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Global Market Report - 4 October

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

The Australian share market is expected to open higher after Wall Street recorded gains overnight following two sessions of significant losses.

The SPI200 futures contract was up 35 points, or 0.54 per cent, at 6,498.0 at 7am Sydney time, suggesting positive start for the benchmark S&P/ASX200 on Friday.

The Australian share market yesterday dived for a second straight day, losing $49 billion in value amid a rout of global equities.

The benchmark S&P/ASX200 index dropped 146.9 points, or 2.21 per cent, to 6,493 points, while the broader All Ordinaries was down 141.6 points, or 2.1 per cent, to 6,611.7 points.

On Wall Street, the Dow Jones Industrial Average finished up 0.47 per cent, the S&P 500 was up 0.80 and the tech-heavy Nasdaq Composite was up 1.12 per cent.

The Aussie dollar is buying 67.41 US cents from 67.05 US cents on Thursday.

Asia

Chinese markets on Tuesday began a week-long break to mark 70 years since the founding of the People’s Republic of China.

The Hong Kong stock market jumped to one week high on Thursday after local media reported that the government could outlaw face masks to help quell four months-long protests gripping the city.

The benchmark Hang Seng Index, down for much of the day along with other Asian markets, rose over 300 points just after 0600 GMT and reversed all losses on the day in mid-afternoon trade.

A broker said the jump was due to news of a potential mask ban. It was up as much as 0.6 per cent and at its highest level since September 24. MSCI’s Asia ex-Japan index was last seen down 0.5 per cent.

Local broadcasters TVB and Cable TV said the Hong Kong government was set to ban face masks at public rallies in a bid to ease months of unrest.

The Nikkei share average fell 1.93 per cent to 21,358.10, hitting its lowest levels in more than three weeks while the broader Topix lost 1.87 per cent to 1,566.51, also a three-week low.

Europe

Euro zone shares made small gains on Thursday after their worst sell-off in two months a day earlier, as a rebound in Airbus and spirits makers outweighed the latest round of weak economic data from the euro zone and the US.

The blue-chip and wider STOXX 600 pan-European indexes sank almost 3 per cent on Wednesday after the World Trade Organization approved 10 per cent US tariffs on European-made Airbus planes and 25 per cent duties on goods ranging from French wine to Scotch whisky.

After the initial shock of the decision, intended by the Trump administration as punishment for illegal EU aircraft subsidies, traders judged the detailed list of products affected showed the actual economic impact should be minimal.

The tariffs were not a game-changer for Europe, said Wouter Sturkenboom, chief investment strategist EMEA & APAC at Northern Trust Asset Management. “However if Trump decides to go after the auto sector, we’d take that to heart.”

Airbus, luxury stocks like Louis Vuitton-owner LVMH, and spirits makers Remy Cointreau and Pernod gained between 0.8 per cent and 6.4 per cent as a list showed that Washington had exempted some products from tariffs.

A prolonged tit-for-tat trade war between Washington and Beijing and a worsening outlook for the quarterly earnings season that is just getting underway have soured investor sentiment towards Europe after a bullish September.

Data on Thursday showed a bigger-than-expected fall in euro zone producer prices and stalling business activity. On the other side of the Atlantic, ISM data showed that US services sector activity slowed in September to a three-year low.

The euro zone index closed 0.1 per cent higher, while the broader pan-region index closed down 0.02 per cent.

London's FTSE dropped 0.6 per cent to close at its lowest since late August, having hit a seven month low earlier in the session. Markets in Frankfurt were closed on Thursday for a local holiday.

Oil stocks were the biggest drags on the pan-region index, and some ex-dividend stocks also weighed.

H&M shares, however, jumped 4 per cent after the world’s second-biggest fashion retailer reported its first quarterly rise in pretax profit in over two years.

North America

Wall Street stocks climbed on Thursday after data showing US services-sector activity at a three-year low fuelled expectations that the Federal Reserve would cut interest rates to stem a wider economic downturn.

Microsoft rose 1.2 per cent and Facebook added 2.7 per cent, with the two contributing more than any other companies to the S&P 500's gain.

The market dropped after the Institute for Supply Management (ISM) said its non-manufacturing activity index fell to a reading of 52.6 in September, the lowest since August 2016.

That added to fears sparked on Tuesday when a report showed US factory activity contracted to its lowest level in more than a decade, as well as data on Wednesday showing private payrolls growth in August was not as strong as previously estimated.

Stock prices bounced back from the dour economic data as bets on a third US rate cut this year at Fed's October policy meeting surged to 90 per cent from 40 per cent, according to CME Group's Fed Watch tool.

Traders are again expecting at least two more rate reductions by the end of 2019, which they had abandoned after the central bank described each of its last two rate cuts as a "mid-cycle adjustment."

A pivotal jobs report on Friday may contribute more evidence of whether the US-China trade war is pushing the world's largest economy toward a recession.

The Dow Jones Industrial Average rose 0.47 per cent to end at 26,201.04, while the S&P 500 gained 0.80 per cent to 2,910.63.

The Nasdaq Composite added 1.12 per cent to end the session at 7,872.27. Over the past 12 months, the S&P 500 is down about 0.5 per cent.

PepsiCo Inc on Thursday rose three per cent after beating quarterly expectations as higher advertising and new low-calorie versions of Gatorade boosted demand for its beverages in North America.

Its shares pushed the S&P consumer staples index 0.7 per cent higher. All of the 11 major sectors rose, led by a 1.3 per cent rise in the energy index.

Corona maker Constellation Brands Inc fell 6.1 per cent after it took an $US839 million ($1.2 billion) markdown in the value of its investment in pot firm Canopy Growth during the quarter.

is content editor for Morningstar Australia

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