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Global Market Report - 5 September

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

Australian shares are expected to open higher, joining a broad global rally in the wake of strong Chinese data and easing geopolitical tensions.

The SPI200 futures contract was up 19 points, or 0.29 per cent, at 6,555.0 at 8am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Thursday.

The Australian share market yesterday trimmed its losses late in the session but still finished the day lower, while the Aussie dollar has touched its highest point in more than a week.

The benchmark S&P/ASX200 index closed on Wednesday down 20.4 points, or 0.31 per cent, at 6,553.0 points, while the broader All Ordinaries was down 17.4 points, or 0.26 per cent, to 6,656.1 points.

Global markets strengthened overnight in the wake of robust economic data from China, with easing tensions in Hong Kong and the approval of a Brexit delay appearing to have calmed growth anxieties.

In the US, the Dow Jones Industrial Average rose 0.91 per cent to 26,355.47, the S&P 500 gained 1.08 per cent to 2,937.78, and the tech-heavy Nasdaq added 1.3 per cent to 7,976.88.

The ABS is scheduled to publish its data on International Trade in Goods and Services for July at 1130 Sydney time.

The Aussie dollar rose overnight and is buying 67.97 US cents from 67.79 US cents on Wednesday.

Asia

China stocks closed higher on Wednesday, bolstered by a private survey showing an upbeat services sector and helped by sharp gains in Hong Kong following reports the government would formally withdraw the proposed extradition bill.

The blue-chip CSI300 index rose 0.8 per cent, to 3,886.00, while the Shanghai Composite Index ended up 0.9 per cent, at 2,957.41.

Hong Kong’s main share index surged more than 4 per cent on Wednesday, ahead of the government’s formal withdrawal of the proposed extradition bill that sparked three months of protests in the former British colony.

Hong Kong chief executive Carrie Lam later announced the formal withdrawal of the bill at a meeting after markets closed, a source at that meeting told Reuters.

The move would meet one of the protesters’ key demands.

The Hang Seng closed at its highest in a month at 26,523.23 points, having rallied over 4 per cent at one point, outpacing the 1.6 per cent gains in MSCI’s index of Asia-Pacific shares ex-Japan and 0.9 per cent rise in Shanghai shares.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.49 per cent, while Japan’s Nikkei index closed up 0.12 per cent.

Europe

A rally in Italian shares driven by the formation of a new government lifted European stocks on Wednesday, with investors also taking heart from an easing of political tensions in Britain and Hong Kong.

The pan-European STOXX 600 index rose 0.89 per cent at the close, with Milan-listed shares soundly outpacing their European peers after Italian Prime Minister Giuseppe Conte unveiled his new cabinet.

Investors cheered an unlikely coalition uniting rival political parties the 5-Star Movement and the Democratic Party, heading off the risk of an early election and prolonged political instability.

Italy's FTSE MIB index rallied about 1.6 per cent, touching a more than one-month high, while the banking index jumped 1.75 per cent.

On the other side of the English Channel, British lawmakers defeated Boris Johnson in parliament on Tuesday in a bid to prevent him from taking Britain out of the EU without a divorce agreement, prompting the prime minister to demand a snap election.

Britain's exporter-heavy FTSE underperformed with a 0.59 per cent rise, weighed down by a steadying of the pound on Tuesday's events at Westminster.

Adding to the upbeat mood was data that showed activity in China’s services sector expanded at the fastest pace in three months in August as new orders rose.

Surveys showed euro zone business growth was a touch faster than expected last month but remained in the doldrums as the bloc’s dominant service industry only partially offset a slowdown in manufacturing.

Investors will now look ahead to a European Central Bank meeting next week that is widely expected to lower interest rates as policymakers seek to head off a slowdown caused by the protracted US-China trade war.

Trade-sensitive sectors such as miners, automakers and oil and gas companies led the charge on the main STOXX 600 index.

Asia-exposed UK banks HSBC and Prudential boosted the main index and helped drive a 1.24 per cent rise in the banking sector, after Hong Kong leader Carrie Lam withdrew an extradition bill that triggered months of often violent protests so the Chinese-ruled city.

The news also helped luxury stocks - LVMH Moet Hennessy Louis Vuitton, Swiss jewellery company Compagnie Financiere Richemont and Gucci owner Kering - rise between 2.4 per cent and 3.6 per cent.

North America

Wall Street's main indexes rebounded on Wednesday, after robust economic data from China, easing tensions in Hong Kong and British MPs approval of a law to delay Brexit provided relief to investors worried about global growth.

MPs in Britain's lower house of parliament voted late in the day to approve legislation designed to prevent Prime Minister Boris Johnson's government from taking the country out of the European Union without a deal.

US stocks opened higher and continued to rise as the day progressed after data showed activity in China's services sector expanded at the fastest pace in three months in August, providing a boost to the world's second-largest economy, which has struggled to reverse a prolonged manufacturing sector slump.

Also, Hong Kong leader Carrie Lam withdrew an extradition bill that had triggered months of often violent protests in the Chinese-ruled city.

Investors fled equities on Tuesday after data showing a contraction in US factory activity in August and after a new round of tariffs from Washington and Beijing went into effect over the weekend.

The president of the New York Federal Reserve Bank, John Williams, said the US economy appeared to be in a good place while saying that he is ready to "act as appropriate" to help avoid a downturn.

The Federal Reserve's Beige Book released on Wednesday showed that the US economy grew at a modest pace in recent weeks, with manufacturing buffeted by a global slowdown while consumer purchases gave mixed signals. The report is a compendium of anecdotes from companies.

The benchmark US Treasury 10-year yield rose on the day with the yield curve at its steepest in more than two weeks.

The Dow Jones Industrial Average rose 237.45 points, or 0.91 per cent, to 26,355.47, the S&P 500 gained 31.51 points, or 1.08 per cent, to 2,937.78, and the Nasdaq Composite added 102.72 points, or 1.3 per cent, to 7,976.88.

Technology stocks provided the biggest boost of the S&P's 11 major sectors with a 1.7 per cent gain. Healthcare was the weakest sector with a 0.01 per cent gain for the day.

is content editor for Morningstar Australia

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