Global Market Report - 3 December

Australian shares are set to rise while the local dollar has hit near four-month highs after the US and China agreed to halt their market-rattling trade spat with a 90-day tariff truce.

Lex Hall

03 December 2018

Australia

Australian shares are set to rise while the local dollar has climbed to near four-month highs after the US and China agreed to halt their market-rattling trade spat with a 90-day tariff truce.

The SPI200 futures contract is up 25 points, or 0.44 per cent, to 5699.0, at 7am on Monday, pointing to a jump for the ASX, after the weekend's trade breakthrough between US President Donald Trump and Chinese leader Xi Jinping at the G20 summit in Buenos Aires.

The US promised to leave existing tariffs on $200 billion of Chinese goods at 10 per cent and refrain from raising that rate to 25 per cent on 1 January. China agreed to boost purchases of farm and industrial goods to reduce the trade imbalance.

The Aussie has surged ahead to its highest point since early August, buying 73.73 US cents, up from 73.15 US cents on Friday.

On local markets, the Reserve Bank will meet on Tuesday, but is expected to leave interest rates on hold, while third quarter growth statistics will be released on Wednesday.

On Thursday, the RBA's deputy governor Guy Debelle will address "Questions from the GFC"
at the annual Australian Business Economist's dinner.

ASIA

The Hang Seng index rose 0.2 per cent at 26,506.75 on Friday, and gained 2.2 per cent for the week. The Hang Seng China Enterprises index rose 0.4 per cent to 10,621.74 on Friday, and was up 2.2 per cent for the week.

The sub-index of the Hang Seng tracking energy shares rose 1.8 per cent. The top gainer on the Hang Seng on Friday was Chinese energy provider CNOOC, which rose 3.7 per cent.

China's A-share market rose, aided by expectations of policy support should the G20 trade talks collapse. But trading volume was thin as investors sought to avoid shocks from the summit.

MSCI's Asia ex-Japan stock index fell by 0.4 per cent.

EUROPE

The pan-European STOXX 600 closed down 0.3 per cent and on a 1.2 per cent loss over the month after a poor earnings season.

Germany's DAX, the most sensitive to China due to its big exporters, fell 0.4 per cent.

German blue chip companies posted their fourth straight month of losses, with a 1.6 per cent dip in November - the longest losing streak since 2008.

Luxury goods conglomerates Kering and LVMH, fell 1.2 per cent and 1.5 per cent respectively. Luxury stocks have been especially sensitive to slowing growth in China.

UK shares posted a second straight monthly loss, with builders, financial and mining stocks leading the losses. The FTSE 100 fell 0.8 per cent, trailing its eurozone peers due in part to its heavy weighting in mining stocks. The midcap FTSE 250 was down 0.7 per cent.

NORTH AMERICA

Wall Street rose on Friday as investors hoped for - and got - progress on trade in a critical US-China meeting over the weekend, and the S&P 500 and the Nasdaq posted their biggest weekly percentage gains in nearly seven years.

The Dow saw its largest weekly advance in two years.

At the G20 meeting in Buenos Aires on Saturday the US and China had reached a 90-day ceasefire.

Investors were encouraged this week by comments by US Federal Reserve Chair Jerome Powell and subsequent minutes from the central bank's latest meeting that suggested that the Fed will take a data-driven rather than ideological approach to future rate-hikes.

All three major US indexes recorded modest monthly percentage gains for November.

Of the 11 major sectors in the S&P 500, all but energy ended the session in positive territory.

Energy stocks fell 0.2 per cent as crude prices extended their slide.

But falling oil prices boosted airlines stocks. The Dow Jones Airlines index rose 2.8 per cent.
Shares of Marriott International sank 5.6 per cent after the hotel operator said hackers stole about 500 million records from its Starwood Hotels reservation system.

General Electric shares slid 5.5 per cent following a Wall Street Journal report that former employees are being questioned by federal investigators about the company's failure to acknowledge its insurance business' worsening results over the years.

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AUTHOR

Lex Hall
is senior editor for Morningstar Australia

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