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Global Market Report - 4 June

Lex Hall  |  04 Jun 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher despite a mixed lead from Wall Street and a fall on the Nasdaq as tech giants face an regulatory pressure.

The SPI200 futures contract was up 18 points, or 0.29 per cent, at 6,332.0 at 7am Sydney, suggesting a positive start for the benchmark S&P/ASX200 on Tuesday.

The Australian share market has suffered its worst loss in five months amid jitters on global growth and fears the US is picking a second trade war, this one with Mexico.

The benchmark S&P/ASX200 index closed down 76.4 points, or 1.19 per cent, to 6,320.5 points, while the broader All Ordinaries was down 81 points, or 1.25 per cent, to 6,410.8.

On Wall Street overnight, the Dow Jones Industrial Average closed up 0.02 per cent, the S&P 500 was down 0.28 per cent and the tech-heavy Nasdaq Composite was down 1.61 per cent.

The Aussie dollar is buying 69.77 US cents from 69.14 US cents on Monday.

Out today: Balance of payments first quarter; Retail sales for April; RBA board decision at 2.30pm; RBA governor Philip Lowe speaks at 7.30pm.

Asia

Shanghai stocks ended the first session of the month on a bearish note on concerns that escalating trade tensions could increase risks of a global slowdown, and as investors were worried Beijing’s stimulus measures might impact liquidity.

The blue-chip CSI300 index ended up 0.1 per cent at 3,632.01 on Monday, while the Shanghai Composite Index closed 0.3 per cent weaker at 2,890.08 points.

Hong Kong stocks recouped earlier losses to close flat on Monday, aided by telecommunications firms following a report that Beijing will push forward 5G development, although investors remained concerned that escalating trade tensions could increase risks of a global slowdown.

The Hang Seng index was unchanged at 26,893.86 points, while the China Enterprises Index gained 0.4 per cent, to 10,430.64 points.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.37 per cent, while Japan’s Nikkei index closed down 0.92 per cent.

Europe

European shares recovered from early losses to end Monday higher as gains in healthcare stocks helped head off weakness in trade-sensitive sectors like technology after the latest twist in the US-China trade war.

China will reportedly investigate whether FedEx Corp damaged its clients’ legal rights and interests after telecoms giant Huawei said parcels intended for it were diverted.

The pan-European STOXX 600 gained 0.4 per cent, coming off a 3½ -month low hit earlier in the day.

Germany’s DAX rose 0.6 per cent, shaking off pressure from a 8.1 per cent slide in Infineon’s shares after the chipmaker agreed to buy Cypress Semiconductor for $10 billion.

Payments firm Wirecard rose 3.6 per cent following a tweet by Chief Executive Markus Braun on Sunday saying the company was “steering toward an outstanding first half year of 2019”.

Merck KGaA was a source of optimism to both Germany’s DAX and the STOXX 600, rising 2.1 per cent. It reported Phase II results for an investigational therapy.

Lonza Group gained 3.9 per cent on announcing it will carve out its specialty ingredients business and cut around 130 jobs there as it reorganizes the struggling division.

Healthcare stocks, up 1.4 per cent on the day, dipped during May but greatly outperformed the STOXX 600 over the course of a month which saw investors scurrying toward safe havens as no end to the US-China trade war appeared in sight.

The tech sector - relatively exposed to worsening global trade ties - slipped 0.3 per cent on Monday, with Infineon’s chipmaking peer ASM International declining 0.7 per cent.

Financial services stocks fell 0.7 per cent, with Bolsas y Mercados Espanoles SHMSF SA leading the losses with a slide of 3.8 per cent.

The Spanish exchange operator reported a 22.3 per cent year-on-year drop in trading volumes for the month of May.

Travel and leisure stocks fell 0.6 per cent, weighed on by a 4.4 per cent decline in TUI as the travel firm’s contingency measures to cope with the grounding of Boeing 737 MAX jets were triggered.

Banks dipped 0.5 per cent, with Natixis sliding 4 per cent. Credit Suisse cut its target price on the French lender’s stock to 4.90 euros per share from 5.70 euros per share.

North America

The Nasdaq tumbled 1.6 per cent on Monday, confirming a correction as it was dragged down by Alphabet, Facebook and Amazon.com on fears the companies are the targets of US government antitrust regulators.

While the sell-off in the internet heavyweights was the biggest drag on the Nasdaq, the index has been falling steadily since its 3 May record closing high as investors worried about slowing global growth amid an escalating US-China trade war.

The S&P 500 had a volatile session and ended the day down 0.3 per cent, but the Dow Jones Industrial Average ended the session virtually unchanged.

The Dow Jones Industrial Average rose 4.74 points, or 0.02 per cent, to 24,819.78, the S&P 500 lost 7.61 points, or 0.28 per cent, to 2,744.45 and the Nasdaq Composite dropped 120.13 points, or 1.61 per cent, to 7,333.02 which was 10.2 per cent lower than its 3 May close.

A correction is defined as a 10 per cent drop from the most recent 52-week high.

The benchmark S&P 500 swung in and out of negative territory during the day as investors monitored the latest comments around the US trade battles with both China and Mexico, as well as US President Donald Trump’s decision on Friday to end preferential trade treatment for India.

An ISM survey showed US manufacturing growth unexpectedly slowed in May, driving demand for the safety of government bonds. Two-year yields hit their lowest since September 2017 on growing conviction that the Federal Reserve will start cutting interest rates to stave off a recession.

High-profile internet stocks dominated trading, with Facebook closing down 7.5 per cent after the Wall Street Journal reported that the Federal Trade Commission has secured the right to examine how the social media company’s practices affect digital competition. The stock was on pace for its biggest one-day drop since 26 July.

Alphabet Inc tumbled 6 per cent after sources told Reuters the US Justice Department is preparing an investigation to determine if the Google parent broke antitrust laws. Amazon.com fell 4.6 per cent on a report that the e-commerce giant could be put under the watch of the FTC.

The communication services sector, which includes Google and Facebook, closed down 2.8 per cent, the biggest drop of the S&P’s 11 major sectors, while Amazon shares helped pull the consumer discretionary sector down 1.2 per cent.

The S&P materials sector was the biggest percentage gainer of the S&P’s major sectors, with a 3.4 per cent advance. Dupont’s 11.5 per cent gain accounted for roughly half of the sector’s rise in the first trading session after it spun off its Corteva agriculture business.

Healthcare was one bright spot for the Nasdaq, with the Nasdaq biotech index climbing 1.2 per cent, helped by shares of companies including Amgen and Gilead. Amgen and Merck & Co reported positive drug data at the annual American Society of Clinical Oncology meeting in Chicago.

Amgen jumped 3.4 per cent after its drug showed a high response rate in a small lung and colon cancer trial, while Merck rose 1.3 per cent after data showed nearly a quarter of patients who received immunotherapy Keytruda as an initial treatment for advanced lung cancer were still alive after five years.

is content editor for Morningstar Australia

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