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Global Market Report - 12 December

Lex Hall  |  12 Dec 2019Text size  Decrease  Increase  |  
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Australia

Australian stocks are set to open lower as the US Fed kept rates on hold and signaled that borrowing costs are likely to remain unchanged indefinitely.

The SPI Futures contract was down 25 points, or 0.37 per cent, at 8am Sydney time, suggesting a fall for the benchmark S&P/ASX200 on Thursday.

The Australian share market climbed higher yesterday following a report that the Trump administration was set to delay the next round of US tariffs on China that are set to kick in on Sunday.

The benchmark S&P/ASX200 index surged in the final minutes of trading on Wednesday to finish up 45.7 points, or 0.68 per cent, to 6,752.6 points, while the broader All Ordinaries was up 41.1 points, or 0.6 per cent, to 6,853.2 points.

On Wall Street, stocks posted modest gains. The Dow Jones Industrial Average rose 0.1 per cent to 27,910.41, the S&P 500 gained 0.29 per cent and the Nasdaq Composite added 0.44 per cent.

The decision by the US central bank's rate-setting committee left the benchmark overnight lending rate in its current target range between 1.50 per cent and 1.75 per cent.

The Fed's policy statement expressed an upbeat view of the economy, with new projections showing most officials believe rates are low enough to stimulate growth.

Local highlights today include the Westpac annual meeting and the government’s expected response on the digital platforms inquiry.

The Aussie dollar is buying 68.79 US cents, up 1.03 per cent.

Asia

Shares in China inched higher on Wednesday on hopes that fresh US tariffs on Chinese goods may be delayed, but gains were limited amid the lack of formal confirmation from Beijing and Washington.

The Shanghai Composite index closed up 0.2 per cent at 2,924.42, after hitting its highest level since Nov. 20 earlier in the session. The blue-chip CSI300 index climbed 0.1 per cent.

Hong Kong stocks closed higher on Wednesday amid speculation that Washington may hold back from slapping new tariffs on Chinese exports that are scheduled to kick in this weekend.

At the close of trade, the Hang Seng index was up 0.8 per cent at 26,645.43, hovering around the session’s high.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.6 per cent, while Japan’s Nikkei index closed 0.1 per cent weaker.

Europe

European shares made small moves on Wednesday in anticipation of pivotal global events such as a US-China tariff deadline, UK general election and some central bank meetings, but a 5.2 per cent rally in Zara owner Inditex ensured a higher close.

The pan-European STOXX 600 index ticked up 0.2 per cent reversing early gains. Spanish shares rose 0.8 per cent to lead gains among regional peers as Inditex shares scaled a two-year high after posting a strong profit growth.

JD Sports’ 9.5 per cent drop was the biggest on the pan-region index. The sportswear retailer posted its worst day in 3½ years after its largest shareholder, Pentland, sold a part of its stake.

That cancelled gains on London's benchmark FTSE 100 index which closed flat. An index with more domestically focused British firms slid 0.6 per cent.

Britons vote on Thursday in an election that should decide the fate of Brexit. Polls now predict only a modest majority for Prime Minister Boris Johnson, an outcome that could prolong uncertainty and further hit investor sentiment.

The benchmark European index scaled four-year peaks in the past two months on optimism around an eventual departure for Britain from the European Union as well as hopes of a resolution to the US-China trade war, but sentiment has lately been dampened by conflicting headlines on both.

A Sino-US trade deal remains elusive ahead of the next round of US tariffs on Chinese imports due on 15 December, but latest reports suggest that tariffs could be postponed.

Among other shares, German engineering company Siemens was among the biggest boosts to the STOXX 600 after it named its strategy chief and former Kuka CEO Horst J. Kayser as boss of its loss-making portfolio companies.

North America

Wall Street’s main stock indexes ended modestly higher on Wednesday after the US Federal Reserve held interest rates steady and signaled that borrowing costs are likely to remain unchanged indefinitely.

The US central bank said moderate economic growth and low unemployment are expected to continue through next year’s presidential election.

After cutting rates three times earlier this year, the Fed left its benchmark rate at the target range of between 1.50 and 1.75 per cent, a decision that was widely expected.

The Fed’s move to ease monetary policy this year has supported the rise in stocks to record highs; the S&P 500 has gained 25 per cent so far in 2019.

With the Fed expected to stand pat on rates this time, investors have been more focused on US-China trade relations, including new tariffs on Chinese goods. President Donald Trump has said the new tariffs will go into effect on 15 December, but uncertainty remains over whether they will be implemented.

Fed policymakers said they would continue monitoring “global developments” in deciding whether interest rates need to change. They also said they would keep an eye on “muted inflation pressures,” a reflection of concern that the pace of price increases has failed to hit the central bank’s target.

Data on Wednesday did show U.S. consumer prices increased solidly in November.

The Dow Jones Industrial Average rose 29.37 points, or 0.11%, to 27,911.09, the S&P 500 gained 9.1 points, or 0.29%, to 3,141.62, and the Nasdaq Composite added 37.87 points, or 0.44%, to 8,654.05.

Most S&P 500 sectors finished positive, with materials and technology leading the way.

In company news, Home Depot Inc shares fell 1.8 per cent as the home improvement chain forecast fiscal 2020 sales below Wall Street expectations. Home Depot shares were the biggest drag on the Dow, keeping the blue chip index’s gain relatively slim.

American Eagle Outfitters Inc shares dropped 6.5 per cent after the apparel retailer forecast holiday-quarter profit and comparable sales below market expectations.

is content editor for Morningstar Australia

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