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Global Market Report - 8 July

Glenn Freeman  |  08 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower, as US stocks last week snapped a three-day streak of record closes.

The SPI200 futures contract was down 12 points, or 0.18 per cent, at 6,678.0 at 0800 AEST, suggesting a fall at the start of trade for the benchmark S&P/ASX200 on Monday.

Wall Street fell on Friday, with the Dow Jones Industrial Average closing down 0.16 per cent, the S&P 500 was down 0.18 per cent and the tech-heavy Nasdaq Composite was down 0.10 per cent.

Strong US jobs data for June released on Friday lowered the prospect of the country's central bank lowering interest rates and boosted the US dollar.

Australian shares on Friday closed at their highest since late 2007, the S&P/ASX 200 index up 0.5 per cent or 33.30 points to 6,751.30 at the close. Over the week, the benchmark added 2 per cent.

Most of these gains came from financials and real estate states, with Commonwealth Bank – Australia's largest lender – gaining 0.9 per cent.

The Aussie dollar is buying 69.78 US cents, from 70.17 US cents on Friday.

Asia

China shares closed slightly higher on Friday, as investors adopt a cautiously optimistic stance ahead of the fresh round of talks between Beijing and Washington slated for this week.

The Shanghai Composite index closed 0.2 per cent firmer on Friday at 3,011.06 points, up 1.1 per cent week-on-week. The blue-chip CSI300 index was up 0.5 per cent on the day, and closed 1.8 per cent higher on the week.

CSI300’s financial sector sub-index ended down 0.1 per cent, while the consumer staples, real estate and healthcare sectors closed up 2.7 per cent, 1.4 per cent and 1.7 per cent, respectively.

Hong Kong shares fell slightly on Friday, the Hang Seng index down less than 0.1 per cent at 28,774.83, and up 0.8 per cent week-on-week.

The Hang Seng China Enterprises index, which fell 0.2 per cent on the day, posted weekly gains of 0.1 per cent.

Energy shares were flat, the IT sector lost 0.2 per cent and financials fell 0.1 per cent, while property rose 0.3 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.1 per cent, while Japan’s Nikkei index closed up 0.2 per cent.

The slight gain came amid slower trade as investors await a key US jobs report, and oil and mining shares underperformed.

The Nikkei index ended 0.2 per cent higher, at 21,746.38, having dipped in and out of gains and losses during the session. For the week, the index rose 2.2 per cent for its fifth consecutive weekly gains, on optimism ahead of the next round of US-China trade talks proposed for this week.

Europe

European shares ended their six-day winning streak on Friday, on poor data out of Germany and dimming hopes of an aggressive US Fed rate cut this month.

The pan-European STOXX 600 index finished down 0.7 per cent on broad-based losses, capping the week’s gains at 1.4 per cent. The index retreated from more than 12-months highs hit on Thursday.

Hopes of a US-China trade truce and more accommodative US monetary policy drove the index to its fourth week-on-week gain. But uncertainty remains over the global growth outlook.

News that German industrial orders had fallen far more than expected in May weighed on industrial stocks such as Schneider Electric, Siemens and Sandvik.

Industrial goods stocks were the biggest fallers, down 1.9 per cent on Friday.

Swedish technology group Hexagon announced it was cutting 700 jobs and warned of falling quarterly sales, its share price tumbling 11 per cent in response – its worst day in almost nine years.

European chipmakers AMS, STMicroelectronics and Siltronic were down more than 2.4 per cent, largely on US-China trade uncertainty that saw Samsung Electronics issue a second-quarter profit warning. The technology index slid 1.3 per cent.

Bank stocks, which tend to gain in higher interest rate environments, were one of the few gainers – up 0.3 per cent.

North America

US stocks have dipped, as the S&P 500 snapped a three-day streak of record closes, following an unexpectedly strong US payrolls report that led investors to reassess how dovish a stance the Federal Reserve may take at its next meeting.

The Dow Jones Industrial Average fell 43.88 points, or 0.16 per cent, to 26,922.12 on Friday, the S&P 500 lost 5.41 points, or 0.18 per cent, to 2990.41 and the Nasdaq Composite dropped 8.44 points, or 0.1 per cent, to 8161.79.

The US Labor Department data showed non-farm payrolls rose by 224,000 jobs in June, the most in five months, solidly beating economists' expectation of 160,000 additions.

Traders sharply scaled back their expectations of a rate cut of half a percentage point by the central bank at its next policy meeting on 30-31 July, although confidence remained high the Fed would cut rates by 25 basis points.

The jobs report also pointed to slowing wage growth and mounting evidence that the economy was losing momentum, which could still give the Fed enough of a cushion to cut rates at the end of the month.

The Fed, in its semi-annual report to Congress, repeated its pledge to "act as appropriate" to sustain the economic expansion.

It said while US economic growth continued "at a solid pace" in the first half of the year, it likely weakened in recent months as higher tariffs weighed.

Shares of banks, which have been under pressure from falling benchmark debt yields in recent weeks, rose 0.73 per cent and helped drive a 0.38 per cent gain in financials, one of the few bright spots among S&P sectors.

The defensive names such as real estate, utilities and consumer staples - each lost ground as a rise in US Treasury yields served to make the dividend-paying companies less attractive.

is senior editor for Morningstar Australia

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