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Global Market Report - 14 November

Lex Hall  |  14 Nov 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher as investors wait for the latest unemployment data.

The SPI200 futures contract was up 17.0 points, or 0.25 per cent, at 6,708.0 at 8am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Thursday.

The Australian share market fell yesterday, with every sector save one in the red, after US President Donald Trump threatened to escalate his trade war with China if the two countries can't reach a deal.

The benchmark S&P/ASX200 index closed on Wednesday down 54.7 points, or 0.81 per cent, to 6,698.4 points, while the broader All Ordinaries was down 51.6 points, or 0.75 per cent, to 6,805.5 points.

On Wall Street, the Dow Jones Industrial Average was up 0.33 per cent, the S&P 500 was up 0.07 per cent and the tech-heavy Nasdaq Composite was down 0.05 per cent.

The Australian Bureau of Statistics will release its jobs numbers for October at 11.30am Sydney time on Thursday.

The Aussie dollar is buying 68.38 US cents from 68.54 US cents on Wednesday.

Asia

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Shanghai stocks on Wednesday hit their lowest close in more than six weeks amid mixed signals over the extent of progress made in the US-China trade talks, while an escalation of violence in Hong Kong rattled sentiment.

The blue-chip CSI300 index closed 0.1 per cent lower at 3,899.98, while the Shanghai Composite Index ended down 0.3 per cent at 2,905.24 points, its lowest close since 30 September.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1.08 per cent, while Japan’s Nikkei index closed down 0.85 per cent.

Europe

European shares retreated from four-year highs on Wednesday, as ambiguity over a US-China trade deal and intensifying unrest in Hong Kong kept investors at bay, while Spanish stocks underperformed as Rome braced for more political uncertainty.

The pan-European STOXX 600 index fell 0.2 per cent with trade-sensitive autos and miners hurt as a much awaited speech by US President Donald Trump gave scant clues on the progress of a trade deal with China.

European indices had rallied to their highest levels in four years, just 2 per cent short of reclaiming their record highs, on the prospects of a ‘Phase 1’ trade deal being finalised between Washington and Beijing and some better-than-expected earnings.

Earnings expectations for European listed companies for the third quarter improved, but not enough for the region to escape the corporate recession it is stuck in, the latest data from Refinitiv showed.

Banks were the biggest drag on the benchmark index. Those with significant exposure to Hong Kong, such as HSBC and Standard Chartered, weighed as parts of the Asian financial hub were paralysed.

Tullow Oil slumped 21 per cent after cutting its 2019 oil production and free cash flow forecasts and dragged the oil and gas sector down 0.6 per cent.

A 23 per cent jump in the shares of medical equipment maker Ambu due to an early launch of duodenoscope stood out among positives, while a clear move into defensive stocks like food and beverage and healthcare underlined muted risk appetite.

Spanish stocks led losses among regional peers, down 1.3 per cent, extending a slide after Socialists and far-left Unidas Podemos formed a new coalition on Tuesday.

The unexpectedly fast preliminary agreement was formed between two parties that recently refused to work together.

Ratings agency Fitch said on Wednesday that political stability for the euro zone economy remains uncertain as forming a lasting majority government will be challenging.

Focus will now be on German GDP numbers on Thursday that are expected to show a technical recession for Europe’s largest economy, which analysts say is mostly baked in by markets.

North America

The Dow Jones Industrial Average and the S&P 500 posted record closing highs on Wednesday, helped by a big jump in Walt Disney shares, but the Nasdaq fell as stocks were kept in check by fresh uncertainty over US-China trade relations.

The Wall Street Journal reported during the session that US-China trade negotiations have hit a snag over farm purchases, the latest development in a dispute between the two countries that has convulsed markets for more than a year.

The three indexes had all drifted higher earlier in the day after Federal Reserve Chairman Jerome Powell said US central bankers see a “sustained expansion” ahead for the country’s economy.

Stocks have recently climbed to record levels, fuelled by Fed interest rate cuts, third-quarter earnings exceeding low expectations and signs the economy is bottoming. But questions about an initial agreement to help resolve the US-China trade dispute remain a key wild card.

The Dow Jones Industrial Average rose 92.1 points, or 0.33 per cent, to 27,783.59, the S&P 500 gained 2.2 points, or 0.07 per cent, to 3,094.04 and the Nasdaq Composite dropped 3.99 points, or 0.05 per cent, to 8,482.10.

Among the S&P 500 sectors, traditionally defensive groups such as utilities, real estate and consumer staples ended sharply positive, while cyclical sectors, such as financials, energy and materials, which are known for tracking the health of the economy, lagged.

Investors also had their eyes on geopolitical developments, including presidential impeachment hearings in the US and protests in Hong Kong.

Walt Disney Co shares jumped 7.3 per cent after the media company said its new streaming service, Disney+, had reached 10 million sign-ups since launching the previous day. Disney shares provided the biggest boost to the Dow and the S&P 500.

Shares of streaming rival Netflix Inc sank 3.0 per cent.

SmileDirectClub Inc shares slumped 20.3 per cent after the teeth alignment company reported a bigger quarterly loss.

About three-fourths of S&P 500 companies have topped earnings estimates in their third-quarter reports, but the companies are still expected to have posted an overall 0.5 per cent decline in earnings, according to Refinitiv data.

is senior editor for Morningstar Australia

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