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Global Market Report - 8 August

Lex Hall  |  08 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after a mixed session on Wall Street.

The SPI200 futures contract was down 11 points, or 0.17 per cent, at 6,438.0 at 8am Sydney time, suggesting an early dip for the benchmark S&P/ASX200 on Thursday.

The Australian share market has closed higher following two days of monster losses after being thrown a lifeline by central bankers across the Tasman.

The benchmark S&P/ASX200 closed up 41.4 points, or 0.64 per cent, to 6,519.5 points, while the broader All Ordinaries was up 42 points, or 0.64 per cent, to 6,588.5 points.

Wall Street recovered overnight after an early slide, with the Dow Jones Industrial Average finishing down 0.09 per cent, the S&P 500 up 0.08 per cent and the tech-heavy Nasdaq Composite up 0.38 per cent.

The Aussie dollar is buying 67.59 US cents from 67.11 US cents on Wednesday.

Asia

China stocks ended lower on Wednesday posting their sixth straight session of losses, amid persistent worries of an escalation in the Sino-US trade tensions.

The blue-chip CSI300 index fell 0.4 per cent, to 3,621.43, while the Shanghai Composite index shed 0.3 per cent to 2,768.68.

The Hang Seng index was down 0.4 per cent at 25,879.14 points, while the Hong Kong China Enterprises Index lost 0.6 per cent to 9,949.36 points.

Hong Kong is facing its biggest crisis since it returned from British to Chinese rule in 1997, the head of China’s Hong Kong and Macau Affairs office said on Wednesday, as more protests were set to rock the Asian financial hub.

Japan’s Nikkei fell on Wednesday as a stronger yen and fears of a global currency war prompted investors to sell riskier assets, though some upbeat corporate results and Wall Street’s bounce helped curb losses.

The Nikkei stock average ended the day down 0.33 per cent at 20,516.56 points.

Europe

European shares rose on Wednesday, breaking a three-day losing streak on euphoria over a multi-billion dollar German chemical deal but gave up some gains after Wall Street opened sharply lower on recession worries.

The pan-European STOXX 600 index closed 0.2 per cent higher, after having gained as much as 1 per cent during the session when Bayer and Lanxess’ deal to sell chemical park operator Currenta for $3.9 billion had lifted stocks.

Bayer's 6 per cent jump was the biggest boost to the main index and helped Germany's DAX shrug off week industrial output data.

However, all major country indexes in Europe cut some gains, with Italian and Swiss  stocks turning negative, after US stocks plunged as investors were spooked by the latest signals from bond markets that pointed to heightened risk of a recession.

Investors have been scooping up US government debt since last week on bets the Federal Reserve would need to cut interest rates more than it has signalled so far, in a bid to combat risks from the escalating trade war between China and the US.

In Europe, German long-dated bond yields tumbled to new record lows as a large rate cut from New Zealand and weak German data gave further impetus to a relentless rally in bond markets.

A sell-off in stocks since last week when US President Donald Trump threatened more tariffs on Chinese goods is reminiscent of a sharp fall in May when a sudden breakdown in trade talks had seen European markets post their worst month in more than three years.

Europe’s main index has lost about 5 per cent since last Friday. In May, it lost 5.7 per cent.

A continued slide in iron ore and oil prices weighed on material and energy stocks .SXEP, with Glencore’s 0.9 per cent slip on a 32 per cent drop in first-half core profit adding to the material sector’s 1 per cent fall.

Novartis was the biggest weight on STOXX 600 after the Swiss drugmaker said it knew about discrepancies in data submitted to regulators as it sought approval of its more than $2 million gene therapy Zolgensma.

In Italy, biggest lender UniCredit lagged after it cut its revenue target for 2019, but a sharp rise in net profit at Italian lender Banco BPM saw its shares post their best day in over a month.

North America

The S&P 500 has recovered from steep early losses to end slightly higher as investors snapped up oversold shares and bond yields rebounded from significant lows that raised fears about a recession.

Increasing worries over a global economic downturn and bets the Federal Reserve will have to pick up its pace of interest rate cuts pushed Treasury yields sharply lower early, with 10-year yields touching their lowest since October 2016.

Ten-year yields began to cut their earlier decline in afternoon trading after a soft auction.

During the session, the premium on three-month Treasury bill rates over 10-year Treasury yields, a closely watched US recession indicator, was at its most elevated levels since March 2007.

Financials were the biggest loser among S&P 500 sectors, down 1.2 per cent, while the staples and materials indexes ended up more than 1 per cent each.

Investors also were attracted to some bargains in shares after the recent sell-off. The S&P 500 is down 4.7 per cent since its July 26 record high close.

The Dow Jones Industrial Average fell 22.45 points, or 0.09 per cent, to 26,007.07, the S&P 500 gained 2.21 points, or 0.08 per cent, to 2,883.98 and the Nasdaq Composite added 29.56 points, or 0.38 per cent, to 7,862.83.

Interest rates futures suggested traders are building bets the Fed will cut interest rates three more times by year-end.

Central banks in New Zealand, India and Thailand on Wednesday cut their lending rates amid growing fears that the US-China trade war could aggravate a slowdown in the global economy.

Trade concerns re-emerged after President Donald Trump last week threatened to slap 10 per cent levies on the rest of $US300 billion of Chinese imports and called China a currency manipulator on Monday.

The energy sector was down 0.8 per cent after oil prices slid.

On the plus side, CVS Health Corp shares climbed 7.5 per cent after the drugstore chain raised its full-year profit forecast.

Walt Disney Co dropped 4.9 per cent, a day after its quarterly earnings missed analysts' forecast on higher investments in its streaming platform.

is content editor for Morningstar Australia

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