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Global Market Report - 20 November

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

The Australian share market is expected to open lower after a mixed lead from Wall Street.

The SPI200 futures contract was down 35.0 points, or 0.51 per cent, at 6,786.0 at 8am Sydney time, suggesting a fall for the benchmark S&P/ASX200 on Wednesday.

The Australian share market rallied yesterday and the dollar has dipped after it was revealed the Reserve Bank gave serious thought earlier this month to cutting rates for a fourth time this year.

The benchmark S&P/ASX200 index finished Tuesday up 47.4 points, or 0.7 per cent, to 6,814.2 points, while the broader All Ordinaries gained 42.4 points, or 0.62 per cent, to 6,914.1 points.

On Wall Street overnight, the Dow Jones Industrial Average fell 0.37 per cent; the S&P 500 lost 0.06 per cent; and the Nasdaq Composite added 0.24 per cent.

The Aussie dollar is buying 68.26 US cents from 67.98 US cents on Tuesday.

Asia

China stocks rose the most in two weeks on Tuesday, as a cut in a key interbank funding rate on Monday bolstered hopes for more government stimulus to prop up slowing growth.

The blue-chip CSI300 index rose 1.0 per cent, to 3,947.04, while the Shanghai Composite Index gained 0.9 per cent, to 2,933.99.

Hong Kong stocks on Tuesday closed at a one-week high as China central bank’s rate cut stoked hopes that Beijing is keen to stem an economic slowdown with stimulus measures, while strong demand ahead of Alibaba’s listing boosted sentiment.

The Hang Seng index was up 1.6 per cent at 27,093.80, its highest close since 8 November. The China Enterprises Index closed 1.3 per cent higher at 10,696.56 points.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.51 per cent, while Japan’s Nikkei index closed down 0.53 per cent.

Europe

European stocks reversed course to close lower in a choppy session on Tuesday as lack of clarity on the progress of trade talks between Washington and Beijing kept investors from making bold bets.

The pan-European STOXX 600 index rose 0.5 per cent to its highest level since July 2015 in morning trade but pared gains to closer marginally lower tracking Wall Street’s retreat from record highs in early US session.

Reports indicated on Monday that Beijing was pessimistic about the prospects of sealing a trade pact with Washington sending markets in a tizzy.

Some relief however, came after the Trump administration issued a new 90-day extension allowing US companies to continue doing business with China’s Huawei Technologies, whose blacklisting by Washington has been a bone of contention in the trade saga.

Strength in defensive plays like utilities and telecoms that investors had taken refuge in through the previous session, started to wear out with both sectors down between 0.4 per cent and 0.9 per cent.

The media sector was among the weak spots due to a 23 per cent slide for Luxembourg-based satellite provider SES after the Federal Communications Commission chairman backed a public, rather than private auction of spectrum for next-generation 5G wireless networks.

Macro-driven travel & leisure led sub-sector gains powered by a 5 per cent jump in shares of Britain’s easyJet after it posted full-year profit toward the top end of expectations.

Automakers rebounded from their worst session in more than a month as data showed passenger car registrations in Europe rose to their highest since 2009 in October.

Miners and industrials gained 0.4 per cent each.

Among individual movers, Halma Plc led gains on the STOXX 600 as well as the FTSE 100 after the British safety equipment maker posted upbeat first-half results.

A recent rally that has pushed the index to its four-year peak has been led in part by positive cues on US-China trade talks and better-than-feared third quarter corporate results.

The STOXX 600 is about 2 per cent away from reclaiming its all-time highs, hit last in April 2015.

However, analysts suggest caution as previously when the European benchmark surged in 2000, 2007 and 2015 to record levels above the 400 points threshold, a significant correction took place in the following several weeks.

North America

The Dow Jones Industrial Average and the S&P 500 fell from record levels on Tuesday as dour forecasts from retailers Home Depot and Kohl's fuelled worries about consumer spending and the US-China trade dispute dragged on.

US President Donald Trump on Tuesday threatened to escalate the trade war by raising tariffs on Chinese imports if no deal is reached with Beijing.

Home Depot Inc fell 5.4 per cent and was the top drag on the benchmark S&P 500 and the blue-chip Dow after the No.1 US home improvement chain cut its 2019 sales forecast for the second time this year.

Also, department store operator Kohl’s Corp slumped 19.5 per cent after slashing its annual profit forecast and missing quarterly comparable sales and earnings estimates.

Expectations of a US-China trade deal and a largely better-than-expected third-quarter corporate earnings season had fuelled an equities rally in recent weeks that helped all three indexes set record highs. Nasdaq barely extended its record on Tuesday with a 0.24 per cent gain.

The weak retailer forecasts came as investors are laser focused on consumer spending as the key to US economic growth.

Public hearings for the impeachment inquiry against Trump, also added to uncertainty, the money manager said. On Tuesday a White House official said the president’s request that Ukraine investigate a domestic political rival was an improper “demand,” and he fended off Republican efforts to cast doubt on his competence and loyalty to the US.

The Dow Jones Industrial Average fell 102.2 points, or 0.36 per cent, to 27,934.02, the S&P 500 lost 1.85 points, or 0.06 per cent, to 3,120.18 and the Nasdaq Composite added 20.72 points, or 0.24 per cent, to 8,570.66.

Seven of the 11 major S&P 500 sectors fell, with the consumer discretionary index’s 0.97 per cent drop weighing most. The S&P 500 retail index fell 1.24 per cent.

The energy sector was the S&P’s biggest percentage loser with a 1.5 per cent drop as oil prices fell on concerns about excess global supply and the demand outlook due to a lack of progress in the US-China trade dispute.

Investors will be watching for earnings reports from other retailers, including Lowe’s Cos Inc, Target Corp and Nordstrom Inc later this week.

They will also look for more details on the Fed’s monetary policy stance from Wednesday’s release of the central bank’s minutes from the latest policy meeting, in which it cut interest rates for the third time this year but signaled it may be done with rate easing for now.

is content editor for Morningstar Australia

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