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Global Market Report - 15 May

Lex Hall  |  15 May 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher following gains on Wall Street overnight as investors welcomed a tonal shift in US-China trade rhetoric.

The SPI200 futures contract was up 25 points, or 0.40 per cent, at 6,251.0 at 7am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Wednesday.

The Australian share market plummeted yesterday after renewed concerns about US-Chinese trade tensions led to large losses on Wall Street overnight.

The benchmark S&P/ASX200 index was down 57.7 points, or 0.92 per cent, to 6,239.9 points, while the broader All Ordinaries was down 54.1 points, or 0.85 per cent, to 6,327.2.

Wall Street bounced back from some of its losses of the previous day, with the Dow Jones Industrial Average up 0.82 per cent, the S&P 500 up 0.80 per cent and the tech-heavy Nasdaq Composite up 1.14 per cent.

US President Donald Trump said he had an “extraordinary” relationship with Chinese President Xi Jinping and trade talks had not yet collapsed. Earlier in the day, China said it agreed to continue talks on trade.

The Aussie dollar is buying 69.43 US cents from 69.76 US cents on Tuesday.

Out today: WBC-MI consumer confidence for May; Wage price index for first quarter.

Asia

Chinese stocks skidded further on Tuesday and the onshore yuan fell to its weakest level of the year as the Sino-US trade war intensified.

Markets managed to claw up from early lows, however, with shares buoyed by suspected state-backed buying and comments from US President Donald Trump that raised hopes the two sides would eventually reach a trade deal.

The Shanghai Composite ended 0.7 per cent lower at 2,883.61 points, while the blue-chip CSI300 eased 0.6  per cent, paring some of their initial losses. Both indexes swung in and out of positive territory during the session.

The Hong Kong stock market, returning from a holiday, ended down 1.5 per cent in its first reaction to the tariff retaliation, as the market was closed on Monday for a holiday.

In Japan, the Nikkei hit a three-month low, ending the day down 0.59 per cent at 21,067.23 after falling to as low as 20,751.45, the lowest since mid-February.

Europe

European shares gained on Tuesday, recovering most of the previous session’s losses amid optimistic comments on trade.

The pan-European STOXX 600 index climbed 1 per cent, lifting off Monday’s two-month low which came after China slapped retaliatory tariffs on US goods, spurring investors into scaling back risky bets as they fled to safer shores.

Trade sensitive European auto and tech stocks bounced 2.2 per cent and 1.2 per cent each, after being caught at the heart of Monday’s selloff, at which point the STOXX 600 had outperformed the S&P 500.

However, the STOXX 600 is down 3.8 per cent this month, set for its biggest monthly loss since December.

Among auto stocks, Ferrari added 3.3 per cent, leading the sector index’s rise. On the other hand, Renault tempered sector gains, falling 2.3 per cent.

The French carmaker’s Japanese partner, Nissan Motor Co, flagged its weakest annual profit in more than a decade.

Banks rose 0.9 per cent, with Commerzbank up 4.3 per cent after Reuters reported UniCredit had stepped up preparations for a potential bid for the German lender.

Unicredit shares fell 1.7 per cent, on a day when Italian banks’ shares were pressured due to their holdings of the country’s sovereign bonds.

Italian cable maker Prysmian and German pharma group Evotec climbed 7.5 per cent and 5 per cent, respectively, on positive earnings updates.

North America

US stocks on Tuesday reclaimed some of the ground lost in the prior day’s steep sell-off, with tariff-sensitive technology stocks leading the S&P 500 and the Nasdaq higher as investors were heartened by a tonal shift in US-China trade rhetoric.

All three major US indexes closed in the black, although they pared gains late in the day and clawed back less than half of Monday’s losses, which were the largest one-day percentage drops in months. The bellwether S&P 500 remains nearly 4 per cent below its all-time high reached two weeks ago.

Investors’ nerves were calmed after US President Donald Trump referred to the escalating trade war with China as “a little squabble,” and added, “We have a good dialogue going.”

Beijing echoed that sentiment. A Chinese Foreign Ministry spokesman told reporters: “My understanding is that China and the United States have agreed to continue pursuing relevant discussions.”

Boeing Co provided the biggest boost to the Dow, rising 1.7 per cent as tariff-vulnerable industrials buoyed the blue chip index.

Ralph Lauren Corp fell 3.7 per cent after the apparel company posted quarterly results that included disappointing North American sales.

Uber Technologies and ride-hailing rival Lyft reversed course after their post-debut slides. Their stocks advanced 7.7 per cent and 4.9 per cent, respectively.

Uber’s shares rose another 6.4 per cent in after-the bell trading after a US labour agency said it had concluded that the company’s drivers were independent contractors, not employees.

Walt Disney Co announced it would take control of Comcast Corp’s Hulu in a move to challenge Netflix and others in the global video streaming war.

Disney stock rose 1.4 per cent, while Comcast gained 1.5 per cent. Netflix edged up 0.1 per cent.

The Dow Jones Industrial Average rose 207.06 points, or 0.82 per cent, to 25,532.05, the S&P 500 gained 22.54 points, or 0.80 per cent, to 2,834.41, and the Nasdaq Composite added 87.47 points, or 1.14 per cent, to 7,734.49.

Of the 11 major sectors of the S&P 500, all but utilities closed in the black. Technology stocks posted the largest percentage gains, climbing 1.6 per cent.

Chipmakers enjoyed a reprieve, with the Philadelphia SE Semiconductor Index rising 2.4 per cent after suffering its worst one-day percentage loss since 3 January.

The first-quarter earnings season is winding down, with 453 of the S&P 500 companies having reported. Of those, 75.3 per cent beat analyst expectations, slightly below the 76 per cent beat rate for the last four quarters.

 

is content editor for Morningstar Australia

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