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Global Market Report - 7 January

Lex Hall  |  07 Jan 2019Text size  Decrease  Increase  |  
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Australia

Early gains are tipped for the Australian share market after Wall Street surged on stronger-than-expected jobs data, while the Aussie dollar has spiked back above 71 US cents.

The SPI200 futures contract was up 69 points, or 1.24 per cent, at 5631.0, at 8am Sydney time on Monday, hinting a jump is likely for the benchmark ASX/200 after a choppy start to 2019.

On Friday, the ASX shrugged off some of its earlier losses but fears of a slowdown in China weighed on stocks. The benchmark S&P/ASX200 index was down 14 points, or 0.25 per cent, to 5619.4 at 4.15pm on Friday, following a morning that saw it lower by more than 1 per cent.

The forecast gains on the ASX follow a strong US jobs report, which lifted Wall Street to its highest in two weeks on Friday.

In late-week trade, the Dow Jones Industrial Average rose 746.94 points, or 3.29 per cent, to 23,433.16, the S&P 500 gained 84.05 points, or 3.43 per cent, to 2531.94 and the Nasdaq Composite added 275.35 points, or 4.26 per cent, to 6738.86.

Analysts say investors will be keeping a sharp eye on trade talks between the US and China, which are due to begin this week, as well as any fallout from the ongoing US government shutdown.

Oil is trading higher while copper prices have rallied from an 18-month low after China cut bank reserve requirements.

US bond prices also changed course and moved lower on Friday. The yield on the 10-year Treasury note rose to 2.66 per cent after falling to 2.55 per cent Thursday.

It will be a data-heavy week from the Australian Bureau of Statistics, with releases on trade, building approvals, meat and livestock processing, and retail expected over the coming days.

Meanwhile, the Aussie continues to climb from last week's slump, spiking 1.5 per cent to 71.25 US cents, from 70.23 US cents on Friday.

ASIA

Asian markets finished mixed as of their recent closing prices. The Hang Seng gained 2.24 per cent while the Shanghai Composite was higher by 2.05 per cent. The Nikkei 225 was even.

Among the gainers in Hong Kong were CSPC Pharmaceutical, which rose 10.14 per cent, and CK Asset Holdings, which rose 5.6 per cent.

In China, the central bank is cutting the amount of cash banks have to hold as reserves for the fifth time in a year, freeing up $163 billion for new lending.

A US delegation heads to China today for trade talks. The talks will be the first since Donald Trump and Xi Jinping agreed to a 90-day truce in their trade war last month, and any progress would boost markets and economies, which have suffered during the months-long tensions.

EUROPE

European shares posted their biggest daily gain since June 2016. Europe's STOXX 600 rose 2.8 per cent, with strong gains across the region's bourses.

The FTSE 100 is up more than 2 per cent, Germany's DAX is up 3.37 per cent, and France's CAC 40 is up 2.72 per cent.

Mining companies jumped 5.4 per cent, the top gainer as copper prices recovered on news of new trade talks between China and the US.

Autos, which suffered in 2018 from the trade dispute, rose 4.5 per cent.

NORTH AMERICA

Wall Street has surged to close at its highest level in two weeks after a strong jobs report and assurances from US Federal Reserve chairman Jerome Powell that the central bank would be patient and flexible in steering the course of interest rates.

Based on the latest available data, the Dow Jones Industrial Average rose 746.94 points, or 3.29 per cent, to 23,433.16, the S&P 500 gained 84.05 points, or 3.43 per cent, to 2531.94 and the Nasdaq Composite added 275.35 points, or 4.26 per cent, to 6738.86.

Technology stocks led the charge, jumping 4.3 per cent, bouncing back from the prior session's worst day for the sector in over seven years.

The Labor Department's employment report showed the US economy added 312,000 new jobs in December, far more than the 177,000 analysts expected.

Powell, in remarks to the American Economic Association, soothed market nerves with assurances that the central bank is sensitive to risks that worry investors and is not on a preset path of interest rate hikes.

News that China and the US would hold trade talks in Beijing next week helped tariff-vulnerable industrials lead the Dow's rally, headed by Caterpillar, United Technologies, 3M and Boeing.

Keeping with Friday's risk-on theme, oil prices rose in tandem with equities. Brent crude futures rose $US1.11 to settle at $US57.06 a barrel, a 1.98 per cent gain. US crude futures settled 87 cents higher at $US47.96 a barrel, a 1.85 per cent gain.

Safe-haven assets retreated. Treasury yields rose sharply, and the dollar gained 0.8 per cent against the yen. Spot gold prices, which reached a six-month peak on Thursday, dropped 0.7 per cent.

Powell's dovish comments pushed down the US dollar index, which gave up earlier gains and last traded down 0.1 per cent. The euro was little changed.

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