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Global Market Report - 3 January

Lex Hall  |  03 Jan 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is set for an early boost after Wall Street hit fresh record highs overnight on easing trade tensions and fresh stimulus for the Chinese economy.

The SPI200 futures contract was up 58 points, or 0.88 per cent, at 6,682.0 at 7am Sydney time, suggesting the benchmark S&P/ASX200 is set to climb at the open of trade.

The ASX made marginal gains during the first day's trade of 2020, with telco and consumer discretionary stocks helping offset a weak open by health care and industrials.

The benchmark S&P/ASX200 index finished Thursday up 6.5 points points, or 0.1 per cent, to 6,690.6 points, with the broader All Ordinaries up 7.6 points, or 0.11 per cent, to 6,810 points.

Global sentiment is buoyant on news that China's central bank is freeing another 800 billion yuan ($164 billion) to prop up a slowing economy, while the nation's trade relationship with Washington is also improving.

All three US indices closed at a fresh record high.

The Australian dollar has fallen back from recent five-month highs and is buying 69.81 US cents, from 70.01 US cents on Thursday.

Asia

Chinese shares rallied on the first trading day of the new decade on Thursday after US President Donald Trump said he will seal a deal with Beijing mid-month and as the Chinese central bank ramped up policy support.

The Shanghai Composite index was up 1.2 per cent at 3,085.20 points - its highest level since last April. The blue-chip CSI300 index climbed 1.4 per cent to its highest level since February 2018.

Trump said on Tuesday that phase one of trade deal with China would be signed on 15 January at the White House and that he would later travel to Beijing to begin talks on the next phase.

China’s central bank said on Wednesday it was cutting the amount of cash that all banks must hold as reserves, effective 6 January, releasing around 800 billion yuan ($114.91 billion) in funds to shore up the slowing economy.

The People’s Bank of China has now cut the reserve requirement ratio eight times since early 2018 to free up more funds for banks to lend as economic growth slows to the weakest pace in nearly 30 years.

China’s factory activity expanded at a slower clip in December, pulling back from a three-year high the previous month as new orders softened, but production continued to grow at a solid pace and business confidence shot up.

The Caixin/Markit Manufacturing Purchasing Managers’ Index for December eased to 51.5 from 51.8 in November, but it remained above the 50-mark that separates expansion from contraction for the fifth straight month.

Hong Kong’s Hang Seng added 1.25 per cent. In Japan, the Nikkei 225 lost 0.76 per cent.

Europe

Fresh monetary stimulus in Beijing and growing Sino-US trade optimism helped European shares stay close to record highs on Thursday with banks and technology stocks leading a broad-based rally.

Riding the high tide across global markets, the pan-European stocks index STOXX 600 jumped 0.9 per cent after declining for two straight sessions when caution crept in about how long a US-China trade truce would last.

But US President Donald Trump brightened the mood on Tuesday by saying the phase one agreement would be signed on 15 January  at the White House.

Lenders were on a tear, up 1.9 per cent at their highest in nearly eight months, followed by the technology sector that was driven by gains in trade-sensitive chip stocks.

China-exposed mining and auto shares were also among the biggest gainers along with industrials which were lifted by a 2.3 per cent jump in Airbus after it edged out Boeing to become the world’s biggest planemaker.

That lifted the wider French index 1.1 per cent. Bank-heavy Spanish and Italian indices gained the most in the region, up around 1.4 per cent each, while German shares posted their best day in one month, shrugging off figures that showed the manufacturing sector contracted further in December.

Euro zone stocks jumped 1.2 per cent on Thursday despite latest data showing factory activity in the bloc contracting for the eleventh straight month.

The benchmark European STOXX 600 index ended last year with its biggest annual gain since the global financial crisis on easing recession fears and a loose monetary policy by some of the world’s biggest central banks.

Signalling that it stood pat to boost a slowing economy, China’s central bank on Wednesday lowered the reserve requirement ratio for banks for the eighth time since 2018, with the latest cut freeing up about 800 billion yuan ($164 billion).

London-listed shares climbed 0.8 per cent. The other key date this month for European markets will be 31 January - the deadline for Britain's exit from the European Union. Higher volatility during this period will also stem from companies starting to report fourth-quarter results and expectations for 2020.

Missing out on the broader rally, Tullow Oil Plc shares fell 6.8 per cent an on doubts over commercial viability of a reservoir in its newly struck oil well in offshore Guyana.

North America

Wall Street’s major indexes notched record highs to open the new year on Thursday, as fresh economic stimulus from China added to optimism fuelled by easing trade tensions and an improving global outlook.

China’s central bank said on Wednesday it would cut the amount of cash that all banks must hold as reserves, the eighth such cut since early 2018. The move to inject fresh stimulus into the Chinese economy boosted equity markets around the globe.

The benchmark S&P 500 hit its 11th record high in 14 sessions and posted its largest daily percentage gain in three weeks. The Dow registered its biggest such gain in almost four weeks, and the Nasdaq its greatest in nearly three months.

Economic stimulus in China, along with the easing of trade tensions between Washington and Beijing, has bolstered optimism that the global economy will accelerate in 2020.

Among the S&P 500’s sectors, technology and industrials, both of which have high exposure to the Chinese economy, rose more than 1 per cent and led in percentage gains. Shares of Apple Inc, which have been a bellwether of trade sentiment, ended 2.3 per cent higher and surpassed US$300.

The lengthy rally on Wall Street has prompted some concerns that US stocks are vulnerable to a pullback, especially if economic growth does not pick up as much as expected or if US-China trade tensions reignite.

The Dow Jones Industrial Average rose 330.36 points, or 1.16 per cent, to 28,868.8, the S&P 500 gained 27.07 points, or 0.84 per cent, to 3,257.85 and the Nasdaq Composite .IXIC added 119.59 points, or 1.33 per cent, to 9,092.19.

Adding to positive economic sentiment, data from the US Labor Department showed the number of Americans filing claims for jobless benefits edged lower last week.

Other data from Greater China showing that gross gaming revenue in Macau fell less than expected in December boosted shares of US casino operators. Shares of Wynn Resorts Ltd, Las Vegas Sands Corp and Melco Resorts & Entertainment Ltd rose between 2 per cent and 4 per cent.

The S&P 500 posted 59 new 52-week highs and one new low; the Nasdaq Composite recorded 115 new highs and 15 new lows.

 

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