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Global Market Report - 4 November

Lex Hall  |  04 Nov 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 at the end of last week.

The SPI200 futures contract was up 25.0 points, or 0.38 per cent, at 6,671.0 at 7am Sydney time, suggesting an early bounce for the benchmark S&P/ASX200 on Monday.

The Australian share market finished marginally higher yesterday despite losses by the heavyweight financial sector.

The benchmark S&P/ASX200 index finished Friday up 5.7 points, or 0.09 per cent, to 6,669.1 points, while the broader All Ordinaries was up 6.2 points, or 0.09 per cent, to 6,779.1 points.

Westpac has reported a 15 per cent fall in its cash profit to $6.849 billion, cut its second half dividend to 80c and will raise $2.5 billion in capital.

On Wall Street on Friday, the Dow Jones Industrial Average was up 1.11 per cent, the S&P 500 was up 0.97 per cent and the tech-heavy Nasdaq Composite was up 1.13 per cent.

The Aussie dollar is buying 69.17 US cents from 69.05 US cents on Friday.

Asia

Chinese shares rose on Friday to finish the week higher on stronger-than-expected factory activity data and growing optimism around a potential trade deal between the US and China.

At the close, the Shanghai Composite index was up 1 per cent at 2,958.20, up 0.1 per cent from the previous week.

Hong Kong’s main stock index closed at its highest level in over six weeks on Friday as a surprise rise in factory activity in mainland China and increased hopes of a US-China trade agreement cheered investors.

At close, the Hang Seng index climbed 0.7 per cent at 27,100.76 points, its highest level since 16 September. The index gained 1.6 per cent week-on-week.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.4 per cent, while Japan’s Nikkei index closed down 0.3 per cent.

Europe

European shares clocked their best day in over a week on Friday, as upbeat jobs data from the US and a surprise bounce in Chinese manufacturing tempered nerves around slowing global growth.

The pan-European STOXX 600 index closed 0.7 per cent higher, while German shares, heavily export-oriented, were also up 0.7 per cent.

US job growth slowed less than expected in October, while a private business survey indicated that China’s factory activity unexpectedly expanded at the fastest pace in more than two years last month.

The latest data out of China is in contrast to an official survey published on Thursday, which had factory activity shrinking for the sixth straight month in October.

The US Federal Reserve lowered borrowing costs for the third time this year on Wednesday, although it signalled there would be no further reductions unless the US economy took a turn for the worse.

Adding to the bounce were comments from White House adviser Larry Kudlow who said trade talks with China were making progress and the United States still aimed to sign an initial deal this month, although the phase one agreement remained unfinished and some issues would be pushed to a second pact.

Mining stocks led gains among sub-sectors with a 3.2 per cent jump following strong factory activity data from China, the world’s top metals consumer.

After a volatile week packed with corporate news and conflicting tones on the trade front, the benchmark index registered its fourth straight weekly gain with a 0.4 per cent rise.

Danish stocks outperformed their European peers with a 2.5 per cent jump, boosted by transport and logistics services company DSV Panalpina), which gained 7.4 per cent after reporting strong third-quarter results.

Drugmaker Novo Nordisk rose 3.6 per cent after raising its sales outlook for 2019 on the back of its new drugs for type II diabetes and obesity.

Among disappointing earnings, Denmark’s biggest lender Danske Bank slid 4 per cent after narrowing its annual profit outlook as it grapples to restore trust after being involved in one of the world’s biggest money laundering scandals.

Bank stocks snapped a three-week run of gains also hit by sour results from Deutsche Bank and Credit Suisse.

North America

US stocks have surged as the S&P 500 set a closing record for the third time in five days after an upbeat US jobs report and data on Chinese manufacturing eased concerns about slowing global growth.

Job growth slowed less than forecast in October, as a drag from a strike at General Motors was made up for in other areas of the labour market, while job gains in the prior two months were stronger than previously thought.

The strong jobs number helped overshadow a report that showed the manufacturing sector contracted for a third straight month.

Along with the S&P's new high, the Nasdaq eclipsed its July closing record. The S&P has climbed for four straight weeks, its longest streak since February, while the Nasdaq has gained in five straight weeks as quarterly earnings have come in stronger than anticipated and US-China trade rhetoric has appeared to be productive. The Dow sits less than 12 points from a closing record.

Before the jobs report, sentiment was supported by data showing China manufacturing activity unexpectedly expanded in October, easing concerns about a slowdown in demand from the world's second-largest economy as a result of US tariffs.

The Dow Jones Industrial Average rose 301.13 points, or 1.11 per cent, to 27,347.36, the S&P 500 gained 29.35 points, or 0.97 per cent, to 3,066.91 and the Nasdaq Composite added 94.04 points, or 1.13 per cent, to 8,386.40.

US-China trade news remained supportive for stocks, as Beijing's state-media Xinhua News Agency reported the two countries have "reached consensus on principles." Earlier, US Commerce Secretary Wilbur Ross said the "phase one" trade pact with China appeared to be in good shape.

About 76 per cent of the 356 S&P 500 companies that have reported so far have beaten profit estimates, according to Refinitiv data.

However, profit growth forecasts for the next four quarters have been revised lower, even as expectations for a decline in third-quarter earnings have shrunk to 0.8 per cent from 2.2 per cent at the start of October.

Oil major Exxon Mobil Corp rose 3.00 per cent after it beat recently lowered third-quarter profit expectations. The energy sector gained 2.50 per cent as the best-performing S&P sector, and oil prices jumped on trade deal progress.

is content editor for Morningstar Australia

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