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Global Market Report - 5 August

Lex Hall  |  05 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open flat a day ahead of the central bank's decision on interest rates while trade fears hurt US indexes.

The SPI200 futures contract was unchanged at 6,708.0 points at 8am Sydney time, suggesting a steady start for the benchmark S&P/ASX200 on Monday.

On Wall Street on Friday, the Dow Jones Industrial Average finished down 0.37 per cent, the S&P 500 was down 0.73 per cent and the tech-heavy Nasdaq Composite was down 1.32 per cent. The benchmark S&P/ASX200 index closed down 20.3 points, or 0.3 per cent, to 6,768.6 on Friday, while the broader All Ordinaries was down 25.8 points, or 0.38 per cent, to 6,846.1.

The Reserve Bank of Australia will decide on interest rates at its meeting on Tuesday, with most analysts expecting it to keep rates on hold at 1.0 per cent.

The Aussie dollar is buying 67.94 US cents from 68.45 US cents on Friday.

Asia

Chinese shares plummeted with the Shanghai Composite Index falling 1.4 per cent, down 2.6 per cent for the week. The blue-chip CSI300 fell 1.5 per cent.

In Hong Kong, the Hang Seng Index closed down 2.4 per cent, entering “oversold” territory for the first time in almost two months.

As investors sought sanctuary from volatility in safer assets, the 10-year Chinese government bond yield fell to 3.1 per cent, its lowest since early April.

The MSCI’s broadest index of Asia-Pacific shares, fell 1 per cent last month, after a gain of over 5 per cent in June. The index has fallen another 1.8 per cent so far this month.

In Japan, the Nikkei 225 is off 2.11 per cent and China's Shanghai Composite is lower by 1.41 per cent.

Europe

A slump in shares of automakers, miners and chipmakers led European stocks to their biggest losses in more than seven months on Friday after Washington’s announcement of new tariffs on Chinese goods raised fears of a further hit to global growth.

The pan-European STOXX 600 index sank 2.5 per cent to hit a six-week low. Germany's trade-sensitive DAX index .GDAXI slumped 3.1 per cent, while losses for luxury goods makers, which draw a large part of their revenue from China, dragged down France's CAC 40 .FCHI by 3.6 per cent.

Abruptly ending a temporary trade truce between the two countries, U.S. President Donald Trump said on Thursday he would impose a 10 per cent tariffs on $300 billion of Chinese exports to the US from September 1, prompting Beijing to warn of retaliation.

Further spooking investors, Bloomberg reported that Trump is scheduled to make a statement on trade with the European Union at 1745 GMT on Friday.

The technology index, which includes chipmakers that rely heavily on China for their revenue, dropped 3.7 per cent. Shares of Siltronic, Infineon, STMicro and ASML dropped 4.8 per cent to 6.3 per cent.

Shares of basic resources companies fell the most among European sectors with a 4.6 per cent drop.

Most of Europe’s main markets were set for their worst week since May, when a sudden breakdown in trade talks between China and the United States hammered markets.

A rally since then had been fuelled by hopes that major central banks would adopt looser monetary policy to offset the trade war’s impact on growth, but the European Central Bank and the US Federal Reserve both disappointed investors last month with stances that were more cautious than expected.

However, a spike in trade tensions again pushed money markets to bet the Fed and the ECB will cut rates next month.

North America

Wall Street has extended its sell-off on renewed trade fears as the benchmark S&P 500 index and Nasdaq saw their worst weekly percentage plunges since December, when investors were spooked by the prospect of a looming recession.

The blue chip Dow and the S&P 500 on Friday hit their lowest levels since late June with S&P 500 and the Nasdaq registering their fifth consecutive days of losses.

US 10-year Treasury yields saw their steepest weekly decline in over seven years.

The sell-off wrapped up a tumultuous week, which saw the US Federal Reserve cut interest rates for the first time since 2008 and a renewal of trade war fears following a tweet by US President Donald Trump announcing plans to impose additional tariffs on $US300 billion ($442 billion) of Chinese imports on 1 September.

A report from the Labor Department on Friday showed that nonfarm payrolls increased by 164,000 jobs last month, in line with economists' expectations.

The Dow Jones Industrial Average on Friday fell 98.41 points, or 0.37 per cent, to 26,485.01; the S&P 500 lost 21.51 points, or 0.73 per cent, to 2,932.05; and the Nasdaq Composite dropped 107.05 points, or 1.32 per cent, to 8,004.07.

Of the 11 major sectors in the S&P 500, eight closed in the red.

Technology companies, which get a sizeable portion of their revenue from China, were the hardest hit, falling 1.7 per cent. This sector was weighed by iPhone-maker Apple and chipmakers.

The Philadelphia Semiconductor index slipped 1.6 per cent while shares of Apple fell 2.1 per cent.

The second-quarter earnings season passed its halfway mark, with 380 of the companies in the S&P 500 having reported. Of those, 73.9 per cent have beaten analyst expectations.

New tariff threats dragged oil prices lower for the week, as Exxon Mobil and Chevron reported quarterly results.

Exxon topped analyst expectations but fell year-on-year, while Chevron's earnings rose 26 per cent, in line with forecasts.

Sprint shares dropped 5.8 per cent even after reporting fewer-than-expected phone subscriber losses in the quarter.

Restaurant Brands International jumped 6.1 per cent after quarterly profits topped expectations.

is content editor for Morningstar Australia

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