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Global Market Report - 4 July

Glenn Freeman  |  04 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open in positive territory, after each of the major US indexes hit new highs overnight.

The SPI200 futures contract was up 22 points, or 0.33 per cent, at 6,645.0 at 8am Sydney time, suggesting an early bounce for the benchmark S&P/ASX200 on Thursday.

All three major Wall Street indices finished at record highs, with the Dow Jones Industrial Average closing up 0.67 per cent, the S&P 500 up 0.77 per cent and the tech-heavy Nasdaq Composite up 0.75 per cent.

Australian shares booked solid gains yesterday, the S&P/ASX 200 Index closing at 32.3 points, or 0.5 per cent, higher at 6685.5, just 2 points below its 20 June peak.

The Aussie dollar is buying 70.34 US cents, from 69.94 US cents on Wednesday.

Ahead today: May figures for both retail sales and ABS job figures.

Asia

Chinese shares fell on Wednesday amid waning investor optimism over progress in trade negotiations between the United States and China, and as new data from China’s services sector added to signs of a domestic slowdown.

At the close, the Shanghai Composite index was down 0.94 per cent at 3,015.26. The blue-chip CSI300 index fell 1.11 per cent, with its financial sector sub-index losing 0.72 per cent, the consumer staples sector down 2.92 per cent and the healthcare sub-index off 1.62 per cent.

Real estate shaers gained 1.15 per cent, driven by a 1.07 per cent gain in the Shenzhen shares of China Vanke Co, as it announced contract sales jumped 9.6 per cent in the first half.

In Hong Kong, waning investor enthusiasm around the prospects of a new US-China trade deal led shares lower on Wednesday – at the same time as weak Chinese economic data was announced.

At the close of trade, the Hang Seng index was down 20.42 points or 0.07 per cent at 28,855.14.

The Hang Seng China Enterprises index ended down 0.54 per cent at 10,922.41, with slowing growth in China’s services sector further weighing on sentiment.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.45 per cent, while Japan’s Nikkei index closed down 0.53 per cent.

Japanese stocks slid on Wednesday on a weaker yen and broad-based profit taking among export-linked stocks, ahead of the 4 July holiday in the US.

Japan’s benchmark Nikkei share average fell 0.7 per cent to 21,608.73 by the midday break, but was only just below its two-month high touched on Tuesday.

Europe

European shares edged higher in early trading on Wednesday on hopes that France’s Christine Lagarde, who was named the new head of the European Central Bank, will continue with the dovish policy stance of current chief Mario Draghi.

Government bond yields in much of the euro zone fell to fresh record lows on the news and bank stocks, which tend to suffer from a low interest rate environment, fell 0.5 per cent.

The pan-European STOXX 600 index gained 0.2 per cent, with the food and beverages sector outperforming with a 0.9 per cent rise.

German consumer goods company Henkel rose 1.5 per cent after Goldman Sachs upgraded the stock to “buy” from “neutral” as the brokerage expects the company’s recovery in the second half of the year to drive future growth.

European chipmakers took a hit after a senior US official told the Commerce Department’s enforcement staff this week that China’s Huawei should still be treated as blacklisted.

The news comes as a stark difference from US President Donald Trump decision over the weekend to ease a ban on sales to the Chinese firm.

STMicroelectronics, STMicroelectronics and Infineon fell between 1 per cent and 2 per cent.
In the currency markets, the pound flirted with two-week lows after the PMI data and stood at $US1.2568, on course for its fifth drop in the last six sessions.

The euro was steadier at $US1.1282 while the dollar traded down at 107.70 yen, off Monday's high of 108.535 hit after the weekend agreement between the United States and China to resume trade talks.

Sweden's crown meanwhile hit a two-and-a-half month high of 10.4890 versus the euro after the Riksbank bucked the global trend back towards cutting interest rates and said it remained on track to raise its by early 2020, albeit with some caveats.

North America

US stocks rose yesterday, with each of the major indexes closing at a record high, as expectations grew the Federal Reserve would take a more dovish turn as a raft of data provided more evidence of a slowing economy.

Benchmark US 10-year Treasury Note yields touched its lowest since November 2016 at 1.939 per cent, while eurozone yields tumbled to record lows on bets the European Central Bank's next chief would stay a dovish course.

Data on Wednesday showed the US trade deficit jumped to a five-month high while services sector data showed a slowdown in activity. The reports come on the heels of data on housing, manufacturing, business investment and consumer spending that point to slowing economic growth in the quarter.

The Dow Jones Industrial Average on Wednesday rose 179.32 points, or 0.67 per cent, to 26,966; the S&P 500 gained 22.79 points, or 0.77 per cent, to 2,995.8; and the Nasdaq Composite added 61.14 points, or 0.75 per cent, to 8,170.23.

The defensive utilities, real estate and consumer staples rose the most among the 11 major S&P sectors as the falling bond yields made stocks that pay high dividends more attractive.

The dividend yield for the broad S&P 500 and the 10-year Treasury are nearly identical.

Rising expectations for a rate cut, fuelled by softer economic data and comments from global central banks indicating a more dovish stance helped the S&P 500 and the Dow Jones indexes post their best June performance in decades.

Among stocks, Symantec surged 13.57 per cent, the most on the S&P, after sources told Reuters that chipmaker Broadcom is in advanced talks to buy the cybersecurity firm. Broadcom fell 3.5 per cent.

Tesla rose 4.61 per cent after the electric car-maker set a record for quarterly vehicle deliveries after months of questions about demand for its luxury electric cars.

is senior editor for Morningstar Australia

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