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Global Market Report - 13 June

Glenn Freeman  |  13 Jun 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open flat as investors wait for the latest unemployment data, while Wall Street was down slightly overnight as banks priced in the rising prospect of a Fed interest rate cut.

Australia's SPI200 futures contract was up 2 points, or 0.03 per cent, at 6,552 at 7am, suggesting a slow start for the benchmark S&P/ASX200 on Thursday.

The ASX closed flat on Wednesday, as concerns over soft local and Chinese data and ongoing uncertainty on US-China tariffs offset sharp gains for miners.

The S&P/ASX 200 index ended flat at 6,543.70, having gained 1.6 per cent on Tuesday.
On Wall Street, the Dow Jones Industrial Average was down 0.17 per cent, the S&P 500 down 0.20 per cent and the tech-heavy Nasdaq Composite down 0.38 per cent.

The Aussie dollar is buying 69.29 US cents, from 69.46 US cents on Wednesday.
Out today: The Australian Bureau of Statistics release jobs numbers for May.

Asia

China stocks ended lower on Wednesday after the previous session’s rally, as weak factory inflation data and prospects of escalating US-China trade tensions damaged investor sentiment.

At the close, the Shanghai Composite Index was down 0.6 per cent to 2,909.38 points, and the blue-chip CSI300 index fell 0.8 per cent, to 3,691.10 points.

In Hong Kong, stocks fell and demand for cash surged as protests over proposed changes to the territory's extradition laws shut down parts of the city.

The benchmark Hang Seng Index fell 1.6 per cent in the morning session, while Chinese companies in Hong Kong slid 1.1 per cent, compared with losses of less than 0.6 per cent in Shanghai and Asia ex-Japan.

Japan's Nikkei share average declined on Wednesday, ending a three-day winning streak largely because of fears of a global slowdown stemming from aggressive US posturing in tariff negotiations with China.

The Nikkei fell 0.4 per cent to 21,129.72, and the broader Topix shed 0.5 per cent to 1,554.22.

Europe

Europe's main markets followed Asia down on Wednesday's earlier trading sessions. London's FTSE, the DAX in Frankfurt and CAC40 Paris were down 0.2 per cent to 0.4 per cent as traders trimmed some of June's 4 per cent gains.

The pan-regional STOXX 600 index fell 0.45 per cent in the morning session, and the tariff-sensitive technology sector was down 0.76 per cent.

London-listed shares of Asia-focused banks Standard Chartered and HSBC dropped in response to the Hong Kong protests.

The biggest faller was Europe’s oil and gas index, down 2.2 per cent, as the commodity’s price took a hit from an unexpected rise in US crude inventories and by a weaker outlook for global demand.

Europe's tech sector was also weighed down by a 1.2 per cent fall in shares of French firm Dassault Systemes after it agreed to buy US software company Medidata Solutions, in a deal worth $5.8 billion.

Chipmakers, which get a huge portion of their revenue from China, fell, with AMS AG and STMicroelectronics declining 3.5 per cent and 1.8 per cent.

Italy’s FTSE MIB fell 0.7 per cent and its banking index dropped 1.5 per cent as the European Union moved closer to taking disciplinary action over the country’s growing debt.

The Turkish lira weakened before a central bank that's expected to leave Turkey's main interest rate unchanged at 24 per cent. In commodity markets, all the chatter of rate cuts kept gold near 14-month highs at $US1,335.51 ($A1,919.34) per ounce.

The euro gained to $US1.1336 ($A1.6292), just short of the recent three-month high of $US1.1347 ($A1.6307).

North America

Wall Street ended down slightly, with bank stocks declining as prospects of a US interest rate cut rose and energy shares tumbled along with oil prices.

The S&P 500 energy index slid 1.4 per cent on Wednesday, the most among the 11 S&P sectors, as demand worries drove US crude prices down four per cent.

The day's losses made energy the worst-performing S&P 500 sector for the year to date.
A report from the Labor Department showed US consumer prices rose 0.1 per cent in May, in line with expectations of economists polled by Reuters, pointing to moderate inflation. This backed the case for a rate cut by the Federal Reserve.

Banking stocks, which tend to benefit from higher interest rates, dropped 1.4 per cent. The broader financial sector fell one per cent.

Still, hopes that the Fed will act to counter a slowing global economy due to the escalating trade war with China have spurred a rally in stocks this month. The S&P 500 index is up 4.6 per cent so far in June.

Fed policymakers will meet on June 18-19, and markets have already priced in at least two rate cuts by the end of 2019.

Fed fund futures imply around an 80 per cent chance of an easing in rates as soon as July.
The Dow Jones Industrial Average fell 43.68 points, or 0.17 per cent, to 26,004.83, the S&P 500 lost 5.88 points, or 0.2 per cent, to 2879.84 and the Nasdaq Composite dropped 29.85 points, or 0.38 per cent, to 7792.72.

S&P 500 utilities, which are positively affected by falling rates, was the day's best-performing sector, rising 1.3 per cent.

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. He said interest rates were "way too high" and the Federal Reserve had "no clue".

Less than three weeks before proposed talks between the US and Chinese leaders, sources say there has been little preparation.

Trump said a deal could be reached, but again threatened to increase tariffs on Chinese goods unless that happens.

Semiconductor stocks, which get sizeable revenue from China, declined on Wednesday. The Philadelphia Semiconductor index dropped 2.3 per cent. Micron Technology, Applied Materials and Lam Research dropped more than five per cent each.

Facebook shares declined 1.7 per cent after the Wall Street Journal reported the social media giant uncovered emails possibly connecting chief executive Mark Zuckerberg to potentially problematic privacy practices.

With trade tensions rising, US growth slowing and hiring in May declining, markets have priced in at least two rate cuts by the end of 2019. Futures imply around an 80 per cent chance of an easing as soon as July.

Trump also alarmed currency markets by tweeting that the euro and other currencies were "devalued" against the dollar, putting the United States at a "big disadvantage".

is senior editor for Morningstar Australia

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