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Global Market Report - 2 April

Lex Hall  |  02 Apr 2019Text size  Decrease  Increase  |  
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Australia

Australian shares are set to open higher, bolstered by gains on Wall St as upbeat manufacturing numbers from China and the US eased worries about slowing global growth.

ASX futures were up 36 points at 8am Sydney time. The Australian dollar edged 0.3 per cent higher.

Australian shares jumped yesterday after China reported stronger-than-expected economic data - but the local bourse didn't gain as much as other Asian indices, with investors cautious a day ahead of the federal government's budget.

The benchmark S&P/ASX200 index closed up 36.3 points, or 0.59 per cent, to 6,217 points on Monday, while the broader All Ordinaries was up 38 points, or 0.61 per cent, to 6,299.7.

Treasurer Josh Frydenberg will unveil the federal budget at 7.30pm.

The government will try to ram through parliament this week the tax cuts contained in the budget in a bid to create a wedge it can use against Labor throughout the election campaign.

Also out today: Building approvals February at 11.30am; RBA policy statement at 2.30pm.

ASIA

China's main Shanghai Composite index rose 2.6 per cent to its 10-month high. The blue-chip CSI300 index rose 2.6 per cent to its highest level in over a year.

Hong Kong shares rose to their highest point in nine months on Monday. At the close of trade, the Hang Seng index was up 1.8 per cent at 29,562.02, the highest since June 2018.

The Hang Seng China Enterprises index rose 1.6 per cent.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 1 per cent, while Japan's Nikkei index closed up 1.4 per cent.

MSCI’s broadest index of Asia-Pacific shares rose about 9 per cent in the first quarter of 2019, its biggest quarterly gain since March 2012. Last month, the index rose 0.7 per cent.

EUROPE

European shares started the second quarter strongly on Monday, posting their biggest daily gain in a month and a half, as unexpectedly strong factory data from China and signs of progress in its trade talks with Washington boosted risk appetite.

China’s manufacturing sector surprisingly returned to growth for the first time in four months. The country’s State Council on Sunday said additional tariffs on imports of U.S. vehicles and auto parts would continue to be suspended after April 1 in a goodwill gesture.

The pan-European share index closed up 1.2 per cent, as stocks of automakers and their suppliers jumped 3.3 per cent in their best daily showing since early 2019. Advances in all but two sectors helped the benchmark build on its best quarterly performance in four years.

The data helped offset the impact of parallel surveys showing Germany’s manufacturing index sliding to an 80-month low and euro zone’s factories registering their worst month for almost six years.

Germany’s DAX - a bellwether for trade sentiment - added 1.35 per cent. Bourses elsewhere in Europe also rose.

Among autos, Continental AG gained 5.2 per cent, while Daimler AG rose 4.1 per cent.
The sector was also boosted by a Bloomberg report saying France’s Peugeot SA and Italy’s Fiat Chrysler Automobiles were exploring a European partnership, sending their stocks up 4.2 per cent and 2.4 per cent, respectively.

Banking stocks rose 2.7 per cent, with Italian lender Unicredit among the strongest performers with a 4.3 per cent jump after Goldman Sachs added the bank to its conviction list.

The basic resources index recorded its best day since January, notching its highest level since June as commodity prices firmed after the Chinese data.

Swiss logistics group Panalpina soared 15 per cent after accepting an increased bid of 4.6 billion Swiss francs ($4.6 billion) from Danish rival DSV, ending a more than two-month takeover battle.

London-traded equities gained on advances by miners and banks.
Britain’s EasyJet tumbled 9.7 per cent after warning that Brexit jitters and a weaker economic outlook were taking their toll on demand and pricing.

Rival low-cost airline Ryanair Holdings declined 2.6 per cent.

NORTH AMERICA

US stocks rallied on Monday, starting off the second quarter on a strong note, as upbeat manufacturing numbers from China and the US eased worries about slowing global growth.

The benchmark S&P 500 index, which is only 2.2 per cent below its record closing high in September, triggered a “golden cross” pattern, in which its 50-day moving average crosses above its 200-day moving average. Many believe the technical signal could portend more gains for stocks in the short term.

Gains in global equities were spurred by data showing that China’s manufacturing sector unexpectedly returned to growth in March for the first time in four months.

US manufacturing numbers for March were also better than expected, helping investors overlook soft retail sales data for February.

The Dow Jones Industrial Average rose 329.74 points, or 1.27 per cent, to 26,258.42, the S&P 500 gained 32.79 points, or 1.16 per cent, to 2,867.19, and the Nasdaq Composite added 99.59 points, or 1.29 per cent, to 7,828.91.

Concerns about a global economic slowdown have dimmed sentiment since the Federal Reserve announced in late January that its monetary tightening would end earlier than expected, as it cited “cross currents” affecting the economy. The shift in Fed policy drove yields on 10-year Treasury notes below those of three-month bills last week for the first time in more than a decade.

Yields on 10-year notes have since risen back above three-month bill rates and on Monday hit a one-week high. Monday’s rise in the 10-year Treasury yield helped lift financial shares, which provided the biggest boost to the S&P 500 among the index’s 11 sectors. S&P 500 bank shares jumped 2.9 per cent.

Concerns about slowing momentum have not entirely dissipated. With the first-quarter corporate earnings reporting season about two weeks away, investors are bracing for what may be the first US profit decline since 2016. Analysts expect quarterly earnings to fall 2 per cent, according to Refinitiv data.

Still, on Monday, most S&P sectors rose. Only consumer staples, real estate and utilities shares, which tend to decline as 10-year Treasury yields rise, were in the red.

Auto shares rose after China’s State Council said on Sunday that the country would continue to suspend additional tariffs on import of U.S. vehicles and auto parts after 1 April.

General Motors Co shares added 1.8 per cent and Ford Motor Co shares gained 2.3 per cent.
Chipmakers, which draw much of their revenue from China, also rose. The Philadelphia Semiconductor index advanced 2.5 per cent.

Shares of Wynn Resorts Ltd jumped 8.4 per cent, the most among S&P 500 companies, as March gambling revenue from the Chinese territory of Macau rose from the previous month.

Lyft Inc shares tumbled 11.9 per cent to end below their IPO price after brokerage Guggenheim Securities started coverage of the ride-hailing company’s shares with a “neutral” rating. Lyft debuted on the Nasdaq on Friday.

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