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Global Market Report - 16 May

Lex Hall  |  16 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 amid reports the US will delay tariffs on imported cars and parts. 

The SPI200 futures contract was up 14 points, or 0.22 per cent, at 6,301.0 at 7am Sydney time, suggesting a positive start for the benchmark S&P/ASX200.

The Australian share market began its rally yesterday, recouping some of the losses from the previous day amid hopes that a deal was still within reach amid the US-China trade war.

The benchmark S&P/ASX200 index closed up 44.3 points, or 0.71 per cent, to 6,284.2 points on Wednesday, while the broader All Ordinaries was up 43.7 points, or 0.69 per cent, to 6,370.9.

US stocks closed higher on Wednesday as reports that US President Donald Trump would hold off on imposing tariffs on imported cars and parts eased growth concerns even as economic data disappointed investors.

Wall Street finished higher, with the Dow Jones Industrial Average up 0.45 per cent, the S&P 500 up 0.58 per cent and the tech-heavy Nasdaq Composite up 1.13 per cent.

The Aussie dollar is buying US69.27 cents, from US69.30 cents yesterday.

Out today: Consumer inflation expectations for May; labour force data for April; RBA assistant governor Michelle Bullock speaks at 12.45pm.

Asia

China’s stock benchmarks rebounded roughly 2 per cent on Wednesday, lifted by consumer shares, as weak industrial output and retail sales data reinforced expectations of fresh stimulus, while a slight softening in rhetoric from Trump eased trade worries.

China’s blue-chip CSI300 index rose 2.3 per cent to 3,727.09, while the Shanghai Composite Index gained 1.9 per cent to 2,938.68.

Growth in industrial output slowed more-than-expected to 5.4 per cent in April from a year earlier, pulling back from a surprising strong 4½-year high of 8.5 per cent in March. Retail sales were also worse-than-expected, with the headline number rising 7.2 per cent, the slowest pace since May 2003.

Hong Kong stocks rebounded to close higher on Wednesday as weak economic data from China reinforced expectations that Beijing will roll out more stimulus, while a slight softening in rhetoric from US President Donald Trump eased trade worries.

The Hang Seng index ended up 0.5 per cent at 28,268.71, while the China Enterprises Index gained 0.4 per cent to 10,804.14 points.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.56 per cent, while Japan’s Nikkei index closed up 0.58 per cent.

Europe

European shares gained on Tuesday, recovering most of the previous session’s losses, as optimistic comments from Washington and Beijing helped soothed investors’ fears about the top two economies’ intensifying trade spat.

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 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.

Germany’s trade-sensitive DAX and London-listed equities tacked on 1 per cent, while French stocks gained 1.5 per cent.

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.

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 and 5 per cent, respectively, on positive earnings updates.

Vodafone slid after a dividend cut, walking back on a pledge to maintain one of the biggest payouts in Britain, so it can build 5G networks and complete its looming acquisition of Liberty Global assets.

North America

All three major US indexes saw their second straight day of gains following Monday’s steep sell-off, but the S&P 500 remained more than 3 per cent below its all-time high reached just over two weeks ago.

The prospect of a six-month postponement of tariffs on imported autos and auto parts, along with Treasury Secretary Steven Mnuchin’s remarks that he expects trade talks to resume soon in China, was welcome news to investors, who started the session in a selling mood after the underwhelming economic reports.

Retail sales posted a surprise drop in April as consumers pulled back on their spending, according to the US Commerce Department. A separate report from the Labor Department showed US industrial production also unexpectedly dipped in April.

The Dow Jones Industrial Average rose 115.97 points, or 0.45 per cent, to 25,648.02, the S&P 500 gained 16.55 points, or 0.58 per cent, to 2,850.96 and the Nasdaq Composite added 87.65 points, or 1.13 per cent, to 7,822.15.

Of the 11 major sectors in the S&P 500, eight ended the session in positive territory, with communications services enjoying the largest percentage gain, led by Alphabet Inc and Facebook.

With 455 of S&P 500 companies having posted results, first-quarter earnings season is winding down. Of those who have reported, 75.2 per cent have bested expectations.

Analysts now see first-quarter earnings growth of 1.2 per cent, a significant turnaround from the 2 per cent loss seen on 1 April.

Macy’s dipped 0.5 per cent after the department store beat quarterly expectations but said the recent tariff hikes on Chinese goods will hurt its furniture business.

Agilent Technologies was the worst performer of the S&P 500, falling 11 per cent after the medical equipment maker reported quarterly profit that fell short of consensus estimates.

Ride-hailing rivals Uber Technologies and Lyft saw their second straight day of gains following their underwhelming post-debut performances. Their shares advanced 3.3 per cent and 7 per cent, respectively.

Cisco Systems shares rose more than 3 per cent in after-market trading following the company’s earnings release.

 

is content editor for Morningstar Australia

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