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Global Market Report - 9 July

Glenn Freeman  |  09 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open flat after losses on Wall Street overnight, amid flagging hopes of a Fed rate cut and a sharp drop in Apple shares.

The SPI200 futures contract was up 1 point, or 0.02 per cent, at 6,616 at 8am in Sydney, suggesting a steady start for the benchmark S&P/ASX200 on Tuesday.

Wall Street closed lower, with the Dow Jones Industrial Average finishing down 0.43 per cent, the S&P 500 down 0.48 per cent and the tech-heavy Nasdaq Composite down 0.78 per cent.

Australian shares yesterday had their worst session since 3 June, after economic data in the US dampened expectations around Federal Reserve rates cuts this year.

The S&P/ASX 200 Index fell 79.1 points, or 1.2 per cent lower, at 6672.2. The broader All Ordinaries dropped 74.4 points, or 1.1 per cent, to 6757.4.

This came after the All Ordinaries closed just shy of an all-time high on Friday.
The Aussie dollar is buying 69.73 US cents, from 69.86 US cents on Monday.

Asia

Chinese shares also declined, the Shanghai Composite index posting its biggest daily loss in two months on the back of economic data out of the US and new listings in China's tech sector.

At the close, the Shanghai Composite index was down 2.58 per cent at 2,933.36, its lowest close since 6 May. The blue-chip CSI300 index was down 2.32 per cent, its biggest daily loss since 17 May.

The financial, consumer staples, real estate and healthcare sub-indexes dropped by 2.21 per cent, 1.19 per cent, 1.89 per cent and 1.94 per cent, respectively.

In Hong Kong, the Hang Seng index saw its biggest daily drop in nearly four weeks. At the close of trade, the index was down 1.54 per cent at 28,331.69 – its biggest daily decline since 12 June.

The Hang Seng China Enterprises index dropped 1.56 per cent to 10,725.2, led down by the IT sector sub-index, which lost 2.35%, followed by declines in property, energy and financials, down 1.97 per cent, 1.7 per cent and 1.23 per cent, respectively.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1.37 per cent, while Japan’s Nikkei index closed down 0.98 per cent.

The Nikkei share average ended 1 per cent lower at 21,534.35 points.

Financial stocks bucked the weakness, after US Treasury yields rose on Friday following the strong jobs report. Mitsubishi UFJ Financial Group was up 0.1 per cent, Mizuho Financial Group added 0.6 per cent and Dai-ichi Life Holdings gained 0.2 per cent.

Europe

Europe shares were down slightly on Monday as Deutsche Bank announce a massive restructuring, and hopes around US Fed rate cuts faded.

The pan-European STOXX 600 index ended marginally lower with all major indices in the red. Madrid's bank-heavy index underperformed but London's FTSE 100 outperformed, boosted by miners and oil majors.

Healthcare stocks were down, as Swiss drugmaker Roche Holding agreed to extend the deadline for a US$4.3 billion takeover bid for US gene therapy specialist Spark Therapeutics.

A surge in basic resources stocks, however, helped limit losses for the benchmark after Dalian iron ore recouped some of its losses from late last week, buoyed by expectations of strong demand.

The pan-European banking sector, which fell 1 per cent was further weighed down by shares of Swiss lender Julius Baer.

In Greece, despite the expected victory of the country's opposition conservatives in Sunday's snap election, Athens stocks ended almost 2 per cent lower.

North America

US stocks have fallen as Apple shares dropped following a broker downgrade, and investors continued to weigh chances of an aggressive interest rate cut by the Federal Reserve later this month.

Apple fell 2.2 per cent and was the biggest drag on the S&P 500 and Nasdaq.
The technology index was down 0.7 per cent on Monday, while the healthcare index fell 0.8 per cent, weighed down by US President Donald Trump's recent statement about an upcoming executive order that would lower prescription drug prices.

Surprisingly, strong US jobs data on Friday has forced traders to temper hopes of a sharp rate cut at the central bank's July 30-31 policy meeting, even as a reduction is still expected.

The Dow Jones Industrial Average fell 115.98 points, or 0.43 per cent, to 26,806.14 on Monday, the S&P 500 lost 14.46 points, or 0.48 per cent, to 2975.95 and the Nasdaq Composite dropped 63.41 points, or 0.78 per cent, to 8098.38.

A week ago, the market forecast an 80.1 per cent chance of a 25-basis-point cut, and a 19.9 per cent chance of a 50-basis-point cut, according to CME Group's FedWatch tool.

In afternoon trade, the chances were 92 per cent and eight per cent, respectively.
Investors might get an opportunity to gauge near-term monetary policy thinking during Fed Chairman Jerome Powell's semi-annual testimony to the US Congress on July 10-11.

Also ahead are the central bank's June meeting minutes, scheduled for release on Wednesday.

Boeing fell 1.3 per cent and was the biggest drag on the Dow after Saudi Arabian budget airline flyadeal said it would not proceed with a provisional US$ 5.9 billion order for the planemaker's grounded 737 MAX aircraft, instead opting for a fleet of Airbus A320 jets.

Symantec rose 2.4 per cent after Jefferies said the cybersecurity firm is a "logical financial acquisition" amid reports Broadcom is in advanced talks for a deal.

is senior editor for Morningstar Australia

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