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Global Market Report - 29 October

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

The Australian share market is expected to rise at the start of trade after stocks hit new highs on Wall Street overnight.

The SPI200 futures contract was up 23.0 points, or 0.34 per cent, at 6,741.0 at 7am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Tuesday.

The Australian share market gave up nearly all of its early gains yesterday, just barely extending its winning streak to six days ahead of a busy week for economic data.

After being up by as many as 27 points in the morning, the benchmark S&P/ASX200 index finished Monday just 1.5 points higher, to 6,740.7 points.

The S&P 500 hit a record high on Monday, while the Nasdaq fell just short of its lifetime high touched in late July as a more civil tone between the US and China lifted hopes for a possible trade deal and investors looked toward a Federal Reserve rate cut later this week.

On Wall Street, the Dow Jones Industrial Average was up 0.50 per cent, the S&P 500 was up 0.55 per cent after hitting a record high and the tech-heavy Nasdaq Composite was up 1.07 per cent.

The Aussie dollar is buying 68.41 US cents from 68.15 US cents on Monday.

Asia

China stocks closed higher on Monday, underpinned by gains in tech heavyweights after Beijing pledged more support for the sector, amid hopes that the Sino-US negotiators were making headway in their trade talks.

The blue-chip CSI300 index ended 0.8 per cent firmer at 3,926.59, while the Shanghai Composite Index closed up 0.9 per cent to 2,980.05.

Hong Kong stocks closed at a six-week peak on Monday, boosted by gains in tech firms and as investors cheered progress in Sino-US trade talks.

The Hang Seng index rose 0.8 per cent to 26,891.26, its highest closing level since Sept. 16, while the China Enterprises Index climbed 1.0 per cent to 10,569.82.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.43 per cent, while Japan’s Nikkei index closed up 0.3 per cent.

Europe

European shares touched their highest level since January 2018 on Monday, boosted by carmakers and miners on hopes that the US and China were closer to getting a trade deal, while a drop in banks led by HSBC capped gains.

US President Donald Trump said he expected to sign a significant part of the trade deal with China ahead of schedule but did not elaborate on the timing. This helped the S&P 500 index on Wall Street hit a record high.

Among the major regional indexes, export-heavy Frankfurt-listed shares .GDAXI rose 0.4 per cent, while the pan-European STOXX 600 index gained 0.3 per cent.

European automakers jumped 1.8 per cent, hitting a near six-month high, while commodity-linked stocks rose 1.5 per cent.

The latest development on US-China trade comes as investors are trying to gauge its impact on European corporate earnings. After the three busiest weeks of the reporting season, companies have managed to deliver modest beats to earnings expectations but analysts say that the bar had been lowered.

Defensive plays like utilities, food & beverage and telecoms lost between 0.5 per cent and 0.3 per cent as appetite for riskier sectors increased and as investors moved back into growth sectors in response to the more positive tone on the political front.

This has included the European Union agreement for a three-month flexible delay to Britain’s departure from the bloc, while Prime Minister Boris Johnson pushes for an election.

Also aiding the upward move was a rise in luxury stocks on new M&A activity.

Louis Vuitton owner LVMH made a proposal to buy US jeweller Tiffany & Co with a $14.5 billion offer.

While LVMH shares edged lower, rivals Swatch, Pandora and Salvatore Ferragamo traded higher.

Europe’s largest bank HSBC slipped 3.7 per cent, after it dropped its 2020 profit target, and said it would undertake a costly restructuring against the backdrop of a gloomy business environment in Europe and the United States.

HSBC shares pulled the banking index 0.4 per cent lower and kept the European blue-chip index in the red.

Another disappointment among banks was Spain’s Bankia, down 1.8 per cent, after it signalled lending income could fall slightly in 2019 compared to 2018, hurt by ultra-low interest rates which are expected to erode margins further.

Investors will look to the US Federal Reserve’s meeting later this week for more clarity and potential support for a slowing economy.

Among other stocks, shares in Nokia touched a new 6-year low after Bank of America Merrill Lynch removed the company from its Europe 1 list after its dismal earnings report last week.

North America

Microsoft Corp shares climbed 2.46 per cent, making the stock among the biggest boosts to each of three major indexes after the technology giant won the Pentagon’s $10 billion cloud computing contract, beating Amazon.com Inc.

After rising as much as 0.71 per cent to 3,044.08, the benchmark S&P closed up 0.56 per cent at 3,039.34, topping the record high of 3,025.86 hit on July 26, while the Nasdaq ended the session less than 5 points below its closing high. The Dow Jones Industrial Average ended less than 1 per cent away from its record closing level.

President Donald Trump said on Monday he expected to sign a significant part of a trade deal with China ahead of schedule but did not elaborate on the timing, building on optimism from Friday when Washington said it was “close to finalising” some parts of a trade deal.

Economic data shows the trade war between the world’s two largest economies has begun to take a toll on both countries, leading to worries about a global slowdown.

Global central banks have responded by easing monetary policy. The Federal Reserve is expected to follow that trend at its two-day policy meeting beginning on Tuesday, with high expectations that it will cut interest rates for a third time this year.

The Dow Jones Industrial Average rose 132.25 points, or 0.49 per cent, to 27,090.31, the S&P 500 gained 16.79 points, or 0.56 per cent, to 3,039.34 and the Nasdaq Composite added 82.87 points, or 1.01 per cent, to 8,325.99.

The outlook for a quarter percentage point cut in US borrowing costs have jumped to 94.1 per cent from 49.2 per cent last month, according to CME Group’s FedWatch tool.

The third-quarter earnings season has managed to ease some concerns related to the impact of trade tensions on corporate profits, with over 78 per cent of the 204 S&P 500 companies that have reported so far surpassing profit expectations, according to Refinitiv data. Still, third-quarter earnings are expected to show a decline of 2 per cent.

Investors are waiting for earnings from heavyweights this week such as Apple Inc, Starbucks and Merck & Co Inc.

Chipmakers, which have acted as a proxy for trade tensions with China, gained 1.75 per cent on Monday. The technology, healthcare and communication services sectors gained more than 1 per cent each.

Among other stocks, AT&T Inc rose 4.28 per cent after the US wireless carrier said it would add two new board members and consider selling off up to $10 billion worth of non-core businesses next year.

Tiffany & Co surged 31.63 per cent after Louis Vuitton owner LVMH made a $120 per share offer to buy the US luxury jeweller.

 

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