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Global Market Report - 6 June

Lex Hall  |  06 Jun 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after a positive lead from overseas as investors bet on a Fed rate cut.

The SPI200 futures contract was up 21 points, or 0.33 per cent, at 6,383.0 at 7am Sydney time, suggesting a rise for the benchmark S&P/ASX200 on Thursday. The Australian share market rallied early yesterday following strong gains on Wall Street, but then faded.

The benchmark S&P/ASX200 index still managed to close higher, up 26.1 points, or 0.41 per cent, to 6,358.5 points on Wednesday, while the broader All Ordinaries was up 26.9 points, or 0.42 per cent, to 6,443.6.

On Wall Street overnight, the Dow Jones Industrial Average closed up 0.82 per cent, the S&P 500 was up 0.82 per cent and the tech-heavy Nasdaq Composite was up 0.64 per cent.

The Aussie dollar is buying 69.69 US cents from 69.98 US cents on Wednesday.

Out today: trade balance for April.

Asia

China and Hong Kong stocks staged a broad-based rebound on Wednesday morning, as Asian markets tracked Wall Street’s rally after US central bank comments raised hopes of an interest rate cut. The CSI300 index rose 0.6 per cent to 3,619.60 at the end of the morning session, while the Shanghai Composite Index gained 0.6 per cent to 2,880.18.

In Hong Kong, the Hang Seng index added 0.7 per cent to 26,953.77, while the Hong Kong China Enterprises Index gained 0.4 per cent to 10,378.29.

Japan’s Nikkei rebounded sharply on Wednesday morning thanks to a rally in US stocks after US Federal Reserve Chairman Jerome Powell signalled a possible rate cut in a boost to riskier assets.

The Nikkei share average rose 1.9 per cent to 20,785.71 in mid-morning trade, posting the biggest daily percentage gain since 26 March.

Europe

European stock markets crept higher on Wednesday as defensive shares gained ground, but rising tensions between Italy and the European Commission over the country’s debt dampened sentiment.

The caution in Europe made the region an outlier, as US Federal Reserve Chairman Jerome Powell’s accommodative comments late on Tuesday and weaker-than-expected US data on Wednesday supported assets globally.

The European Commission said Italy was in breach of EU fiscal rules due to its growing debt and this justified a disciplinary procedure, a position that firmly capped regional risk appetite.

Italian Deputy Prime Minister Luigi Di Maio complained that Brussels had treated Rome unfairly, but said he wanted constructive talks with the commission.

The STOXX 600 index gained 0.4 per cent, rising for a third straight day. Germany’s DAX and London-traded stocks edged up 0.1 per cent, while Italian equities shed 0.4 per cent.

While Europe’s lenders fell 0.5 per cent, Milan-traded banks dropped 1.6 per cent. UniCredit slid 3.5 per cent, while Banco BPM declined 2.2 per cent.

Berenberg trimmed its price target on Madrid-listed Caixabank, its shares fell 3.5 per cent.

Utilities and real estate stocks rose late in the day, especially after Di Maio’s comments, tacking on 1.4 per cent and 1.1 per cent, respectively. Investors often take refuge in those sectors at times of market uncertainty.

Industrial goods and services stocks rose 0.7 per cent, aided by Dassault Aviation surging 5 per cent after Goldman Sachs upgraded the aviation firm’s stock to “Buy”, citing capital flexibility and an inexpensive valuation.

Basic resources firms fell 1 per cent, with losses partially cushioned by Norsk Hydro ASA’s 0.9 per cent rise. The Oslo-listed firm’s quarterly underlying operating earnings beat expectations, although it said a cyber attack in March would cost it between NOK 300 million ($34.39 million) and NOK 350 million ($40.13 million).

North America

Wall Street's major indexes have risen as investors bet on a Federal Reserve interest rate cut in the wake of weak private sector jobs data, and hopes grew that the US and Mexico would reach an agreement to avoid US tariffs on Mexican goods.

The gains extended the rally on Tuesday when Fed Chairman Jerome Powell indicated the central bank may have to react to the US trade wars, boosting rate cut hopes. Other Fed officials also hinted that a rate cut was possible.

The ADP National Employment Report on Wednesday further bolstered bets for a rate cut.

US private employers hired at the slowest pace in more than nine years in May, weakness that analysts blamed on the heightening global trade tensions.

The data comes ahead of more comprehensive nonfarm payrolls data from the Labor Department due out on Friday.

For now, he said, the market is betting the Fed will make a precautionary rate cut in July.

The Dow Jones Industrial Average rose 207.39 points, or 0.82 per cent, to 25,539.57 on Wednesday, the S&P 500 gained 22.88 points, or 0.82 per cent, to 2826.15 and the Nasdaq Composite added 48.36 points, or 0.64 per cent, to 7575.48.

Investors were also encouraged after US President Donald Trump said he thinks Mexico wants to reach a deal to stop a new trade war. A White House trade adviser and a senior US Republican senator also said Washington might not introduce proposed tariffs.

Schwab's Kleintop saw the prospect of rate cuts as a bigger factor because defensive dividend sectors that do well in low-rate environments were outperforming more trade-sensitive sectors in Wednesday's rally.

The top gainers among the S&P 500's 11 major sectors were real estate which ended up 2.3 per cent, while utilities closed up 2.1 per cent and consumer staples registered a 1.1 per cent advance.

The technology sector rose 1.4 per cent and provided the biggest boost to the market, helped by Apple and Microsoft. Another big boost was Salesforce.com, which advanced 5.1 per cent after the cloud-based service provider forecast full-year results above expectations.

The energy sector slipped 1.1 per cent, making it the only S&P sector in the red, as crude prices fell sharply.

Campbell Soup, the biggest percentage gainer on the S&P 500, rose 10 per cent after the canned soup maker raised its full-year profit forecast.

is content editor for Morningstar Australia

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