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Global Market Report - 6 January

Lex Hall  |  06 Jan 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to edge lower following renewed tensions in the Middle East and a contraction in US manufacturing which caused Wall Street's major indexes to fall.

The SPI200 futures contract was down four points, or 0.06 per cent, at 6,655.0 at 8am Sydney time, suggesting a slight decline for the benchmark ASX/200 at Monday's open.

The ASX closed higher on Friday, up 42.9 points or 0.64 per cent to 6,733.5, but there are concerns the US' killing of Iranian military chief Qassem Soleimani and US manufacturing sector data could still impact the Aussie market.

The US air strike in Iraq helped push oil prices to more than three month highs.

On Friday, the Dow Jones Industrial Average fell 233.92 points, or 0.81 per cent, to 28,634.88. The S&P 500 lost 23 points, or 0.71 per cent, to 3,234.85. The Nasdaq Composite dropped 71.42 points, or 0.79 per cent, to 9,020.77.

The Australian dollar was buying 69.34 US cents, down from 69.63 US cents on Friday. 

Asia

China stocks slipped on Friday, but finished the first week of a new decade higher with a five-week winning streak as Beijing eased monetary policy to shore up the economy even as investors cheered a thaw in Sino-US trade tensions.

The blue-chip CSI300 index fell 0.2 per cent to 4,144.96, while the Shanghai Composite Index slipped 0.1 per cent to 3,083.79.

For the week, CSI300 was up 3.1 per cent, while SSEC advanced 2.6 per cent, both logging fifth week of gains in a row.

Hong Kong stocks reversed gains to end lower on Friday, as investors worried about heightening geopolitical tensions in the Middle East after a US air strike at Baghdad airport killed a top Iranian commander.

But stocks on the island managed to wrap up the first week of the new decade higher with a five-week winning streak, thanks to an accommodative stance by China’s central bank and a thaw in Sino-US trade tensions.

The Hang Seng index fell 0.3 per cent, to 28,451.50, after climbing as much as 1.2 per cent to a six-month high, while the China Enterprises Index lost 0.6 per cent, to 11,253.55.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.15 per cent. 

Europe

European shares slipped from near record highs on Friday after a US air strike in Iraq that killed a top Iranian commander increased Middle East tensions and spurred moves out of risk assets, while an oil price surge hammered airline stocks.

Iran’s Supreme Leader Ayatollah Ali Khamenei vowed harsh revenge after Iranian Major General Qassem Soleimani, architect of the country’s spreading military influence in the Middle East, was killed in the air strike at Baghdad airport.

The pan-European STOXX 600 index was down 0.3 per cent, with German shares having their worst day in a month as Lufthansa slumped 6.5 per cent.

Along with losses in airlines Air France and EasyJet Europe’s travel and leisure sector shed 1.6 per cent, on fuel price concerns as oil jumped more than 3 per cent.

The jump in oil prices lifted the regional energy sector index to seven week highs which tied in with a weaker pound to help London's FTSE buck the trend.

Global financial markets had started the new decade on a high note on improving US-China trade relations, further monetary easing in China and a brightening economic outlook.

But data on Friday showed unemployment Germany rose more than expected in December, while US manufacturing for the same period saw a bigger-than-expected dip.

Friday’s moves tipped an otherwise flat week for Europe into red.

In corporate news, tobacco companies Match and British American Tobacco rose to the top of the STOXX 600 after the US Food and Drug Administration exempted menthol and tobacco from a list of popular e-cigarette flavours that it had banned under new guidelines.

Cellnex Telecom SA rose 2.3 per cent after agreeing to buy Portuguese telecommunication tower operator OMTEL for around 800 million euros ($894 million).

Trading for the first time this year, Swiss stocks, rose 0.8 per cent after a near 26 per cent rise last year as investors bought into consumer goods. 

North America

Wall Street’s major indexes fell from record highs on Friday after the attack on Soleimani ratcheted up tensions in the Middle East and a bigger-than-expected contraction in the US manufacturing sector raised concerns of slowing economic growth.

Friday’s decline put the benchmark S&P 500 in the red for the week, snapping a five-week winning streak for the index.

Demand for safe-haven assets soared as Iran vowed revenge for the killing of Soleimani, head of its elite Quds Force, in an air strike authorised by US President Donald Trump.

In a further blow to US market sentiment, data from the Institute for Supply Management showed that US factory activity contracted in December by the most in more than a decade.

S&P 500 bank stocks dropped 1.6 per cent as the news sent benchmark US bond yields to their lowest since 12 December.

Shares of airlines also tumbled as oil prices jumped about 3 per cent. American Airlines Group Inc shares dropped 5.0 per cent, while shares of United Airlines Holdings Inc fell 2.1 per cent.

Among the S&P 500’s 11 major sectors, only real estate and utilities - both considered defensive plays - ended higher.

In a sign of investor jitters, US stocks extended their fall following a false report of an attack on a US military base in Iraq.

Shares of US defense companies jumped on news of the air strike that killed Soleimani. Northrop Grumman Corp shares climbed 5.4 per cent and Lockheed Martin Corp shares rose 3.6 per cent. The two provided the biggest boosts to the S&P 500.

The market disturbance following the strike could be fleeting, said Wayne Wicker, chief investment officer of Vantagepoint Investment Advisers in Washington.

The Dow Jones Industrial Average fell 233.92 points, or 0.81 per cent, to 28,634.88. The S&P 500 lost 23 points, or 0.71 per cent, to 3,234.85. The Nasdaq Composite dropped 71.42 points, or 0.79 per cent, to 9,020.77.

For the week, the Dow dipped 0.04 per cent, the S&P 500 fell 0.17 per cent, and the Nasdaq rose 0.16 per cent.

Among advancers, Tesla Inc shares hit a record high and ended up 3 per cent after the automaker beat estimates for vehicle deliveries in the fourth quarter.

Lamb Weston Holdings Inc shares surged 11.3 per cent, the biggest percentage gain on the S&P 500, after the frozen foods supplier’s quarterly results surpassed estimates.

Shares of retailer L Brands Inc rose 7.8 per cent after Bank of America upgraded its rating on the company’s stock. 

 

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