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Global Market Report - 19 June

Glenn Freeman  |  19 Jun 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher, after a positive lead from Wall Street following indications of easing Chinese-US trade tensions.

The SPI200 futures contract was up 39 points, or 0.59 per cent, at 6,614 at 8am Sydney time, suggesting an early bounce for the benchmark S&P/ASX200 on Wednesday.

US markets finished higher overnight after US President Donald Trump said he would meet with Chinese President Xi Jinping at the G20 summit this month.

In Australia, the S&P/ASX 200 yesterday closed at a fresh high of 6,572.5, up 43 points, or 0.6 per cent, from 6529.30 at the open. The broader All Ordinaries index finished up 39 points, or 0.58 per cent, to 6,647.93.

On Wall Street, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were each up, by 1.35 per cent to, 0.97 per cent and 1.39 per cent, respectively.

The Aussie dollar is buying 68.76 US cents from 68.39 US cents on Tuesday.

Out today: RBA head of financial stability, Jonathan Kearns delivers a speech; ABS dwelling prices for Q1 2019 and RBA board meeting minutes.

Asia

China stocks inched higher on Tuesday in thin trade as market participants exercised caution ahead of the US Federal Reserve’s two-day policy meeting.

The Shanghai Composite index was up 0.1 per cent, closing at 2,890.16, while the blue-chip CSI300 ended 0.4 per cent higher at 3,667.62 points.

Hong Kong stocks closed higher on Tuesday, extending a rally from the previous session, aided by strong inflows from the mainland as the protests subsided.

The Hang Seng index ended up 1 per cent at 27,498.77 points, while the China Enterprises Index closed 0.8 per cent higher at 10,507.65 points.

Hong Kong leader Carrie Lam said she had heard the people "loud and clear" and apologised again for the recent upheaval, after a proposed change to extradition laws prompted some of the most violent protests the city has seen.

Elsewhere in the region, MSCI’s Asia ex-Japan stock index was firmer by 0.56 per cent, while Japan’s Nikkei index closed down 0.72 per cent to 20,972.71 – its lowest close since 7 June. The broader Topix also dropped 0.7 per cent to 1,528.67.

Europe

European stocks hit six-week highs on Tuesday, boosted by dovish remarks from European Central Bank chief Mario Draghi along with news that the US and China would resume trade talks at the G20 summit.

The pan-European STOXX 600 index closed 1.8 per cent higher, after having fallen as much as 0.5 per cent earlier in the day, but rose to its best day in five months at the close.

Italy’s FTMIB, France’s CAC 40 and Germany’s DAX climbed more than 2 per cent, while most others ended more than 1 per cent higher.

Draghi suggested there may be new rate cuts or asset purchases if inflation did not head back to its targets. His comments weakened the euro, lowered European bond yields to fresh lows and helped stock markets climb globally.

Eurozone stocks jumped most markedly, up 2 per cent as the lower currency benefited exporters in the economic zone.

More positive sentiment stemming from news that Washington and Beijing would resume trade talks later this month bumped up trade-sensitive auto shares and basic resources stocks. Bond-proxy utilities stocks gained 2.3 per cent yesterday.

However, German chipmaker Siltronic fell 7.8 per cent after issuing a second profit warning in two months, following closely from US chipmaker Broadcom's shock announcement of a $2 billion drop in sales for 201

Other European chipmakers STMicroelectronics, ASM International and ASML Holding, which were pressured by Siltronic’s results earlier, recovered losses to trade higher, pinning hopes on a positive outcome from the G20 summit.

North America

Wall Street has surged and the S&P 500 approached a record high after Washington rekindled trade talks with Beijing, boosting sentiment along with growing investor confidence that the Fed will cut interest rates this year.

US President Donald Trump on Tuesday said he would meet with Chinese President Xi Jinping at the G20 summit later this month, and said talks between the two countries would restart after a recent lull.

Trump’s statement pushed trade-sensitive industrials up 1.9 per cent and technology stocks gained 1.7 per cent – combining as the biggest boost to the S&P500 index.

The benchmark index was up 0.97 per cent to 2,917.75 at the close, and the Dow Jones Industrial average jumped 1.35 per cent to end at 26,465.54 points.

The Nasdaq Composite was up 108 points, or 1.39 per cent, to 7,953.88 at the close.
Chip companies, which have a sizeable revenue exposure to China, led the rally in tech stocks, with the Philadelphia Semiconductor index surging 4.3 per cent.

The US-China trade war and its impact on economic growth have investors increasingly expecting the Federal Reserve will cut rates to preserve the US economic expansion, which would be the longest on record this summer.

The Fed is widely expected to leave interest rates unchanged at its two-day policy meeting that ends Wednesday, while laying the foundation for a cut later this year.

The Fed is scheduled to release its statement at 2pm local time on Wednesday, and Chairman Jerome Powell will hold a press conference shortly after.

is senior editor for Morningstar Australia

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