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Global Market Report - 29 August

Lex Hall  |  29 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower as trade tensions dampen optimism about a climb in US stocks.

The SPI200 futures contract was down 9 points, or 0.14 per cent, at 6,463.0 at 8am Sydney time, suggesting an early dip for the benchmark S&P/ASX200 on Thursday.

The Australian share market has climbed modestly for a second day, buoyed by the tech sector, while the Aussie dollar has hit a 10-year low against its US counterpart.

The benchmark S&P/ASX200 index finished Wednesday up 29.4 points, or 0.45 per cent, to 6,500.6 points, while the broader All Ordinaries was up 35.2 points, or 0.54 per cent, to 6,600.8 points.

On Wall Street overnight, the Dow Jones Industrial Average finished up 1.0 per cent, the S&P 500 was up 0.65 per cent and the tech-heavy Nasdaq Composite was up 0.38 per cent.

The Aussie dollar is buying 67.38 US cents, unchanged from Wednesday.

Asia

China stocks ended lower on Wednesday as lingering uncertainty over the Sino-US trade dispute continued to unnerve investors, and while the positive impact from MSCI’s latest phase of China stock inclusion fades.

The blue-chip CSI300 index ended down 0.4 per cent at 3,802.58, while the Shanghai Composite Index lost 0.3 per cent to 2,893.76 points.

Hong Kong shares extended losses to a third session on Wednesday as uncertainty over the Sino-US trade dispute and the city’s deepening political crisis continued to sap risk appetite.

The Hang Seng index and the China Enterprises Index ended down 0.2 per cent at 25,615.48 and 9,980.73 points, respectively.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.04 per cent, while Japan’s Nikkei index closed up 0.11 per cent.

Europe

European shares inched lower on Wednesday as worries of a looming global recession kept investors from making bold bets, while a dive in the pound over fears of a disorderly Brexit pushed British stocks higher.

The pan-European STOXX 600 index ended 0.2 per cent lower paring deep losses from the morning, helped by London's exporter-heavy FTSE 100 as sterling tumbled after Prime Minister Boris Johnson announced plans to suspend parliament.

Johnson’s move, approved by Queen Elizabeth, limits the British parliament’s ability to derail his Brexit plans, stoking fears of an economically disruptive no-deal departure from the European Union on 31 October.

UK house-builders were the hardest hit on worries that a hard Brexit would damage the British economy. Persimmon, Berkeley, Barratt Developments and Taylor Wimpey were the biggest decliners on the FTSE 100, down 3 per cent to 5 per cent.

Dublin stocks sensitive to Brexit news fell 1.3 per cent with Irish low-cost carrier Ryanair falling nearly 2 per cent.

The picture was more mixed for the rest of Europe, with Germany's trade-sensitive DAX ending lower, but bank-heavy Madrid stocks finishing in the positive territory.

Milan stocks ended flat, reversing earlier losses as Italy appeared to be nearing the end of its latest political turmoil with the opposition Democratic Party (PD) saying it was ready to form a coalition with the 5-Star Movement.

A majority of European sub-sector indexes fell, with technology stocks .SX8P down 1 per cent after a forecast cut from US software company Autodesk Inc.

Danish companies were at extreme ends of the STOXX 600 index. Brewer Royal Unibrew was up 10 per cent on higher-than-expected second-quarter results and an upbeat outlook, but jeweler Pandora slumped 6 per cent after Tiffany & Co warned of the potential impact from ongoing protests in Hong Kong.

North America

US stocks have climbed, recovering from early declines on gains in energy and financial shares, but investors remain leery about the potential for another flare-up in the US-China trade war.

The financial sector was up 0.91 per cent on Wednesday, recouping all of the prior day's losses that came on a deepening of the US Treasury yield curve inversion, which often precedes a recession.

Gains in the benchmark S&P 500 index were also supported by a 1.40 per cent jump in energy stocks after industry data showed a fall in stockpiles of US crude, boosting oil prices, which settled up more than 1.5 per cent.

The two have been the worst performing of the 11 major S&P sectors in August.

Investors took some relief in the lack of new developments on the trade front although the US Trade Representative's office on Wednesday reaffirmed President Donald Trump's plans to impose an additional 5 per cent tariff on a list of $US300 billion ($445 billion) of Chinese imports starting on 1 September and 15 December.

Next week, investors will look towards the monthly jobs report and manufacturing data which could guide expectations on the likelihood of another rate cut from the Federal Reserve at its mid-September meeting.

The Dow Jones Industrial Average on Wednesday rose 258.2 points, or 1 per cent, to 26,036.1; the S&P 500 gained 18.78 points, or 0.65 per cent, to 2,887.94; and the Nasdaq Composite added 29.94 points, or 0.38 per cent, to 7,856.88.

In another factor that could support stock prices, the 30-year US Treasury yield fell below that of the S&P 500 dividend yield, making equities a more attractive income alternative.

Shares of Autodesk slid 6.74 per cent, as the worst performer on the S&P 500, after the company cut its full-year earnings forecast.

Shares of Tiffany & Co rose 3.02 per cent after the luxury jeweller reported quarterly earnings above analysts' estimates.

is content editor for Morningstar Australia

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