composite was down 0.08 per cent.

The Aussie dollar is buying US69.75 cents from US69.74 cents yesterday.

Asia

China stocks ticked up on Thursday as global central banks look poised to ease policies, while concerns about a slowdown in the country’s economic growth weighed on investor sentiment.

At the close, the Shanghai Composite index was up 0.1 per cent at 2,917.76. The blue-chip CSI300 index was flat.

CSI300’s financial sector sub-index was higher by 0.1 per cent, the consumer staples sector fell 0.2 per cent, while the healthcare sub-index eased 0.3 per cent.

The smaller Shenzhen index ended down 0.1 per cent, while the start-up board ChiNext Composite index was higher by 0.2 per cent.

The Hong Kong stock market ended higher on Thursday, tracking gains in broader Asia, after US Federal Reserve Chairman Jerome Powell set the stage for an anticipated interest rate cut later this month.

At the close of trade, the Hang Seng index was up 0.8 per cent at 28,431.80. The Hang Seng China Enterprises index also rose 0.8 per cent.

In Japan, the Nikkei share average ended 0.5 per cent higher at 21,643.53. Japan Post Insurance put the sector under pressure as it dived after admitting mismanagement in handling insurance policies.

Europe

European shares were set to snap four days of losses on Thursday, after US Federal Reserve Chair Jerome Powell’s dovish comments cemented hopes of an interest rate cut this month, even as trade frictions between France and the US rose.

While strong US jobs data last week led investors to trim bets of a 50 basis points rate cut by the Fed in July, Powell’s remarks saw interest rate futures pricing in greater odds of an aggressive rate cut this month.

The pan-European stocks benchmark rose 0.3 per cent on broad-based gains after accumulating losses of 1.4 per cent over the last four sessions. The release of Powell’s prepared remarks had lifted stocks briefly into the positive territory on Wednesday, but they closed lower.

Records from the latest meeting of Fed policymakers showed heightening fears that a US-China trade war was posing a serious risk of ending the economic expansion by pushing growth and inflation lower.

US President Donald Trump on Wednesday ordered an investigation into France’s planned tax on technology companies, a probe that could lead to the US imposing new tariffs or other trade restrictions.

Meanwhile, the European Central Bank is scheduled to release at 1130 GMT minutes of its last meeting when chief Mario Draghi took a sharp dovish stance, pushing stock markets higher.

Data on Thursday showed annual inflation in the euro zone’s biggest economy accelerated in June, but remained below the ECB’s target.

The STOXX 600 has recouped its May losses stemming from a sudden escalation in US-China trade tensions, gaining around 6 per cent since then, largely on expectations that major central banks will adopt a looser monetary policy.

Among stocks, Britain’s Reckitt Benckiser was among the biggest boosts after agreeing to pay up to $1.4 billion to resolve US federal probes in connection with the sales and marketing of an opioid addiction treatment by its former prescription drugs business Indivior.

German pharma firm Gerresheimer AG was the top gainer on the main index, up 8.8 per cent after confirming revenue guidance for the year after posting strong second quarter results.

Energy stocks gained, tracking oil prices that hit six-week highs.

Meanwhile, Swiss stocks underperformed as chemical company Sika slid 4.1 per cent after a UBS downgrade to “sell”, while reinsurance group Swiss Re slipped after suspending plans for a $4.1 billion initial public offering of British life insurer ReAssure.

North America

The Dow and S&P 500 rose on Thursday to close at record highs as health insurers gained after the Trump administration scrapped a plan designed to rein in prescription drug prices, while financial shares climbed with bond yields.

A 5.5 per cent gain in UnitedHealth Group Inc helped the Dow close above 27,000 points for the first time. Cigna Corp surged 9.2 per cent.

The abandoned proposal would have required health insurers to pass on billions of dollars in rebates they receive from drugmakers to Medicare patients.

On the flip side, drugmakers such as Merck & Co Inc and Pfizer Inc dropped following the news, and the Nasdaq biotech index was down 1.5 per cent. Merck ended down 4.5 per cent while Pfizer was down 2.5 per cent. The S&P 500 healthcare index ended flat.

The S&P 500 traded above 3,000 for a second day in a row but again failed to close above that milestone, suggesting investor cautiousness.

Helping to support stocks were the comments from Powell, which supported investor expectations for an interest-rate cut.

In his first day of testimony before Congress on Wednesday, Powell confirmed the US economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war and said the Fed stood ready to “act as appropriate.” Powell testified before the Senate Banking Committee on Thursday.

US benchmark bond yields rose, and the S&P 500 financial index gained 0.6 per cent.

The Dow Jones Industrial Average rose 227.88 points, or 0.85 per cent, to 27,088.08, the S&P 500 .SPX gained 6.84 points, or 0.23 per cent, to 2,999.91 and the Nasdaq Composite dropped 6.49 points, or 0.08 per cent, to 8,196.04.

Iron Mountain slumped after Bank of America Merrill Lynch downgraded the document storage company’s shares to “underperform,” citing recent declines in recycled paper pricing.

A Labor Department report showed US underlying consumer prices rose by the most in nearly 1½ years in June, but that was unlikely to change expectations the Fed would cut rates this month.

is content editor for Morningstar Australia

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