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Global Market Report - 31 July

Lex Hall  |  31 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after a negative lead from overseas, including a fall in US tech stocks.

The SPI200 futures contract was down 28 points, or 0.41 per cent, at 6,755.0 at 7am Sydney time, suggesting an early fall for the benchmark S&P/ASX200 on Wednesday.

The Australian share market hit its highest levels ever yesterday, eclipsing a mark set just before the global financial crisis more than 11 years ago.

The benchmark S&P/ASX200 index traded as high as 6,875.5 in early trade, beating the intraday high of 6,851.5 set 1 November, 2007.

The index of Australia's 200 companies finished Tuesday up 19.3 points, or 0.28 per cent, to 6,845.1 - also its highest close ever.

On Wall Street overnight, the Dow Jones Industrial Average finished down 0.09 per cent, the S&P 500 was down 0.26 per cent and the tech-heavy Nasdaq Composite was down 0.24 per cent.

Germany's DAX slumped 2.18 per cent while in France the CAC 40 fell 1.61 per cent.

The Aussie dollar is buying 68.71 US cents from 68.99 US cents on Tuesday.

Asia

In China, the Shanghai Composite Index closed up 0.39 per cent to 2,952.34, its highest level in three weeks.

The CSI 300, which tracks blue chips on Shenzhen and Shanghai, rose 0.4 per cent to 3,870.32.

Hong Kong shares closed higher on Tuesday as investors awaited an expected US interest rate cut this week, while Sino-US trade negotiations are due to begin later in the day.

The Hang Seng index rose 0.1 per cent, to 28,146.50 points, while the China Enterprises Index gained 0.4 per cent, to 10,818.35.

In Japan, the Nikkei share average rose 0.43 per cent to 21,709.31, edging near its 2-1/2-month high of 21,823 touched last week.

Europe

European shares slipped on Tuesday as grim forecasts from German giants Bayer and Lufthansa soured sentiment, while a battered pound helped London’s blue-chip index outperform for a second day.

Bayer slipped 3 per cent as it became the latest agricultural supplies company to be affected by flooded farms in the United States and by trade disputes, saying its full-year earnings target has become harder to reach.

Airline Lufthansa dropped 5.6 per cent after posting a decline in second-quarter earnings and saying that the European market was likely to remain challenging this year.

That helped make Europe’s travel and leisure index the biggest faller among major sectors, with a 1.1 per cent drop that would be its worst in more than a month.

With concerns about global growth still bubbling among investors, a GfK survey showed German consumer morale worsening for the third month in a row heading into August as trade disputes bit in Europe’s biggest exporter.

Germany's main stocks index fell 0.5 per cent by 0758 GMT, while the broader pan-European stocks STOXX 600 lost 0.4 per cent.

As evidence continues to build of the impact of a bruising trade war on global growth, expectations that major central banks will adopt accommodative policies have buoyed global markets since a sharp fall in May.

The US Federal Reserve is widely expected to deliver a quarter-point cut in rates on Wednesday, although there is some lingering hope it could respond to President Donald Trump’s call for a bigger move - or at least point the way to more easing in the near future.

London's blue chip FTSE 100 index was the big outperformer of the main indexes, touching fresh 11 month highs on the back of a 3 per cent jump in shares for energy giant BP.

The index, heavy with internationally-focused firms who get their revenue from abroad, was also supported by a drop in sterling to more than two-year lows on the rising possibility of a disorderly Brexit.

Ireland's main stock index ISEQ, which tends to fall when fears of a no-deal UK departure from the European Union grow, slid 1 per cent.

London-listed BBA Aviation topped the STOXX 600 with a 5.5 per cent jump after it announced a $1.37 billion deal to sell its aircraft parts unit to private equity firm CVC Capital Partners.

British household goods maker Reckitt Benckiser was the biggest weight on Europe’s main index after it reported lower than expected second-quarter sales and cut its full-year revenue target.

French stocks dipped 0.2 per cent, hit also by data showing the economy slowed slightly in the second quarter.

North America

Wall Street lost ground on Tuesday after a warning from President Donald Trump to China amid ongoing trade negotiations pressured technology shares, while investors looked to an expected Federal Reserve interest rate cut at the conclusion of its monetary policy meeting.

The three major US stock indexes concluded the session in the red, pressured by technology and consumer discretionary stocks.

As trade talks between the world’s two biggest economies continued in Shanghai on Tuesday, Trump warned China against trying to wait out his first term in office to finalize a deal.

Apple Inc’s results could illuminate the impact of the trade tensions with China. Shares of the iPhone maker closed down 0.4 per cent, contributing the most to the tech sector’s 0.7 per cent drop.

Market participants are looking to the Fed’s statement at the conclusion of its two-day meeting on Wednesday for clues as to how the central bank will proceed through year-end.

Many analysts said a 25-basis-point cut in interest rates is fully priced into the market.

Commerce Department data showed US consumer spending and prices rose moderately in June, pointing to slower economic growth and bolstering the case for monetary easing.

The Dow Jones Industrial Average fell 23.33 points, or 0.09 per cent, to 27,198.02, the S&P 500 lost 7.79 points, or 0.26 per cent, to 3,013.18. The Nasdaq Composite dropped 19.72 points, or 0.24 per cent, to 8,273.61.

More than half of the S&P 500 companies have released second-quarter earnings, of which 75.9 per cent have beat bottom-line analyst expectations, according to Refinitiv data.

Procter & Gamble Co jumped 3.8 per cent after the consumer products maker beat quarterly revenue estimates, limiting losses on the blue-chip Dow index.

Shares of Capital One Financial Corp fell 5.9 per cent after the credit-card issuer said information on 106 million people had been compromised.

Pfizer Inc’s stock dropped 6.4 per cent, weighing the most on the healthcare index, after brokers downgraded the stock following the drugmaker’s announcement on Monday that it would spin off its Upjohn unit and merge it with Mylan.

Merck & Co Inc edged higher after reporting better-than-expected second-quarter results and raising its full-year earnings forecast.

is content editor for Morningstar Australia

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