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Global Market Report - 21 March

Lex Hall  |  21 Mar 2019Text size  Decrease  Increase  |  
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Australia

Australian shares are expected to open flat following brief gains on Wall Street overnight after the US central bank indicated there would be no further rate hikes this year.

The SPI200 futures contract was down 4 points, or 0.06 per cent, at 6,170.0 at 8am Sydney time, suggesting a slight dip for the benchmark S&P/ASX200 on Thursday.

Yesterday the ASX closed in negative territory for a second day after a drop in the price of iron ore put pressure on mining shares.

The benchmark S&P/ASX200 index was down 19.5 points, or 0.32 per cent, to 6,165.3 points, while the broader All Ordinaries was down 24.8 points, or 0.4 per cent, at 6,251.8.

The US Federal Reserve brought its three-year drive to tighten monetary policy to an abrupt end overnight, abandoning projections for any interest rate hikes in 2019 amid signs of an economic slowdown.

On Wall Street shares gained after the announcement but ended mixed, with the Dow Jones Industrial Average down 0.55 per cent, the S&P 500 down 0.29 per cent and the tech-heavy Nasdaq Composite up 0.07 per cent.

The Aussie dollar is buying 71.16 US cents from 70.76 US cents on Wednesday.

ASIA

Chinese stocks were little changed on Wednesday ahead of the Federal Reserve’s interest rate decision later in the day and on uncertainty surrounding Sino-US trade negotiations.

The Shanghai Composite index was flat at 3,090.64 points. The blue-chip index was also unchanged.

CSI300’s financial sector sub-index rose 0.7 per cent, the consumer staples sector slipped 0.2 per cent, while the healthcare shares slid 0.3 per cent.

The smaller Shenzhen index fell 0.2 per cent and the start-up board ChiNext Composite index declined 1.2 per cent.

In Hong Kong, the Hang Seng index closed 0.5 per cent weaker at 29,320.97 points. The Hang Seng China Enterprises index ended down 0.5 per cent.

Around the region, MSCI’s Asia ex-Japan stock index eased 0.2 per cent, while Japan’s Nikkei index closed up 0.2 per cent.

EUROPE

European shares retreated from near six-month highs on Wednesday, with German stocks leading losses as chemicals producer Bayer and carmaker BMW tumbled, and as the European Union resisted British Prime Minister Theresa May’s plea to delay Brexit.

The pan-European STOXX 600 index fell 0.9 per cent as investors booked profits after five sessions of gains, with Bayer’s near 10 per cent slump weighing the most.

Bayer’s tumble came after a San Francisco jury became the second to rule against Bayer’s Roundup, which was added to its products after the acquisition of Monsanto last year.

Germany’s benchmark stock index fell 1.6 per cent to its biggest daily drop in six weeks as

BMW’s 4.9 per cent fall after a profit warning also weighed.

Also weighing on Germany’s DAX, typically sensitive to trade news, was US President Donald Trump saying US tariffs on Chinese goods could remain for a long period of time.

In the latest Brexit development, PM May’s request for a three-month extension was seen as shorter than some in the market had been expecting. A longer extension would have raised the prospects of another referendum or a softer Brexit that traders believe would limit damage on the economy.

France’s CAC40 index ended a seven-day winning streak, down 0.8 per cent. Oil and gas company Total slipped 2.3 per cent after Danish container shipping AP Moller Maersk sold 17.3 million shares of the French company.

NORTH AMERICA

The S&P 500 and the Dow have ended lower as interest rate-sensitive financial stocks dragged down the indexes after the US Federal Reserve affirmed a dovish monetary policy stance.

While all three major US stock indexes briefly reversed earlier losses following the Fed statement, only the Nasdaq ended the session in positive territory.

At the conclusion of its two-day monetary policy meeting, the central bank indicated it sees no further rate hikes this year, and released details of a plan to end the monthly reduction of its balance sheet.

But while the indexes briefly turned positive after the statement's release, banks, which are sensitive to interest rates, put a damper on the rally.

The financial sector sold off sharply in the last hour of trading, ending the session down 2.1 per cent.

The stock market has rallied since the beginning of the year, when Fed chair Jerome Powell said the Fed would take a "patient" approach to monetary policy.

Powell affirmed that sentiment at a press conference following the release, citing mixed economic data and risks associated with Brexit and trade negotiations as reasons for caution.

Indeed, federal funds futures now see nearly even chances that the central bank will cut interest rates in early 2020.

The Dow Jones Industrial Average fell 141.71 points, or 0.55 per cent, to 25,745.67, the S&P 500 lost 8.34 points, or 0.29 per cent, to 2,824.23 and the Nasdaq Composite added 5.02 points, or 0.07 per cent, to 7,728.97.

Of the 11 major sectors in the S&P 500, six ended the session in negative territory.

FedEx fell 3.5 per cent after the global package delivery company cut its 2019 profit forecast, citing slowing global trade growth.

FedEx weighed on the Dow Jones Transport Index, a closely-watched gauge of economic health, pulling the index down 1.3 per cent.

Rival United Parcel Service was also down, falling 2.2 per cent.

General Mills rose 2.2 per cent after the packaged food company reported better-than-expected quarterly profit and boosted its full-year forecast.

is content editor for Morningstar Australia

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