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Global Market Report - 31 May

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

The Australian share market is expected to open higher after a positive lead from Wall Street and despite escalating rhetoric between the US and China over trade.

The SPI200 futures contract was up 19 points, or 0.30 per cent, at 6,412.0 at 7am Sydney time, suggesting a rise for the benchmark S&P/ASX200 on Friday.

The Australian share market closed lower for a second day yesterday amid gloomy prospects for global economic growth.

The benchmark S&P/ASX200 index was down 47.9 points, or 0.74 per cent, to 6,392.1 points on Thursday, while the broader All Ordinaries was down 47.4 points, or 0.73 per cent, to 6,489.2.

On Wall Street overnight, the Dow Jones Industrial Average closed up 0.17 per cent, the S&P 500 was up 0.21 per cent and the tech-heavy Nasdaq Composite was up 0.27 per cent.

The Aussie dollar is buying 69.14 US cents from 69.34 US cents on Thursday.

Provoking trade disputes is “naked economic terrorism”, a senior Chinese diplomat said on Thursday, ramping up the rhetoric against the US amid a bitter trade war that is not showing any signs of ending soon.

“This kind of deliberately provoking trade disputes is naked economic terrorism, economic homicide, economic bullying,” China’s Vice Foreign Minister Zhang Hanhui said.

Asia

China stocks dropped on Thursday, as trade war fears heightened after Beijing stepped up the rhetoric against Washington.

The blue-chip CSI300 index fell 0.6 per cent, to 3,641.18, while the Shanghai Composite Index lost 0.3 per cent to 2,905.81.

Hong Kong stocks on Thursday closed at a four-month low as Beijing stepped up its rhetoric amid a festering trade dispute with Washington. The Hang Seng index ended down 0.4 per cent at 27,114.88 points, its lowest closing level since January 24, while the China Enterprises Index closed up 0.6 per cent at 10,450.09 points.

Japan’s Nikkei share average closed at a 3½-month low on Thursday, on growing anxiety the trade dispute between the US and China will be prolonged and damaging to the economy.

The Nikkei fell 0.29 per cent to 20,942, its lowest close since mid-February. It earlier declined as much as 0.92 per cent to 20,809, edging near its May 14 intraday low of 20,751.

Europe

European stocks rose on Thursday, boosted by media firms enjoying their best day in nearly five months on an earnings result and a potential deal - but the main regional index was on track to post its first monthly decline of 2019.

The STOXX 600 gained 0.4 per cent on the day, with media firms’ shares rising 1.8 per cent. Trading volumes were under 80 per cent their 90-day average due to market holidays in countries including Switzerland, Denmark and Sweden.

Germany’s DAX rose 0.5 per cent, while Axel Springer jumped 22.2 per cent on its best day since listing. The publisher’s main owners are in talks with private equity firm KKR to possibly take the company private.

Britain’s Daily Mail and General Trust was another gainer among media firms, rising 9.6 per cent as first-half adjusted pre-tax profit rose more than expected. It also reaffirmed its full-year forecasts.

Tariff-sensitive stocks of carmakers and their suppliers fell 0.3 per cent.

European and US firms’ earnings growth will continue to be anemic for much of this year, estimates accessed from Refinitiv show, with an end to the bruising US-China trade war not in sight. The STOXX 600 is down about 4.9 per cent in the month to date, and now set for its first monthly decline of 2019.

Utilities stocks slid 0.9 per cent on Thursday, with London-listed National Grid falling 4.6 per cent. Credit Suisse cut its price target on the stock, which was trading ex-dividend.

Spanish stocks rose 0.9 per cent, with Cellnex Telecom leading the index with a 4.8 per cent gain after Goldman Sachs boosted its rating on the stock and added it to its conviction list.

The chief executive of Europe’s biggest phone towers group said it expects more deals to take shape in 2019-2020 after its $3-billion splurge on assets owned by French tycoon Xavier Niel.

Passports and banknotes maker De La Rue Plc slumped 34 per cent on a profit warning and announcing its chief executive will leave the firm.

North America

US stocks have shown signs of stabilising but gains were kept in check by conflicting comments on trade talks from President Donald Trump and Beijing, which reinforced concerns about a potentially lengthy battle harming global growth.

Trump said talks with China were going well but his comments were countered by a senior Chinese diplomat who said provoking trade disputes is "naked economic terrorism".

The lack of clarity around the trade battle has rattled investors of late, after the S&P 500 had risen more than 17 per cent through the first four months of the year on optimism a trade deal between the two countries could be reached.

That optimism has faded, however, as the escalating dispute between the two countries has weighed heavily on Wall Street in May, with each of the three main indexes declining at least 5 per cent for the month. Thursday's gains marked the first advance for major US indexes this week.

A government report on Thursday showed US inflation was much weaker than initially thought in the first quarter on a sharp slowdown in domestic demand, while growth was also slightly lower than estimated in April.

The Dow Jones Industrial Average rose 43.47 points on Thursday, or 0.17 per cent, to 25,169.88, the S&P 500 gained 5.85 points, or 0.21 per cent, to 2788.87 and the Nasdaq Composite added 20.41 points, or 0.27 per cent, to 7567.72.

Trade jitters helped sustain demand for safe haven debt, as US Treasury yields held near 20-month lows. The yield curve between three-month bills and 10-year notes remained inverted, the inversion the widest in nearly 12 years.

That, in turn, weighed on interest-rate sensitive bank stocks, which dropped 1.2 per cent and were on track for a third straight day of declines, while the broader financial sector declined 0.5 per cent.

The energy sector fell 1.2 per cent, as oil prices settled down nearly 4 per cent in part due to a smaller-than-expected decline in US crude inventories. The sector has fallen more than 10 per cent this month.

Among stocks, Dollar General jumped 7.2 per cent after the discount retailer's same-store sales and profit topped expectations.

PVH Corp plunged 14.9 per cent as the worst performer on the S&P 500, after the Calvin Klein owner cut its annual profit forecast as it grapples with tariffs and slowing retail growth.

is content editor for Morningstar Australia

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