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Global Market Report - 20 June

Glenn Freeman  |  20 Jun 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open slightly higher after a positive lead from overseas, as Wall Street reacted positively to the Fed's hold on interest rates.

The SPI200 futures contract was up 9 points, or 0.14 per cent, at 6,664 at 7am Sydney time, suggesting a small rise for the benchmark S&P/ASX200 on Thursday.

In the US, the Dow Jones Industrial Average closed up 0.15 per cent, the S&P 500 was up 0.30 per cent and the tech-heavy Nasdaq Composite was up 0.42 per cent.

Australian shares neared record highs yesterday as US-China tensions eased to their lowest ebb in weeks. The S&P/ASX 200 Index advanced 78.1 points, or 1.2 per cent, to 6648.1, just 180.6 points, or 2.6 per cent, shy of the record high of 6828.7

The Aussie dollar is buying 68.81 US cents from 68.76 US cents on Wednesday.

Out today: RBA governor Philip Lowe to deliver a speech, and New Zealand first-quarter GDP figures announced.

Asia

China stocks closed higher on Wednesday as Washington and Beijing looked to rekindle trade talks and confirmed that Presidents Donald Trump and Xi Jinping would meet later this month at the G20 summit.

The Shanghai Composite Index gained 1 per cent to 2,917.80, while the blue-chip CSI300 index rose 1.3 per cent to 3,715.94 points.

The yuan was quoted at 6.9051 per US dollar, up 0.22 per cent on the previous close of 6.92.

Hong Kong's Hang Seng index rose 2.4 per cent to 28,150.33, on track for its biggest single-day rise since December 2018, while the Hong Kong China Enterprises Index advanced 2.4 per cent to 10,756.5.

MSCI’s Asia ex-Japan stock index firmed 1.73 per cent, while Japan’s Nikkei index was up 1.72 per cent.

Japan’s Nikkei rallied hard to end near six-week highs on Wednesday, on the positive news about US-China trade talk, and sentiment was further supported by expectations of US Federal Reserve rate cuts this year.

Europe

European markets were largely flat on Wednesday in anticipation of the US Fed's statement.

The pan-European STOXX 600 index finished up 0.05 per cent, with defensive stocks weighing the most, while banks posted a 1.4 per cent rise.

ECB chief Mario Draghi on Tuesday flagged a potential return to bond-buying and lower interest rates if the economy does not improve, which pushed the STOXX 600 to its best performance in five months.

With the major European index having recouped many of its losses from last month, auto stocks were up 1 per cent, buoyed by news of US-China trade talks resuming, as were chipmakers. Germany's Siltronic recovered almost 5 per cent after big losses a day earlier.

Italy’s FTMIB was notably higher. Deputy Prime Minister Matteo Salvini said on Tuesday Rome would press ahead with a plan to settle overdue state payments by issuing mini-bills unless a better solution was put forward.

North America

The S&P 500 approached a record high overnight, after the Federal Reserve signalled potential interest cuts later this year, reassuring investors worried that the US-China trade war could stall economic growth.

Saying it will "act as appropriate to sustain" economic expansion, the central bank signalled rate cuts of as much as half a percentage point over the remainder of 2019.

In its statement on Wednesday following a two-day policy meeting, the Fed held rates steady, as expected, but dropped a previous promise to be "patient" in adjusting rates.

That elevated the S&P 500 and Dow Jones Industrial Average to less than 1 per cent from their record high closes set in late April.

Buoyed by growing confidence, the Fed will cut rates. US stocks have climbed in recent weeks, on the back of hopes of an end to the US-China trade war – the S&P 500 has gained 6 per cent in June so far.

The financial sector fell 0.2 per cent, with bank stocks dipping 0.2 per cent. Lower interest rates tend to hurt banks' profits.

The Dow Jones Industrial Average rose 0.15 per cent to end at 26,504.27 points, while the S&P 500 gained 0.3 per cent to 2926.44.

The Nasdaq Composite added 0.42 per cent to 7987.32.

Contributing more than any other stock to advances on the Nasdaq and S&P 500, Adobe surged 5.2 per cent after the Photoshop software provider beat analysts' estimates for quarterly profit and revenue.

Facebook fell 0.5 per cent as its ambitious plan to launch a digital currency faced a backlash from regulators and politicians in the US and abroad.

The healthcare sector rose one per cent, helped by gains in UnitedHealth Group, Pfizer and Allergan.

is senior editor for Morningstar Australia

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