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Global Market Report - 22 May

Lex Hall  |  22 May 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is tipped to build on its fresh 11½-half year high at the open after a temporary US licensing reprieve for Chinese telco Huawei gave Wall Street an overnight boost.

The SPI200 futures contract was up 13 points, or 0.2 per cent, at 6,580.0 at 8am Sydney time, suggesting another rise for the S&P/ASX200 after the benchmark hit its highest mark since November 2007 during the previous session.

The Australian share market yesterday recouped early losses to finish higher for a fifth day, setting a fresh 11½ -year high following a strong performance by banks and property shares.

The benchmark S&P/ASX200 index closed up 24 points, or 0.37 per cent, to 6,500.1 points on Tuesday, while the broader All Ordinaries was up 19.7 points, or 0.3 per cent, to 6,584.4.

The banking sector was the biggest gainer on Tuesday after the Reserve Bank indicated it would likely cut interest rates, possibly as soon as June.

APRA also proposed loosening the rules around home loans to allow people to borrow more.

The tech-heavy NASDAQ was the best performing Wall Street index overnight following a move by the US to grant Huawei a licence to buy US goods until 19 August.

Shares of Huawei suppliers such as Intel Corp, Qualcomm, Xilinx and Broadcom rose between 1 and 4.6 per cent, with tech shares rising 1.2 as a sector to add the most gains to the S&P 500.

The Aussie dollar is buying 68.84 US cents from 68.79 US cents on Tuesday.

Asia

Chinese shares finished higher on Tuesday as investors took heart from the temporary easing of US trade restrictions on Chinese telecoms firm Huawei.

At the close, the Shanghai Composite index was up 1.23 per cent at 2,905.97. The blue-chip CSI300 index ended 1.35 per cent higher.

Washington on Monday temporarily eased trade restrictions imposed last week on China’s Huawei Technologies Co in an attempt to minimise disruption for its customers. But Huawei’s founder, Ren Zhengfei, dismissed the move and said that the tech firm had prepared for US action

Hong Kong’s Hang Seng index on Tuesday ended at its lowest close in nearly 16 weeks as investors worried about the risk of escalating trade tensions between Washington and Beijing despite a temporary easing of restrictions China’s Huawei.

At the close of trade, the Hang Seng index was down 130.37 points, or 0.47 per cent, at 27,657.24, its lowest close since 30 January.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.14 per cent, while Japan’s Nikkei index closed down 0.14 per cent.

Europe

European shares rose on Tuesday, with tech stocks contributing to gains as they recovered some ground lost in the previous session following a temporary easing of US. restrictions on China’s Huawei.

The US allowed Huawei Technologies to buy US-made goods to maintain existing networks and provide software updates to existing Huawei handsets until Aug. 19 after blocking it from buying US. goods last week.

The pan-European STOXX 600 gained 0.5 per cent, with Germany’s trade-sensitive DAX rising 0.9 per cent. London-traded stocks pared gains as the pound firmed on Prime Minister Theresa May’s comments about the next Brexit votes.

The tech sector rose 1.6 per cent, making back a chunk of Monday’s 2.8 per cent slide. Chipmakers Infineon Technologies, AMS and STMicroelectronics gained between 1 per cent and 4.2 per cent.

Telecom Italia rose 2.3 per cent as it posted first quarter results and confirmed its guidance for the next three years. The firm’s chief executive said it was in touch with five banks over plans to create a joint venture to offer consumer credit services.

Norsk Hydro climbed 5.6 per cent as a Brazilian federal court allowed the Oslo-traded firm to resume full output at the world’s largest alumina refinery for the first time in more than a year.

Oil and gas stocks added 1 per cent, with Vestas Wind Energy leading the gains with a 3.9 per cent rise. The Danish firm secured an order from Finland’s Fortum for a 90 megawatt wind project and launched a wind turbine targeting the US. market.

Banks rose 0.7 per cent, lifting off Monday’s more-than three-month closing low.

As risk appetite crept back into markets, defensive stocks in sectors such as telecommunications underperformed.

However, stocks are not yet out of the woods, still plagued by investor uncertainty regarding the US-China trade war.

North America

Shares of technology companies helped lift Wall Street on Tuesday after the US temporarily eased curbs on China’s Huawei Technologies Co, alleviating investor concerns about pressure on future corporate results in the sector.

US President Donald Trump added Huawei to a trade blacklist last week, leading several companies to suspend business with the world’s largest telecom equipment maker, a move that could weigh on their sales. Chipmakers, many of which sell to Huawei, bore the brunt of Monday’s sell-off.

But late on Monday, the US granted the Chinese telecoms equipment maker a licence to buy US goods until 19 August. The development offered a reprieve to shares of chipmakers, with the Philadelphia Semiconductor Index gaining 2.1 per cent to end a three-day slump.

Shares of Huawei suppliers such as Intel Corp, Qualcomm, Xilinx and Broadcom rose between 1 per cent and 4.6 per cent.

Technology shares rose 1.2 per cent to add the most gains to the S&P 500 among the benchmark index’s major sectors.

The Dow Jones Industrial Average rose 197.43 points, or 0.77 per cent, to 25,877.33, the S&P 500 gained 24.13 points, or 0.85 per cent, to 2,864.36 and the Nasdaq Composite added 83.35 points, or 1.08 per cent, to 7,785.72.

Even with Tuesday’s gains, the S&P 500 is still on track to post its first monthly decline of the year. The index is now 3 per cent away from its all-time high on May 1 as it has been pressured by mounting concerns about a prolonged US-China trade war.

Among the S&P 500’s major sectors, only defensive consumer staples shares traded lower, down 0.3 per cent.

Shares of Kohl’s Corp and J.C. Penney Co plunged after the two department stores’ quarterly results missed expectations.

Kohl’s shares dropped 12.3 per cent, the largest decline among S&P 500 companies, after the retailer cut its full-year profit forecast and reported quarterly same-store sales and profit that missed expectations.

Shares of rival J.C. Penney fell 7 per cent after the company also reported a bigger-than-expected fall in quarterly same-store sales.

With 463 of S&P 500 companies having posted first-quarter results, 75.2 per cent have topped analysts’ profit expectations. Analysts now expect first-quarter earnings growth of 1.4 per cent, a sharp turnaround from the 2 per cent loss expected on 1 April, according to Refinitiv data.

 

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