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Global Market Report - 13 December

Lex Hall  |  13 Dec 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after Wall Street gained overnight amid new hopes of a US-Chinese trade truce.

At 7am the SPI200 futures contract was up 21.0 points, or 0.31 per cent, at 6,724.0, suggesting a positive start for the benchmark S&P/ASX200 on Friday.

On Wall Street, the Dow Jones Industrial Average was up 0.79 per cent, the S&P 500 was up 0.86 per cent and the tech-heavy Nasdaq Composite was up 0.73 per cent.

“Getting VERY close to a BIG DEAL with China. They want it, and so do we!,” US President Donald Trump tweeted overnight.

The Aussie dollar is buying US68.99 cents from US68.81 cents on Thursday.

Asia

Shanghai stocks snapped a five-session rally to end lower on Thursday, as investors remained wary ahead of Washington’s decision to proceed with new tariffs on Chinese goods this weekend.

The blue-chip CSI300 index fell 0.3 per cent to close at 3,891.02, while the Shanghai Composite Index also shed 0.3 per cent to 2,915.70.

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Hong Kong shares on Thursday hit their highest close in more than three weeks, as investors sought bargains in IT and consumer stocks amid strength in the local currency.

The Hang Seng index was up 1.3 per cent at 26,994.14, its highest close since Nov. 19, while the China Enterprises Index closed 1.1 per cent firmer at 10,614.76.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.96 per cent, while Japan’s Nikkei index closed up 0.14 per cent.

Europe

Euro zone banks enjoyed their best day in two months on Thursday after comments by new ECB chief Christine Lagarde, and European shares were propelled further by US-China trade developments.

The pan-European STOXX 600 index closed up 0.3 per cent as euro zone banks rose 2.8 per cent, with investors taking comfort from Lagarde saying she was aware of the side effects of the European Central Bank’s unconventional monetary policy.

The ECB kept its sub-zero interest rates steady and, at her first meeting as president of the ECB, Lagarde said she was neither a policy hawk nor a dove but an owl who will use her wisdom to heal a recent rift in the Governing Council.

She also said the bank expects in January to begin a strategic review of how it does business.

Bank-heavy indexes in Italy and Spain rose 1 per cent and 0.8 per cent respectively, as overnight the US Federal Reserve also held an accommodative stance.

Trade-sensitive German shares rallied 0.6 per cent after a report saying Washington had offered to cancel tariffs set to take effect on Chinese goods on 15 December and a tweet from US President Donald Trump suggesting a trade deal with China was very close.

Uncertainty around a trade deal as new tariffs loomed had dampened sentiment among investors this week.

These developments helped European shares stay firmly in the black before exit polls from an election in Britain which may determine whether Britain exits the European Union soon after 3½ years of uncertainty.

London's internationally focused FTSE 100 index and an index of more domestically focused firms both firmed around 0.7 per cent.

Opinion polls have pointed to the ruling Conservatives, led by Prime Minister Boris Johnson, gaining a parliamentary majority that enables his stalled Brexit deal to be passed, but the latest polls have shown the lead shrinking. Exit polls are due around 9am Sydney time.

Dublin's ISEQ, typically sensitive to Brexit news, rose 0.6 per cent.

In corporate news, Anheuser-Busch InBev’s weighed the most on the STOXX 600 after Australia’s competition regulator said the Belgian brewer’s $11 billion asset sale to Japan’s Asahi (2502.T) could hurt competition in Australia’s cider sector.

North America

Wall Street’s main indexes hit record highs on Thursday following news that the US had reached a “deal in principle” with China to resolve a trade war that has rattled markets for nearly two years.

Stocks were boosted in the morning when President Donald Trump tweeted that the United States was close to a deal ahead of Sunday, when a new round of tariffs on Chinese goods has been set to go into effect. Later in the day, reports emerged that the two countries had reached a deal in principle.

Wall Street has focused on the new round of tariffs, hopeful they would at least be delayed as the world’s two largest economies make progress on an initial trade deal.

The Dow Jones Industrial Average rose 220.75 points, or 0.79 per cent, to 28,132.05, the S&P 500 gained 26.94 points, or 0.86 per cent, to 3,168.57, and the Nasdaq Composite added 63.27 points, or 0.73 per cent, to 8,717.32.

All three indexes hit intraday records, while the S&P 500 and the Nasdaq posted record high closes.

Investors expressed some wariness of placing too much faith in the trade developments given the continued ups and downs during the prolonged US-China trade saga.

The benchmark S&P index has gained 26 per cent so far in 2019, fueled by interest rate cuts by the US Federal Reserve and better-than-expected corporate profits along with optimism over the US-China trade relations.

On Wednesday the Fed held interest rates steady in its last policy meeting of the year and signaled borrowing costs will not change anytime soon. On Thursday, Europe’s central bank held its rates steady, and its new head struck a more upbeat tone on the economy.

Among S&P 500 sectors, financials and energy gained the most on Thursday, while defensive groups, including real estate and utilities, were negative.

In company news, Facebook Inc shares fell 2.7 per cent after the Wall Street Journal reported that the US Federal Trade Commission is considering seeking a preliminary injunction against the social media company.

Delta Air Lines Inc shares rose 2.9 per cent as the company projected another annual rise in profit and revenue in 2020.

is senior editor for Morningstar Australia

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