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Global Market Report - 18 September

Lex Hall  |  18 Sep 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open slightly higher after a positive lead from Wall Street overnight, including expectations of a Fed interest rate cut.

The SPI200 futures contract was up 9 points, or 0.13 per cent, at 6,703.0 at 8am Sydney time, suggesting an early bounce for the benchmark S&P/ASX200 on Wednesday.

The Australian share market has recovered from a lacklustre start to post gains for a fifth straight day, with every sector up aside from mining and consumer discretionary stocks.

The benchmark S&P/ASX200 index finished Tuesday up 21.8 points, or 0.33 per cent, to 6,695.3 points, while the broader All Ordinaries was up 19.7 points, or 0.29 per cent, to 6,801.7 points.

On Wall Street, the Dow Jones Industrial Average finished up 0.12 per cent, the S&P 500 was up 0.26 per cent and the tech-heavy Nasdaq Composite was up 0.40 per cent.

The US Federal Reserve concludes its two-day policy meeting on Wednesday, where the central bank is expected to lower interest rates by a quarter percentage point, the second rate reduction of the year.

The Aussie dollar is buying 68.68 US cents from 68.33 US cents on Tuesday.

Asia

China stocks fell on Tuesday, after Beijing kept a key money market rate unchanged even as data pointed to downward pressure on the world’s second-largest economy.

The blue-chip CSI300 index fell 1.7 per cent to 3,891.22, while the Shanghai Composite Index also ended down 1.7 per cent at 2,978.12, posting its worst day since 8 July.

In Hong Kong, stocks extended falls after credit rating agency Moody’s downgraded the island city’s outlook.

The Hang Seng index dropped 1.0 per cent, to 26,849.72, while the Hong Kong China Enterprises Index lost 1.0 per cent, to 10,520.42.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.59 per cent, while Japan’s Nikkei index was up 0.02 per cent.

Europe

European stocks closed marginally lower on Tuesday as energy shares gave up a chunk of Monday’s big gains and banks lost steam ahead of a likely interest rate cut from the US Federal Reserve.

The pan-European STOXX 600 index ended about 0.1 per cent lower as investors sought refuge in defensive sectors such as consumer staples and healthcare after the weekend’s attacks on Saudi Arabian oil facilities heightened geopolitical tensions.

Oil & gas sector dropped 0.8 per cent after Reuters reported that Saudi Arabia’s oil output will be fully restored quicker than expected, taking two or three weeks not months as initial indications suggested, according to sources.

The index notched its biggest percentage gain since January on Monday after the Saudi attack disrupted more than 5 per cent of global oil supply.

Worries of an escalation in Middle East conflicts and the impact of a spike in oil prices on global growth cast a pall over investor sentiment.

While the Houthi group, which is fighting a Saudi-led coalition in Yemen, claimed responsibility for the attack, US President Donald Trump blamed Iran. That accusation prompted Iran’s supreme leader on Tuesday to rule out talks with Washington.

Investors were also on the fence ahead of the Fed’s policy meeting, which concludes on Wednesday. The central bank is expected to cut interest rates for the second time this year to prop up slowing economic growth.

The European Central Bank last week cut rates deeper into negative territory and relaunched bond purchases with no scheduled end-date.

Banks slumped the most among the main European subsectors with a 2 per cent drop and Italian banks also fell as much.

The healthcare, utilities, real estate and food and beverage indexes - commonly considered the defensive sectors - posted some of the biggest gains after taking a hit in recent weeks amid a turn to growth stocks.

The Swiss stock index, which includes many dividend-paying companies, gained about 0.5 per cent.

Frankfurt-listed shares ended flat as data from the ZEW institute showed the mood among German investors improved more than expected in September, although warned that the outlook remained negative due to trade disputes and Brexit uncertainty.

Shares in Zalando slumped about 10 per cent after a share placement by top investor Kinnevik in the e-commerce retailer. The broader retail index fell 0.6 per cent.

Swedish garden equipment maker Husqvarna fell 4.3 per cent after it stuck to an operating margin target starting from 2020 as it unveiled new financial goals.

British clothing retailer French Connection slid 13 per cent after the company said it expects the sale process to be concluded by the end of the year, delaying it for the second time.

North America

Wall Street has ended higher as the impact of weekend attacks on Saudi Arabia's biggest oil refinery faded and investors awaited a widely expected Fed interest rate cut.

Stocks closed firmly in positive territory after being mixed for much of the session. That helped make up for a hit to Wall Street on Monday after attacks wiped out nearly half of Saudi Arabia's oil production, sending oil prices soaring and fuelling geopolitical tensions.

The S&P 500 is less than 1 per cent short of its record high close on 26 July.

Investors were calmed after US President Donald Trump said he did not want war and Saudi Arabia said it would restore its lost output by the end of September.

The S&P energy index dipped 1.5 per cent after recording its strongest one-day surge since January on Monday. The so-called defensive consumer staples, utilities and real estate posted some of the biggest gains among the 11 major S&P sectors.

Overall, nine sectors rose on Tuesday, with only energy and industrials ending lower.

The US Federal Reserve concludes its two-day policy meeting on Wednesday, where the central bank is expected to lower interest rates by a quarter percentage point, the second rate reduction of the year.

Investors will also wait for clues on how far the US monetary policy easing would go, given that Fed policymakers are deeply divided on whether more rate cuts are warranted.

The S&P 500 bank index, which tends to underperform in a lower interest rate environment, fell 0.6 per cent.

Economic reports were upbeat, as US manufacturing output increased more than expected in August, while homebuilders' optimism crept up in September.

The Dow Jones Industrial Average edged up 0.12 per cent to end on Tuesday at 27,109.03 points while the S&P 500 gained 0.26 per cent to 3,005.61.

The Nasdaq Composite added 0.4 per cent to 8,186.02.

Among stocks, Chipotle Mexican Grill jumped 3.2 per cent as it added a new steak dish to its menu in the US for the first time in three years.

Home Depot dropped 0.3 per cent after Guggenheim downgraded the home improvement chain's shares to "neutral" from "buy".

Corning slumped 6.1 per cent after the Gorilla glass-maker cut its current-quarter display volume forecast.

Kraft Heinz tumbled 4.3 per cent after the packaged food-maker's second-largest investor, 3G Capital, sold over 25 million shares in open market at a discount.

is content editor for Morningstar Australia

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