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Global Market Report - 31 October

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

The Australian share market is expected to open little changed despite gains on Wall Street overnight after the US central bank announced another rate cut.

The SPI200 futures contract was up 6.0 points, or 0.09 per cent, at 6,676.0 at 7am Sydney time, suggesting a steady start for the benchmark S&P/ASX200 on Thursday.

The Australian share market snapped seven days of gains yesterday with a major sell-off that left every sector in the red.

The benchmark S&P/ASX200 index finished Wednesday down 55.9 points, or 0.83 per cent, to 6,689.5 points, while the broader All Ordinaries fell 53.8 points, or 0.79 per cent, to 6,794.7 points.

The US Federal Reserve cut interest rates for the third time this year - the same number as the Reserve Bank of Australia - but signalled that no further reductions were planned.

On Wall Street, the Dow Jones Industrial Average was up 0.37 per cent, the S&P 500 was up 0.36 per cent and the tech-heavy Nasdaq Composite was up 0.30 per cent.

The Aussie dollar is buying 68.92 US cents from 68.62 US cents on Wednesday.

Asia

China stocks ended lower on Wednesday, shadowed by renewed doubts over the prospects of a first-phase of the Sino- US trade deal.

Hong Kong stocks closed lower on Wednesday, as renewed worries over the prospects of a Sino- US trade deal dampened sentiment.

The Hang Seng index fell 0.4 per cent, to 26,667.71, while the China Enterprises Index lost 0.6 per cent, to 10,479.09.

The blue-chip CSI300 index fell 0.5 per cent to 3,891.23, while the Shanghai Composite Index also shed 0.5 per cent to 2,939.32.

Europe

European shares eked out gains on Wednesday, buoyed by upbeat results from L’Oreal which defied Chinese slowdown fears, although weak earnings from some of the bloc’s biggest lenders such as Deutsche Bank and Santander kept a lid on gains.

The pan-European STOXX 600 index was up 0.1 per cent, with a 1.5 per cent rise in the personal & household goods sector leading gains.

Providing the biggest boost to the sector was L’Oreal’s 7.6 per cent jump, after the Lancome owner beat quarterly revenue forecasts aided by robust demand across Asia and especially in mainland China.

Expectations had been low going into the European corporate earnings season, and after three weeks the overall picture has proved better than expected, with most companies modestly beating estimates.

Disappointing results from some of the Europe’s top lenders, pushed banks 1.9 per cent lower, clocking the biggest decline among the major sub-sectors.

Deutsche Bank fell 8 per cent, as it reported a loss for the second consecutive quarter due to the costs of its wide-ranging global restructuring. The bank also pressured Frankfurt shares, which dropped 0.2 per cent.

Spanish stocks lost 1.2 per cent, lagging the most across major country indexes, hurt by a 4.1 per cent slide in Santander shares.

The euro zone’s biggest lender said net profit fell 75 per cent due to one-off charges in the UK.

Another disappointment was Swiss lender Credit Suisse, which shed 2.6 per cent after issuing a cautious 2020 outlook.

Market participants took heart from a warmer tone around  US-China trade relations after the White House said the Trump administration still expects to sign an initial trade agreement with China next month despite the cancellation of the APEC summit in Chile where officials had hoped to finalise the pact.

All eyes are now on the  US Federal Reserve’s decision on interest rates at 1800 GMT, with a cut in borrowing costs for the third time this year almost certain.

Italian-American carmaker Fiat Chrysler confirmed it was in merger talks with French rival PSA on a deal that would reshape the global industry.

Shares of both companies rose 9.5 per cent and 4.5 per cent respectively, with Peugeot hitting an 11-year high. Shares in another French carmaker, Renault, which was in talks with Fiat earlier this year about a similar deal, slid 4 per cent.

Among other stocks, Italian tyre-maker Pirelli slumped 10.7 per cent, to the bottom of STOXX 600, after lowering its guidance on operating profit margin and cash flow, and as it said it would delay the presentation of its new business plan in a worsening market scenario.

North America

Wall Street gained ground and US Treasury yields fell on Wednesday after the Federal Reserve signalled a pause in the current easing cycle following the expected announcement of a rate cut.

At the conclusion of its two-day monetary policy meeting, the Fed cut key interest rates for the third time this year. “We believe that monetary policy is in a good place,” Fed Chair Jerome Powell said in a news conference.

Stocks retraced losses from earlier, when a spate of mixed corporate earnings and a decline in the  US GDP growth rate kept investors cautious.

The Commerce Department’s advance reading of third-quarter GDP showed the  US economy expanded at a 1.9 per cent annual rate, down from 2 per cent in the second quarter but beating the 1.6 per cent growth rate analysts expected.

The Dow Jones Industrial Average rose 115.27 points, or 0.43 per cent, to 27,186.69, the S&P 500 gained 9.88 points, or 0.33 per cent, to 3,046.77 and the Nasdaq Composite added 27.12 points, or 0.33 per cent, to 8,303.98.

The pan-European STOXX 600 index rose 0.08 per cent and MSCI’s gauge of stocks across the globe gained 0.23 per cent.

However, emerging market stocks lost 0.10 per cent. MSCI's broadest index of Asia-Pacific shares outside Japan closed 0.11 per cent lower, while Japan's Nikkei lost 0.57 per cent.

The  US Treasury yields dropped following the Fed’s announcement.

 

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