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Global Market Report - 12 June

Glenn Freeman  |  12 Jun 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open slightly higher today, with SPI200 futures up 12 points, or 0.18 per cent at 8am, despite Wall Street finishing flat overnight.

While Australia's benchmark S&P/ASX200 was tipped for a positive start today, Wall Street's Dow Jones Industrial Average, S&P500 and Nasdaq composite were yesterday down 0.05 per cent, 0.03 per cent and 0.01 per cent respectively.

The ASX exceeded an 11-year high on Tuesday, cementing Australia's position as one of the top performing share markets of the year so far. Positive investor sentiment was driven by expectations of further RBA rate cuts and fiscal stimulus, which are expected to be positives for both economic growth and company profits.

The S&P/ASX 200 share market index surged 102 points, or 1.6 per cent, to 6546.3 points.

The Aussie dollar is buying 69.62 US cents, from 69.55 US cents on Tuesday.

Asia

China stocks jumped on Tuesday as Beijing eased financing rules to boost local government spending on public works. Market sentiment was also buoyed by expectations of lower central bank rates globally and some signs of easing trade tensions.

The Shanghai Composite climbed 2.6 per cent to 2,925.72 points – its highest since 29 May, while the blue-chip CSI300 index rallied 3 per cent.

In Hong Kong, the Hang Seng Index rose 0.8 per cent to 27,789.34 points and H-shares climbed 0.9 per cent.

Around the region, MSCI's Asia ex-Japan was up 0.9 per cent; Singapore stocks neared one-month closing highs, up 0.67 per cent; and Malaysian stocks dropped 0.3 per cent led down by financials and utilities.

Europe

European shares gained on Tuesday, as German and Swiss investors returning from a one-day holiday drove prices higher.

Germany's carmakers outperformed, as risk appetite held firm after the United States stepped back from imposing tariffs on Mexico. Shares in BMW, Daimler and Volkswagen AS rose 1.6 per cent collectively, lifting the tariff sensitive sector.

The pan-European STOXX 600 climbed 0.62 per cent on Tuesday, on course for a sixth day of gains in the last seven, with Frankfurt's DAX racing up 1.2 per cent as German investors returned from a one-day holiday.

Madrid’s bank-heavy IBEX was a laggard, after Morgan Stanley lowered its earnings estimates for Spanish banks for 2020 and 2021, factoring in a flatter yield curve as a result of the European Central Bank’s swing toward taking new steps to reduce interest rates.

North America

US stocks ended near flat and the Dow has snapped a six-day winning streak, as investors paused following a run of gains and fresh worries emerged over the US trade war with China.

President Donald Trump said on Tuesday he was holding up a trade deal with China and had no interest in moving ahead, unless Beijing agrees to four or five "major points" which he did not specify.

Separately, Trump said he would impose more tariffs on Chinese imports if there was no progress in talks with Chinese President Xi Jinping at the Group of 20 summit later this month.

Stocks were mostly higher in early trading on Tuesday amid lingering optimism over Trump's decision late on Friday to hold off import tariffs on Mexico.

Investors also may be reluctant to push stocks higher without a fresh catalyst for support, some market commentators said.

Data showed US producer prices increased solidly for a second straight month in May, in line with expectations of economists polled by Reuters pointing to a steady pickup in underlying inflation pressures.

Industrials and utilities indexes led the way lower on Tuesday, with the S&P 500 industrial index falling 0.9 per cent, weighed down by losses in United Technologies and Raytheon.

The Dow Jones Industrial Average fell 14.17 points, or 0.05 per cent, to 26,048.51, the S&P 500 lost 1.01 points, or 0.03 per cent, to 2885.72 and the Nasdaq Composite dropped 0.60 points, or 0.01 per cent, to 7822.57.

Recent optimism over trade tensions and the prospect of an interest rate cut by the Federal Reserve had helped stocks rally in recent sessions. The benchmark S&P 500 is just 2 per cent away from its early May all-time high.

The market is betting the Fed will cut interest rates in July and cut two more times this year as Trump's hard bargaining on trade with Beijing and others could push the economy back into recession.

United Technologies fell 4 per cent and Raytheon shed 5.1 per cent, a day after Trump gave mixed signals on whether he believed the $US121 billion merger between the companies should go forward. On Monday, Raytheon edged higher while United Technologies lost 3.1 per cent.

The S&P utilities index on Tuesday was down 0.7 per cent.

is senior editor for Morningstar Australia

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