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Global Market Report - 14 August

Lex Hall  |  14 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after a positive lead from Wall Street as the US agreed to delay a 10 per cent tariff on Chinese goods.

The SPI200 futures contract was up 48 points, or 0.74 per cent, at 6,540.0 at 8am Sydney time, suggesting an early bounce for the benchmark S&P/ASX200 on Wednesday.

The Australian share market finished lower yesterday, led by losses in the health care and consumer discretionary sectors.

The benchmark S&P/ASX200 index finished Tuesday down 21.8 points, or 0.33 per cent, to 6,568.5 points, while the broader All Ordinaries was down 22 points, or 0.33 per cent, to 6,648.1 points.

On Wall Street overnight, the Dow Jones Industrial Average finished up 1.44 per cent, the S&P 500 was up 1.47 per cent and the tech-heavy Nasdaq Composite was up 1.95 per cent.

US Trade Representative Robert Lighthizer said his country would delay imposing an additional 10 per cent tariff on Chinese goods including laptops and mobile phones that were set to go into effect from 1 September.

The Aussie dollar is buying 68.00 US cents from 67.61 US cents on Tuesday.

Asia

Chinese shares fell on Tuesday after data showed banks extended fewer-than-expected new loans in July.

The Shanghai Composite index closed down 0.6 per cent at 2,797.26, while the blue-chip CSI300 index ended 0.9 per cent lower.

CSI300’s with financial sector sub-index was lower by 1.4 per cent, the consumer staples sector was down 0.5 per cent, the real estate index fell 1.1 per cent and the healthcare sub-index declined 0.2 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1.3 per cent, while Japan’s Nikkei index closed down 1.1 per cent.

The Hong Kong stock market on Tuesday fell to its lowest level in over seven months, as escalating anti-government protests left the city’s airport in a gridlock on Monday.

At the close of trade, the Hang Seng index was down 2.1 per cent at 25,281.30 points, its lowest level since 4 January.

Europe

European shares staged a comeback from early losses on Tuesday as growth sectors led the charge, after Washington’s move to delay tariffs on some Chinese goods provided a lift to battered global sentiment.

The US administration will delay imposing a 10 per cent tariff on certain Chinese products, including laptops and cell phones, beyond September, the Office of the US Trade Representative said on Tuesday. A separate list also included some imports that would be exempted altogether from tariffs.

That supported a move back to riskier assets after a cocktail of negative drivers had pressured markets for the past few sessions.

Commodity stocks, automakers and tech sectors were among the biggest gainers in Europe, and helped the pan-European STOXX 600 index close up 0.5 per cent, erasing session losses of up to about 0.8 per cent.

But Odeluga doubts the longevity of Tuesday’s rally given recent volatility in markets spurred by recession fears, worsening Hong Kong tensions and a crash in Argentine markets.

Export-reliant Germany's rose 0.6 per cent on the US news, recovering after data showed plunging economic sentiment among German investors. Investors will be closely watching Wednesday's second-quarter economic growth data to see if Europe's biggest economy is headed for recession.

The easing in trade tensions also lifted oil prices which saw energy stocks being among the top gainers on STOXX 600.

Italian shares, troubled by political turmoil, rose more than 1 per cent as banks rose with Monte Dei Paschi up 7.2 per cent.

Right-wing League leader Matteo Salvini’s drive for early elections in Italy hit a road bump on Monday with parliamentary party leaders failing to decide when the Senate should debate his no-confidence motion in the government.

North America

US stocks have closed higher after an announced delay of planned tariffs on some Chinese imports brought buyers back to the equities market in a broad-based rally.

Tech stocks, headed up by Apple, led all three major US indexes into the black following the announcement, which calmed fears over the US-China trade war and growing signs of imminent recession.

Apple, a likely beneficiary of the tariff delay, rose 4.2 per cent on Nasdaq on Tuesday, while the Philadelphia SE Semiconductor Index gained 3 per cent.

In economic news, US consumer prices accelerated in July, with core CPI, which strips out volatile food and energy prices, growing at 2.2 per cent year-on-year, its largest gain in six months and well above the US Federal Reserve's two per cent target.

The healthy inflation reading is unlikely to change market expectations for another interest rate cut from the Fed next month as it grapples with the US-China trade war and its economic fallout.

The spread between two-year and 10-year US Treasuries hit its flattest level in 12 years, reflecting anxieties over trade and geopolitical turmoil. But yields rose across the board on news of the tariff delay.

The Dow Jones Industrial Average rose 372.54 points, or 1.44 per cent, to 26,279.91, the S&P 500 gained 42.48 points, or 1.47 per cent, to 2926.23 and the Nasdaq Composite added 152.95 points, or 1.95 per cent, to 8016.36.

All of the 11 major sectors in the S&P 500 closed in the black, with technology and consumer discretionary seeing the biggest percentage gains.

Toys and footwear were among the Chinese goods temporarily spared from additional tariffs.

Nike rose 2 per cent, while toymakers Hasbro and Mattel advanced 2.7 per cent and 4.6 per cent, respectively.

Facebook pared gains following a Bloomberg report that the social media company had hired outside contractors to transcribe user audio clips, ending up 1.7 per cent.

Shares of CBS and Viacom gained 1.4 per cent and 2.4 per cent respectively after sources told Reuters the companies had reached an agreement in principle regarding their impending merger.

The second-quarter earnings season has reached the final stretch, with 453 of the companies in the S&P 500 having posted results.

Of those, 73.3 per cent beat consensus estimates, according to Refinitiv data.

is content editor for Morningstar Australia

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