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Global Market Report - 17 September

Lex Hall  |  17 Sep 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after a negative lead from Wall St overnight and a spike in crude prices following the attack on oil sites in Saudi Arabia.

The SPI200 futures contract was down 16 points, or 0.24 per cent, at 6,661.0 at 8am Sydney, suggesting an early fall for the benchmark S&P/ASX200 on Tuesday.

The Australian share market traded flat yesterday after the local dollar spiked along with crude prices following an attack on oil facilities in Saudi Arabia.

The benchmark S&P/ASX200 index was down 3.2 points, or 0.05 per cent, to 6,666.0 points at midday on Monday, while the broader All Ordinaries was down 1.6 points, or 0.02 per cent, to 6,775.5 points.

On Wall Street, the Dow Jones Industrial Average finished down 0.52 per cent, the S&P 500 was down 0.31 per cent and the tech-heavy Nasdaq Composite was down 0.28 per cent.

The Aussie dollar is buying 68.64 US cents from 68.73 US cents on Monday.

Asia

China stocks started the week on a soft note, though losses were limited on easing Sino-US trade frictions, while bleak economic data on Monday raised hopes that Beijing will dole out more stimulus to underpin the economy.

The blue-chip CSI300 index ended down 0.4 per cent at 3,957.72, while the Shanghai Composite Index closed flat at 3,030.75.

Hong Kong stocks fell on Monday following clashes and protests over the weekend and as data showed China’s economic slowdown deepened amid a bruising trade war with the US.

The Hang Seng index fell 0.8 per cent, to 27,124.55, while the China Enterprises Index lost 0.6 per cent, to 10,628.25

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.33 per cent.

Europe

Oil and gas companies stood out in a gloomy session for European stock markets on Monday as an attack on Saudi Arabia’s oil facilities thrust crude prices higher, while heightening geopolitical concerns among investors.

The oil & gas index surged 2.8 per cent to log its biggest percentage gain since January 2019, after the weekend’s attack on the world’s largest crude exporter disrupted more than 5 per cent of global oil supply.

Oil prices soared as much as 20 per cent, with Brent crude LCOc1 posting its biggest intraday gain since the 1990-1991 Gulf crisis before easing off its peaks.

That helped energy-heavy Norwegian stocks jump 1.65 per cent, boosted by Equinor and Aker BP, the top gainer on STOXX 600.

Oil majors BP, Shell and Total jumped between 2.5 per cent and 4 per cent, while UK and Irish-based explorer Tullow Oil gained 8.4 per cent after the firm said it plans to drill three or more exploration wells in Guyana.

Most other major European sectoral indexes fell, with shares in Airbus and French luxury goods exporters sliding as the European Union acknowledged it may face US tariffs in a long-running dispute over aircraft subsidies.

Airbus shares dropped 3.4 per cent, while LVMH, Christian Dior and Hermes fell between 2.8 per cent and 4.5 per cent.

The Iran-aligned Houthi group that controls Yemen’s capital claimed responsibility for the attack, although a Saudi-led coalition said on Monday the attacks were carried out with Iranian weapons.

President Donald Trump said Washington was “locked and loaded” to hit back.

Adding to some weak indicators from China last week, industrial production in the world’s second largest economy grew at its weakest pace in 17½ years in August.

The pan-European STOXX 600 index ended down 0.6 per cent, ending a four-day winning streak, while trade-sensitive German shares dropped 0.7 per cent.

The weekend’s events halted a march higher in European stocks, which logged their fourth week of gains on Friday as investors moved back into cyclical sectors amid signs of progress in US-China trade talks.

After the European Central Bank cut rates deeper into negative territory last week and relaunched bond purchases with no scheduled end-date, all eyes are now on the US Federal Reserve’s policy meeting this week.

The central bank is widely expected to ease interest rates and signal further moves.

Travel and leisure stocks dropped 0.6 per cent, dragged down by shares of airlines Ryanair Holdings, Air France KLM and EasyJet on worries of higher fuel costs hurting profits.

Shares in Italian infrastructure group Atlantia slid another 8 per cent after Italy’s tax police said they had found evidence that safety reports for some viaducts operated by Atlantia’s motorway unit had been falsified or information omitted.

North America

Energy stocks have spiked while most of Wall Street fell after weekend attacks on Saudi Arabia's oil facilities added to investors' concerns about geopolitical risk and a stumbling global economy.

The attacks on the world's biggest crude exporter sent oil prices up more than 20 per cent before they eased, as various nations said they would tap emergency reserves to ensure stable supplies.

The S&P 500 energy index, a gauge of one of the worst performing sectors so far this year, soared 3.3 per cent, its largest one-day gain since January.

Shares of Apache, Helmerich and Payne and Cimarex Energy jumped between 12 per cent and 17 per cent and led gainers on the S&P 500.

The Saudi-led military coalition battling Yemen's Houthi movement said the attacks were carried out with Iranian weapons, raising the prospect of a global conflict involving the United States and Iran.

Anticipation of higher fuel costs drove down shares of airlines and cruise line operators with the S&P 1500 airlines index shedding 2.1 per cent, while Carnival fell 3.2 per cent.

The S&P 500 retailing index lost 1.4 per cent, with retailers, which would be hurt by higher fuel prices, among the biggest drags on the S&P 500.

Shares of defence companies Raytheon, Lockheed Martin and Northrop Grumman rose more than 2 per cent. JP Morgan upgraded Raytheon shares to "overweight".

The Dow Jones Industrial Average on Monday fell 0.52 per cent to end at 27,076.82 points while the S&P 500 lost 0.31 per cent to 2,997.96.

The Nasdaq Composite dropped 0.28 per cent to 8,153.54.

Eight of the 11 major S&P sectors were lower.

Wall Street's more than a decade-long rally continues to hinge on whether the Federal Reserve will keep cutting interest rates and progress in US-China trade talks. A recent easing in trade tensions has brought the benchmark S&P 500 about 1 per cent below its record high.

Among other movers, General Motors fell 4.2 per cent after the United Auto Workers went on strike on Sunday, the first nationwide strike at GM in 12 years.

is content editor for Morningstar Australia

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