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Global Market Report - 4 December

Lex Hall  |  04 Dec 2018Text size  Decrease  Increase  |  
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Australia

Australian shares are set to slide at the open as the surge of optimism around the US-China trade truce dissipates, with overseas markets fading in late trade as investors search for more detail on the nations’ relationship.

The SPI200 futures contract is down 21 points, or 0.36 per cent, to 5750 at 7am Sydney time, with the ASX set to retrace gains it enjoyed on news that President Donald Trump and Chinese President Xi Jinping agreed to hold off on new tariffs for 90 days at their meeting in Argentina.

The Aussie has edged lower overnight, buying US73.49c, down from US73.65c on Monday.

The ASX surged yesterday on the news of the truce, with energy and mining stocks posting big gains. The benchmark S&P/ASX200 index was up 104 points, or 1.84 per cent, at 5771.2 on Monday, while the broader All Ordinaries rose 1.86 per cent.

The Reserve Bank will make its monthly cash rate decision at 2.30pm, with analysts expecting interest rates to remain on hold a record low of 1.5 per cent.

Also out today: current account third quarter, net exports contribution to GDP third quarter.

ASIA

News of the 90-day trade truce buoyed stocks in China and Hong Kong. The benchmark Shanghai Composite Index rose by 2.6 per cent to 2,654.8, recording its biggest daily gain in a month, while the blue-chip CSI300 index jumped 2.8 per cent.

In Hong Kong, the benchmark Hang Seng Index rose by 2.6 per cent to 27,182.04, after China vowed to buy a "substantial amount" of US goods while Washington will delay a scheduled increase in tariffs next month on US$200 billion worth of Chinese imports.

Since the start of the year, the benchmark indices in Shanghai and Hong Kong have fallen by 21 per cent and 11 per cent, respectively, largely because of trade tensions.

Carmakers and car part producers led the rise in stocks following Trump's tweet announcing that China had agreed to reduce and remove the current 40 per cent tariffs on imported cars from the US.

Tech and consumer stocks also shot up, led by telco parts giant ZTE. Temporarily banned by the US this year, the stock rose by almost 3 per cent.

In Tokyo, the Nikkei share average soared 1.0 per cent to 22,574.76, the highest closing level since October 22.

EUROPE

The Stoxx Europe 600 rose 1.3 per cent. The UK's FTSE 100 rallied 1.1 per cent. Germany’s DAX Index gained 1.8 per cent. France's CAC rose 1 per cent.

Stocks stabilised early last month but the selling picked up again as the trade tensions and slowing global growth forced investors to shun tech stocks, while a fall in the oil price put a dent in energy stocks.

On the currency front, the euro gained 0.3 per cent to $1.1352. The British pound weakened less than 0.1 per cent to $1.2727. Sterling gave up early gains and fell to its lowest since the end of October as investors dumped the currency on growing concerns about parliamentary approval for a Brexit deal.

NORTH AMERICA

Wall Street's major indexes have rallied following the truce in the US-China trade row, which has clouded the outlook for the stock market for much of the year.

The benchmark S&P 500 climbed more than 1 per cent, building off of its biggest weekly percentage gain in nearly seven years a week ago.

Oil prices jumped nearly 4 per cent and prices of industrial metals rose overnight with copper hitting a two-month high after the trade news.

Investors were lifted by news over the weekend that US President Donald Trump and Chinese President Xi Jinping agreed during talks in Argentina to hold off on new tariffs for 90 days, declaring a truce following months of escalating tensions on trade and other issues.

Still, major indexes closed below their highs from earlier in the session.

Last week, the S&P 500 gained 4.8 per cent as investors interpreted commentary from the US Federal Reserve as signalling that US interest rate hikes may be less aggressive than feared.

The index rebounded after confirming its second 10 per cent correction of the year, and is now up 4.4 per cent in 2018.

On Monday, the technology sector, among the groups seen as sensitive to trade tensions, gained 2.1 per cent. Apple shares, recently hit by worries over possible tariffs on iPhones, gained 3.5 per cent.

Shares of Boeing and Caterpillar , two industrial companies viewed as trade bellwethers, gained 3.8 per cent and 2.4 per cent, respectively, and gave a lift to the blue-chip Dow. The industrial sector rose 1.2 per cent.

Energy shares rose 2.3 per cent as oil prices bounced back from their recent swoon.

Along with the US-China trade detente, oil got support as Canada's Alberta province ordered a production cut, while exporter group OPEC looked set to reduce supply.

In corporate news, shares of Tesaro soared 58.5 per cent after GlaxoSmithKline agreed to buy the US cancer specialist for $US5.1 billion.

Tribune Media Co shares rose 11.7 per cent after Nexstar Media Group said it agreed to buy its Chicago-based peer for about $US4.1 billion, making it the largest regional US TV station operator. Nexstar shares rose 6.9 per cent.

 

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