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Global Market Report - 2 July

Glenn Freeman  |  02 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after gains on Wall Street overnight, where the S&P 500 closed at record levels.

The SPI200 futures contract was up 21 points, or 0.32 per cent, at 6,608 at 8am in Sydney, suggesting a positive start for the benchmark S&P/ASX200 on Tuesday.

In the US, the Dow Jones Industrial Average finished up 0.44 per cent, the S&P 500 was up 0.77 per cent and the tech-heavy Nasdaq Composite was up 1.06 per cent.

Australian stocks ended higher yesterday, after a trade truce between the US and China lifted investor sentiment.

The S&P/ASX 200 Index rose 29.3 points, or 0.4 per cent, to 6648.1 while the broader All Ordinaries added 32.2 points, or 0.5 per cent, to end the session at 6731.4.

The Aussie dollar is buying 69.66 US cents, from 69.94 US cents on Monday.

Ahead today: The Reserve Bank of Australia will announce its decision on monetary policy at 2:30pm Sydney time on Tuesday, with many investors anticipating another cut in the interest rate to a new

Asia

Chinese shares ended at their highest level in more than two months on Monday, propelled by hopes of an end to the US-China trade war, after the two countries agreed to restart negotiations and Washington said it would postpone further tariffs.

The benchmark Shanghai Composite index was up 2.22 per cent to 3,044.9 points – its highest close since 30 April.

The blue-chip CSI300 index jumped 2.88 per cent, also its highest close since 25 April, despite fresh signs of domestic economic weakness in factory activity surveys.

The smaller Shenzhen index rose 3.46 per cent by the close, and the start-up board ChiNext Composite index added 3.75 per cent.

Hong Kong markets were closed for a holiday.

In Japan, the Nikkei jumped more than 2 per cent, as risk sentiment improved after the agreement to restart talks between US and China.

The Nikkei share average ended up 2.1 per cent at 21,729.97 points, its best closing level since 7 May.

Chip-related shares and electric components maker rallied. Tokyo Electron surged 4.8 per cent, Advantest jumped 6.2 per cent, TDK Corp soared 7 per cent, Sumco Corp added 3.2 per cent and Minebea Mitsumi rose 3.6 per cent.

Other companies which have high exposure to China also gained ground. Murata Manufacturing jumped 5 per cent, Yaskawa Electric Corp surged 5.3 per cent and Keyence Corp added 3.6 per cent.

Europe

Europe stocks also surged yesterday, nearing two-month highs as trade-sensitive technology stocks ticked up on positive trade news from the US-China negotiations.

The pan-European STOXX 600 index rose 0.8 per cent, with the STOXX 50 index of Europe's biggest stocks rising 1.3 per cent to its highest level since February 2018 before closing 0.7 per cent higher.

The breakthrough in trade talks helped the STOXX 600 launch a strong start to the second half of fiscal 2019-20 – after capping its biggest first-half gains since 1998 on Friday.

Frankfurt's trade-sensitive DAX rallied 1 per cent, the most among the major European indexes, while the tech index rose 1.9 per cent as chipmakers were boosted by signs of relief for Huawei.

Part of the concessions US President Trump offered during meetings with China's leader Xi Jinping related to reducing restrictions on Huawei.

The blue-chip Swiss index gained 0.7 per cent despite stocks being blocked from trading on EU exchanges after talks to resolve a dispute between Brussels and Switzerland collapsed.

North America

US stocks have climbed, led by gains in technology stocks on optimism from the US-China trade talks.

Despite losing some of its initial steam, the S&P 500 still managed to close at a record high after the US and China agreed on Saturday to resume trade talks.

US President Donald Trump also offered concessions including no new tariffs and an easing of restrictions on Huawei Technologies, while China agreed to make unspecified new purchases of US farm products.

Still, stocks had given up a good portion of their earlier gains on Monday as investors contemplated whether the US Federal Reserve would be as dovish as has been anticipated recently, and caution crept back in for what is likely to be a lightly traded week due to the 4 July holiday.

Tech stocks, Wall Street's top performers so far in 2019, jumped 1.45 per cent on Monday, with heavyweight Apple's 1.83 per cent gain providing the biggest boost.

Chipmakers with a sizeable revenue exposure to China jumped nearly 5 per cent at their session high before also pulling back, last showing a 2.65 per cent gain in the Philadelphia Semiconductor index. Huawei supplier Micron Technology gained 3.9 per cent.

The Dow Jones Industrial Average rose 117.47 points, or 0.44 per cent, to 26,717.43, the S&P 500 gained 22.57 points, or 0.77 per cent, to 2964.33 and the Nasdaq Composite added 84.92 points, or 1.06 per cent, to 8091.16.

Stocks saw their steepest sell-off this year in May, a 6.6 per cent decline, after a breakdown in the US-China trade talks sparked concerns of a global economic slowdown.

But hopes that the Federal Reserve would cut interest rates to preserve a strong run of US economic growth, and a dovish turn by central banks around the globe, helped the S&P 500 and the Dow Jones indexes post their best June performance in decades.

Despite the latest development in talks, traders still anticipate the Fed's next move will be a rate cut of at least a quarter of a percentage point at its 30-31 July policy meeting.

Data showed growth in manufacturing cooled in the US in June while factory activity shrank across much of Europe and Asia, further supporting expectations of a rate cut.

Gains on the Dow were held in check by a 2.1 per cent drop in Boeing after a report that federal prosecutors had subpoenaed records relating to the production of the 787 Dreamliner in South Carolina.

Wynn Resorts jumped 5.9 per cent, the most on the S&P, as gambling revenue in the Chinese territory of Macau rose more than expected in June. Shares of peers Melco Resorts & Entertainment and Las Vegas Sands also rose.

Coty tumbled 13.5 per cent, falling the most on the S&P, after the company said it would overhaul its operations and write down about US$3 billion in value of its brands acquired from Procter & Gamble.

is senior editor for Morningstar Australia

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