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Global Market Report - 23 July

Lex Hall  |  23 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after a positive lead from Wall Street, expectations of lower interest rates. 

The SPI200 futures contract was up 10 points, or 0.15 per cent, at 6,640.0 at 8am Sydney time, suggesting a rise for the benchmark S&P/ASX200 on Tuesday.

The Australian share market has edged lower, with traders apparently feeling cautious on a number of fronts.

The benchmark S&P/ASX200 index finished down 9.1 points yesterday, or 0.14 per cent, to 6,691.2 points, while the broader All Ordinaries was down five points, or 0.07 per cent, to 6,781.2 points.

On Wall Street overnight, the Dow Jones Industrial Average finished up 0.07 per cent, the S&P 500 was up 0.28 per cent and the tech-heavy Nasdaq Composite was up 0.71 per cent.

The Aussie dollar is buying 70.35 US cents from 70.34 US cents on Monday.

Out today: RBA assistant governor Kent speaks at 8.30am; RBA governor Philip Lowe speaks at 1.05pm

Asia

China’s major stock indexes closed lower on Monday, as enthusiasm for the country’s new Nasdaq-style STAR Market drew investor attention away from the main boards.

The blue-chip CSI300 index fell 0.7 per cent, to 3,781.68, while the Shanghai Composite Index closed down 1.3 per cent at 2,886.97.

More than 40 stocks on the main board tumbled by their 10 per cent daily limits.

Trading hit a fever pitch, with shares rocketing as much as 520 per cent, as China’s new Nasdaq-style board for homegrown tech firms debuted on Monday, with valuations exceeding even the expectations of veteran investors braced for a wild ride.

Stocks were also hit after investors reduced expectations of an aggressive interest rate cut by the US Federal Reserve.

In Hong Kong, the Hang Seng index closed 1.4 per cent lower at 28,371.26, while the China Enterprises Index ended down 1.3 per cent at 10,770.31 points.

Europe

European shares ended flat on Monday as a summer lull hit trading volumes at the start of a pivotal week that will see the European Central Bank meet over monetary policy and a deluge of corporate earnings reports.

The pan-European STOXX 600 index closed up just 0.07 per cent, with just 151.5 million shares changing hands at the close versus its thirty-day average of 1.8 billion.

However, an index of euro zone stocks closed 0.22 per cent higher as Italian shares recovered some ground after political uncertainty drove their worst day in two months on Friday. Investors are gearing up for a showdown between Italy's coalition partners this week that could raise uncertainty about the future of the government.

Investors are focussed on the ECB meet on Thursday, with money markets pricing in a more than 50 per cent chance of a 10 basis point cut in interest rates and bond investors expecting at least a clear promise of action in September to counter slowing growth.

That meeting and next week’s US Federal Reserve’ statement are likely to determine whether a rebound in shares since the worst falls in more than two years in May will continue or stall.

The main STOXX index hit a session high in afternoon trading following a South China Morning Post report that US trade negotiators could visit China next week for their first face-to-face talks with Chinese officials since the G20 meeting last month.

Trade-exposed sectors such as technology and automakers rose, with chipmakers Infineon Technologies, Siltronic and Dialog Semiconductor gaining between 2.3 per cent and 4.2 per cent.

Spanish banks were a weak spot ahead of earnings from the euro zone’s biggest bank by market value, Banco Santander, on Tuesday. The broader banks index was down 0.3 per cent.

Energy shares were again among the top gainers, tracking a rise in crude prices due to tensions in the Middle East and propping up London's commodity-heavy blue chip index.

Shares of British fashion retailer surged 13 per cent to the top of London's FTSE 250 midcap index after reports its founder and former chief executive Ray Kelvin would support a private equity buyout months after he quit over allegations of misconduct.

North America

The S&P 500 climbed toward a record high on Monday, supported by expectations of lower interest rates, while investors awaited quarterly earnings from marquee companies Facebook, Alphabet and Amazon later this week.

Facebook rallied 2.0 per cent ahead of its report due out after the bell on Wednesday, while Amazon.com and Google-parent Alphabet were each up more than 0.7 per cent ahead of their reports on Thursday.

Investors’ reactions to the reports of these top-tier growth companies could affect broader market sentiment, with the S&P 500 about 1 per cent below its July 15 record high close.

The technology index jumped 1.2 per cent, the most among the S&P sectors, while the Philadelphia chip index surged almost 2 per cent. Apple added 2.3 per cent to $207.22 after Morgan Stanley raised its price target to $247 from $231.

Shares of Boeing Co fell 1.0 per cent and pressured the blue-chip Dow index after ratings agency Fitch revised its outlook on the planemaker to "negative" from "stable," while the tech-heavy Nasdaq was lifted by chipmakers.

The European Central Bank meets on Thursday and money markets are pricing in a more than 50 per cent chance of a 10-basis-point cut in interest rates. Federal Reserve officials are set to meet just days later, and are widely expected to lower rates by at least 25 basis points.

Hopes of an interest rate cut have helped Wall Street’s main indexes hit record levels this month, recovering from a slump in May caused by a sudden escalation of US-China trade tensions.

About 30 per cent of S&P 500 companies are set to report second-quarter results this week, with overall profits now estimated to rise about 1 per cent, according to Refinitiv IBES data.

Chip stocks gained on news that White House economic adviser Larry Kudlow will host a meeting with executives of semiconductor and software companies on Monday to discuss a US ban on sales to China’s Huawei Technologies.

The Dow Jones Industrial Average rose 0.07 per cent to end at 27,172.04 points, while the S&P 500 gained 0.28 per cent to 2,985.02. The Nasdaq Composite added 0.71 per cent to 8,204.14.

Second-quarter earnings have been mixed so far, with major banks raising concerns about profit growth in a low-interest-rate environment. Microsoft Corp and International Business Machines, on the other hand, have reported better-than-expected earnings.

Halliburton Co surged 9.1 per cent, the most among S&P 500 companies, after the oilfield services provider’s second-quarter profit beat analysts’ estimates.

is content editor for Morningstar Australia

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