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Global Market Report - 14 January

Lex Hall  |  14 Jan 2020Text size  Decrease  Increase  |  
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Australia

Investors are hopeful of a good day trading on the Australian share market after US technology companies gained good results and optimism grew about a US-China trade deal.

At 7am Sydney time the SPI200 futures contract was up 22 points, or 0.32 per cent, to 6863.0 points, as wall Street extended its rally.

The Australian share market yesterday pulled back after breaking through its all-time highs on Friday, with Australia's largest companies dipping the most.

The benchmark S&P/ASX200 index on Monday closed down 25.3 points, or 0.37 per cent, to 6903.7, while the broader All Ordinaries finished down 21.7 points, or 0.31 per cent, to 7020.2 points.

Meanwhile a US-China trade agreement, expected to be signed in Washington on Wednesday, encouraged riskier bets.

Apple and other tech favorites propelled Wall Street to record highs on Monday, fuelled by optimism about the signing of a preliminary US-China trade deal, as well as upcoming fourth-quarter earnings reports.

The Dow Jones Industrial Average rose 0.29 per cent, the S&P 500 gained 0.70 per cent, and the Nasdaq Composite added 1.04 per cent.

The Australian dollar was buying US69.06 cents, up from US69.15 cents at Monday’s close. 

Asia

China’s blue-chip index closed at a near 2-year high on Monday, amid strength in technology shares, as investors turned optimistic ahead of the signing of the phase one trade deal between China and the US.

Aiding sentiment was recent official rhetoric that called for bolstering of China’s capital market to propel its economy. 

The CSI300 index rose 1 per cent, to 4,203.99, the highest close since February 2018. The Shanghai Composite Index gained 0.8 per cent to 3115.57.

Hong Kong stocks closed at an over eight-month high on Monday as optimism ahead of the signing of the trade deal.

The Hang Seng index rose 1.1 per cent to 28,954.94, the highest close since 8 May 2019. The China Enterprises Index gained 1.2 per cent to 11,396.76.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.68 per cent. 

Europe

European shares fell on Monday as carmakers took a hit from a Chinese sales forecast while the London market outperformed after weak economic data raised expectations of a Bank of England rate cut.

Auto stocks broke a four-day winning run to fall 0.9 per cent. Renault led the fall, hitting a six-year low as investors worried that the French company’s 20-year cost-sharing alliance with Nissan could collapse without Carlos Ghosn to hold it together.

The China Association of Automobile Manufacturers earlier reiterated that auto sales are likely to shrink for a third consecutive year in 2020, damaging the outlook for European carmakers in one of their most important markets.

Germany's DAX index, heavy with auto and parts exporters, registered a 0.2 per cent decline as it retreated slightly from the close to two-year high hit in the previous session.

A slide in bank stocks ensured Italy and Spain led losses among regional peers.

After finishing last week up around 0.2 per cent, the benchmark European STOXX 600 index slipped 0.2 per cent to extend losses to a second session despite a rally in global markets.

The index is down 0.3 per cent from record highs last week, when the mood was brightened by easing tensions between Washington and Tehran and the prospect of the US and China signing a phase one trade deal this week.

European markets could also be catching up with a bit of weakness in the US market on Friday, said TS Lombard’s Cicione. US markets fell on Friday after lower than expected December US jobs growth.

Meanwhile, data on Monday showed Britain’s economy grew at its weakest annual pace in more than seven years in November, raising expectations that the Bank of England will cut interest rates this month.

Britain's mid-cap index closed 0.7 per cent up while a dip in the pound supported a rally by internationally focused stocks that helped the blue-chip index to firm by 0.4 per cent. 

Top gainer on the STOXX 600 was utility Pennon Group after it said all options were being considered in response to a report that KKR had made a bid for its waste-management business.

Rating upgrades, meanwhile, pushed up shares of Avast, Tullow Oil, Publicis and BAE Systems. 

North America

Apple, Alphabet and other tech favorites propelled Wall Street to record highs on Monday, fuelled by optimism about the signing of a preliminary US-China trade deal, as well as upcoming fourth-quarter earnings reports.

Apple, Facebook Inc, Netflix Inc, Microsoft Corp and Amazon.com Inc, which have powered the longest bull run in US equities, were among the top contributors to record high closes for the S&P 500 and Nasdaq.

Apple rose 2.14 per cent to close at a record high. Also reaching a record high, Google-owner Alphabet Inc added 0.8 per cent, bringing its market capitalization to $993 billion.

An easing of Middle East tensions and the phase one US-China trade agreement, which is expected to be signed in Washington on Wednesday, have encouraged riskier bets over the last week.

Bloomberg, citing sources, reported that the Trump administration planned to lift its designation of China as a currency manipulator, adding to the positive mood.

Investors are awaiting earnings from big banks JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co, which kick off the fourth-quarter reporting season from Tuesday.

Analysts expect profits at S&P 500 companies to drop 0.6 per cent for a second consecutive quarter, according to Refinitiv IBES data.

Many investors, however, are already looking ahead to a potentially rosier earnings outlook once Washington and China resolve their trade dispute.

The Dow Jones Industrial Average rose 0.29 per cent to end at 28,907.05, while the S&P 500 gained 0.70 per cent to 3288.13, its highest close ever.

The Nasdaq Composite jumped 1.04 per cent to 9273.93, also a record high.

Aerospace companies Hexcel Corp and Woodward Inc jumped 9.6 per cent and 4.8 per cent, respectively, after the two Boeing suppliers said they would combine in an all-stock merger valued at $6.43 billion.

Tesla Inc surged 9.8 per cent to a record high after a report that China would not make significant cuts to subsidies for new energy vehicles this year, while Oppenheimer boosted its price target on the stock.

 

 

is content editor for Morningstar Australia

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