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Global Market Report - 20 May

Lex Hall  |  20 May 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open marginally higher on the back of Scott Morrison’s sweeping, poll-defying election win.

The SPI200 futures contract was up 5 points, or 0.08 per cent, at 6,368.0 at 7am Sydney time, suggesting a slightly positive start for the benchmark S&P/ASX200 on Monday.

The Australian share market rose on the last trading day before the federal election despite the heavyweight financial sector dropping out of the broad rally.

The benchmark S&P/ASX200 index finished up 37.5 points, or 0.59 per cent, to 6,365.3 points, while the broader All Ordinaries was up 42.7 points, or 0.67 per cent, to 6,460.2.

The market is tipped to edge up today as the Liberal-National Coalition readies to reconvene parliament in a bid to push through its signature $158 billion income tax cut plan.

Wall Street fell on Friday following media reports that US-Chinese trade talks had stalled, with the Dow Jones Industrial Average finished down 0.38 per cent, the S&P 500 down 0.58 per cent and the tech-heavy Nasdaq Composite down 1.04 per cent.

The Aussie dollar is buying 69.12 US cents from 68.89 US cents on Friday.

Minutes from RBA's latest policy meeting will be released on Tuesday, while RBA governor Philip Lowe will give a speech at midday.

Asia

China’s stock market closed lower on Friday, clocking the fourth consecutive weekly loss, largely due to re-escalating trade tensions as Washington blacklisted Chinese tech company Huawei.

The Shanghai Composite index was down fell 2.5 per cent to 2,882.30, losing 1.9 per cent for the week. The blue-chip CSI300 index also lost 2.5 per cent on Friday, accumulating weekly losses of 2.2 per cent.

Hong Kong stocks on Friday touched their lowest close in more than three months as Sino-U.S. tensions heightened after Washington hit Chinese telecoms giant Huawei with sanctions, further straining trade ties.

At the close of trade, the Hang Seng index was down 1.2 per cent at 27,946.46 points. The Hang Seng China Enterprises index closed 1.1 per cent lower.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.7 per cent, while Japan’s Nikkei index closed up 0.9 per cent.

Europe

European stocks snapped a three-day winning streak on Friday amid global trade jitters after Beijing ratcheted up its war of words with Washington, while the end of Brexit talks between British political parties put a lid on risk sentiment.

The Chinese Communist Party’s People’s Daily used a front page commentary to say the trade war would never bring China down, while talks on Brexit between Britain’s opposition Labour Party and the governing Conservatives ended without agreement.

The pan-European STOXX 600 index fell 0.4 per cent, sliding from Thursday’s 10-day closing peak. The benchmark posted a 1.2 per cent weekly gain, however, its best performance since early April.

Germany’s exporter-heavy DAX declined 0.6 per cent, with BMW shedding 5.2 per cent as its shares traded ex-dividend.

Milan-traded shares fell 0.2 per cent, while peers in Paris and London edged 0.2 per cent and 0.1 per cent lower, respectively.

The process of the United Kingdom’s complex divorce from the European Union was jolted by the opposition Labour Party pronouncing the death of last-ditch talks due to deepening fractures in Prime Minister Theresa May’s government.

The news knocked sterling but supported the shares of exporters on the FTSE 100, as a softer pound broadly boosts the value of their overseas earnings.

Real estate stocks shed 1.2 per cent, with Hammerson PLC down 2.2 per cent following a price target cut on the stock by RBC.

Banks dropped 1.1 per cent with the stocks of most lenders on the sector index ending lower. Italy’s Banco BPM fell 3.2 per cent.

Stocks of carmakers and their suppliers ended a fourth straight week lower as they dropped 1.1 per cent on the day. The sector is especially sensitive to worsening US-China trade tensions.

Paris-listed Valeo fell 1.7 per cent, while Faurecia dropped 1.3 per cent. Food delivery companies tumbled after Britain’s Deliveroo, which is unlisted, secured funding from Amazon.com.

North America

Wall Street ended lower as continuing trade tensions pulled industrial and tech shares down, and the Dow capped a fourth straight week of losses in its longest weekly losing streak in three years.

While all three major US indexes struggled for direction for much of Friday's session, they turned decisively negative following a report from CNBC that US-China trade negotiations have stalled.

The S&P 500 and the Nasdaq suffered their second successive weekly declines after US stocks failed to fully recover from Monday's steep sell-off.

China added fuel to the fire of the increasingly rancorous trade war with the US, striking a more aggressive tone and suggesting further talks could be fruitless unless Washington changes course.

Elsewhere in the multi-front US tariff war, President Donald Trump confirmed he would delay imposing imported auto tariffs by as much as six months, and agreed to lift metal tariffs on Canada and Mexico.

Trade headlines overshadowed upbeat economic data. The University of Michigan's consumer sentiment index jumped 5.3 per cent in May to its highest reading in 15 years.

Tariff jitters also dragged on key industrial shares.

Farm equipment maker Deere & Co was the biggest percentage loser on the S&P 500, dipping 7.7 per cent after cutting its full-year forecast.

Caterpillar, 3M, Textron, General Dynamics and Fedex all helped pull the industrial sector 1.1 per cent lower.

The Dow Jones Industrial Average fell 98.68 points, or 0.38 per cent, to 25,764, the S&P 500 lost 16.79 points, or 0.58 per cent, to 2859.53 and the Nasdaq Composite dropped 81.76 points, or 1.04 per cent, to 7816.29.

Of the 11 major sectors in the S&P 500, all but utilities closed in the red, with industrials and energy seeing the largest percentage losses.

With 460 of S&P 500 companies having posted first-quarter results, 75.2 per cent of which beat analyst expectations, the mostly upbeat first-quarter earnings season is nearly complete.

Analysts now expect first-quarter earnings growth of 1.4 per cent, a significant turnaround from the 2 per cent loss expected on April 1.

Active wear company Under Armour gained 7.8 per cent following JP Morgan's upgrade of the stock to "overweight".

Pinterest slumped 13.5 per cent after its first quarterly earnings report as a publicly-traded company.

Shares of Luckin Coffee jumped 19.9 per cent as the Chinese challenger to Starbucks made its debut.

 

is content editor for Morningstar Australia

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