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Global Market Report - 10 October

Lex Hall  |  10 Oct 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after a positive lead from Wall Street and hopes of progress in US-China trade talks.

The SPI200 futures contract was up 41 points, or 0.63 per cent, at 6,555.0 at 8am Sydney time, suggesting a rise for the benchmark S&P/ASX200 on Thursday.

The Australian share market closed lower yesterday, as pessimism about the outcome of the upcoming US-China trade negotiations weighs on market confidence.

The benchmark S&P/ASX200 index finished trade on Wednesday down 46.7 points, or 0.71 per cent, to 6,546.7 points, while the broader All Ordinaries was down 46.7 points, or 0.7 per cent, to 6,667.0 points.

On Wall Street overnight, the Dow Jones Industrial Average was up 0.70 per cent, the S&P 500 was up 0.91 per cent and the tech-heavy Nasdaq Composite was up 1.02 per cent.

Investor sentiment got an early boost following a Bloomberg report that China remained open to agreeing to a partial trade deal with the US.

Separately, the Financial Times said Beijing was offering to increase its annual purchases of US agricultural products.

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The Aussie dollar is buying 67.25 US cents from 67.38 US cents on Wednesday.

Asia

China stocks erased losses to end higher on Wednesday, as banks and real estate firms jumped, while investors were cautious ahead of important trade talks between the US and China.

The blue-chip CSI300 index rose 0.1 per cent to 3,843.24, while the Shanghai Composite Index closed up 0.4 per cent at 2,924.86.

Banking stocks helped drag down Hong Kong's Hang Seng Index Wednesday after Morgan Stanley warned they are vulnerable to the city's economic slowdown and the rise of virtual banks.

The Hang Seng finished the day down 0.8 per cent at 25,682.81.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.58 per cent, while Japan’s Nikkei index closed down 0.61 per cent.

Europe

German shares logged their best day in six weeks on Wednesday, leading the charge among European shares, as sentiment was lifted by signs of progress in US-China trade relations a day ahead of high-level talks between the two parties.

Reports that China was still open to agreeing to a partial trade deal with the US, and that Beijing was offering to increase its annual purchases of US agricultural products, came as signs of compromise, but analysts remain skeptical.

Exporter-heavy German shares added 1 per cent and the pan-European STOXX 600 index rose 0.4 per cent recovering from Tuesday's 1 per cent decline when hostility from both sides in the US-China dispute dented sentiment.

A year into it, headlines from the trade war continue to inject volatility into markets, with STOXX 600 index giving up as much as it gains, putting it on course for a barely changed week.

Trade-reliant sectors such as technology stocks, auto and part makers and some luxury goods stocks were among the biggest boosts to the index.

Among the top performers was the owner of British gambling firm Ladbrokes, GVC Holdings, which gained 5.1 per cent after it raised its annual core earnings forecast for the second time in three months.

Along with a rally in Ryanair and easyJet after a day of steep falls, it lifted last session’s worst performing travel and leisure sector 0.5 per cent.

London's blue chips were among the markets that gained the least as the European Union said a Brexit deal was "very difficult" if not entirely impossible.

EU officials denied the bloc is preparing a major concession for Britain to secure a Brexit deal after a report by the Times newspaper said the EU was ready to offer a mechanism for the Northern Irish assembly to leave a new so-called Ireland backstop.

The deeply uncertain future of Brexit, coupled with mounting concerns around the economically damaging Sino-US trade war, have knocked around 3 per cent off the benchmark index so far this month, erasing its September gains.

Among other stocks, Airbus lost 0.3 per cent after sources said the planemaker’s defence and space unit issued an internal warning of significant challenges in meeting cash flow and other targets for 2019.

North America

Wall Street rose on Wednesday on hopes of progress in US-China trade talks, though stocks pared gains late after Chinese officials said Beijing had lowered expectations for negotiations this week.

All three major US stock averages closed in the black, but lost ground as the closing bell approached after Chinese officials said goodwill was damaged by the US Commerce Department's blacklisting of 28 Chinese companies this week.

Minutes from the US Federal Reserve's September meeting showed most policymakers supported last month's interest rate cut, and while all were generally more concerned with risks associated with the US-China trade war and slowing global growth among other geopolitical issues, they differed on what that meant for the US economy.

Trade tensions, signs of slowing economic growth and rising geopolitical tensions have gripped equity markets so far this month, with the S&P 500 and Dow Jones indexes off about 2 per cent since the end of September.

The Dow Jones Industrial Average rose 182.1 points, or 0.7 per cent, to 26,346.14, the S&P 500 gained 26.34 points, or 0.91 per cent, to 2,919.4 and the Nasdaq Composite added 79.96 points, or 1.02 per cent, to 7,903.74.

All 11 major sectors of the S&P 500 closed higher, with technology and energy enjoying the largest percentage gains.

Trade-sensitive chipmakers rose, with the Philadelphia SE Semiconductor index rising 1.7 per cent.

Microsoft led the Dow's gain, advancing 1.9 per cent, while Johnson & Johnson was the blue-chip index's sole decliner.

The drugmaker's shares dropped 2.0 per cent after a jury awarded $8 billion in punitive damages in a case surrounding its antipsychotic drug Risperdal.

With third-quarter earnings season coming into focus, analysts now expect earnings for S&P 500 companies to drop by 3.1 per cent year-on-year, the first contraction since the earnings recession that ended in 2016.

is senior editor for Morningstar Australia

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