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Global Market Report - 14 October

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

The Australian share market is expected to open higher amid an easing of US-Chinese trade tensions following the announcement of a partial deal at the end of last week.

The SPI200 futures contract was up 34 points, or 0.52 per cent, at 6,615.0 at 7am Sydney time, suggesting a rise for the benchmark S&P/ASX200 on Monday.

The Australian share market has closed solidly higher amid optimism that progress is being made between the US and China on trade.

The benchmark S&P/ASX200 index finished Friday up 59.7 points, or 0.91 per cent, to 6,606.8 points, while the broader All Ordinaries was up 59 points, or 0.89 per cent, to 6,721.9 points.

US President Donald Trump said after talks with Chinese Vice Premier Liu He that the two countries had reached a phase-one trade agreement focused on intellectual property, financial services and agricultural purchases.

On Wall Street on Friday, the Dow Jones Industrial Average was up 1.21 per cent, the S&P 500 was up 1.09 per cent and the tech-heavy Nasdaq Composite was up 1.34 per cent.

The Aussie dollar is buying 67.87 US cents from 67.76 US cents on Friday.

Asia

China stocks rose on Friday to end the four-session week higher, as investors cheered signs of The blue-chip CSI300 index rose 1.0 per cent, to 3,911.73, while the Shanghai Composite Index closed up 0.9 per cent at 2,973.66.

The Hang Seng index added 2.2 per cent, to 26,271.36 points, while the Hong Kong China Enterprises Index gained 2.0 per cent, to 10,427.03 points.

MSCI’s Asia ex-Japan stock index was firmer by 1.29 per cent, while Japan’s Nikkei index closed up 1.15 per cent.

Europe

European shares were on a tear on Friday as a surprise breakthrough in Brexit negotiations drove UK-focused London-listed companies and the Irish index about 4 per cent higher, while German shares logged their best day in nine months.

London-listed companies with exposure to the domestic economy swung to a premium over the exporter-heavy blue-chip index for the first time since May, in a reversal of fortune for the much-shunned market.

The mid-cap index posted its best day since May 2010, while the Irish bourse .ISEQ, seen as a barometer for Brexit sentiment, had its best session since June 2016.

JP Morgan’s UK domestic plays index, which was created in 2017 and tracks about 30 UK stocks that make all or most of their revenue at home, ended 7.7 per cent higher, its best performance on record.

UK Prime Minister Boris Johnson and his Irish counterpart unexpectedly said overnight that they had found a pathway to a possible deal over Britain’s departure from the European Union after three years of crippling uncertainty.

But any deal would need approval from the British parliament, which Johnson suspended unlawfully last month and in which he has no majority.

Britain and the EU agreed to hold intense talks over the next few days in a bid to secure a deal, but arrangements around British-Irish border controls remain at issue, the EU said.

The pan-European STOXX 600 index rose 2.3 per cent with most major European indices gaining more than 1.5 per cent. The German index, packed with carmakers exposed to UK demand, jumped 2.9 per cent.

SAP, Europe’s most valuable tech company, also contributed to gains in Frankfurt, rising 10 per cent for its best day since April after releasing strong third-quarter results and saying its long-term CEO had stepped down.

Rising hopes of top-level trade talks between the US and China yielding a partial trade deal and a delay in planned US tariff increases also brightened sentiment.

US Treasury Secretary Steven Mnuchin, Chinese Vice Premier Liu He and other senior officials concluded discussions on Friday.

The banking index, led broad-based gains, up 5 per cent for its best day since April 2016 and with British lenders CYBG, Lloyds and Royal Bank of Scotland among the top gainers.

Publicis tumbled 14.5 per cent to a seven-year low after the ad firm lowered its full-year sales target for the second time in 2019. Its London rival WPP lost 3.4 per cent.

Fashion house Hugo Boss sank 13.5 per cent to its lowest in almost 9 years after the company cut its 2019 earnings forecast and reported third quarter results below expectations.

The numbers came hard on the heels of a strong sales update from Louis Vuitton owner LVMH on Thursday.

North America

US stocks have closed more than one per cent higher, but well off the day's highs after the announcement of a partial trade deal between the US and China.

Indexes cut their gains late in the session as the deal was announced amid worries over potential glitches in the agreement, strategists said.

President Donald Trump said the US and China had come to a substantial phase-1 trade deal, reaching agreement on intellectual property, financial services and big agricultural purchases.

Trump, who was speaking to reporters after talks with Chinese Vice Premier Liu He, also said the two countries are close to ending their trade war.

The market had risen sharply earlier in the day due to optimism for an agreement.

Top-level talks between the two countries concluded their second day on Friday.

Cyclicals were among the day's best-performing groups, with the S&P industrial index up about 2 per cent ahead of the third-quarter earnings season, which is set to begin next week.

The Dow Jones Industrial Average rose 319.92 points, or 1.21 per cent, to 26,816.59, the S&P 500 gained 32.14 points, or 1.09 per cent, to 2,970.27 and the Nasdaq Composite added 106.27 points, or 1.34 per cent, to 8,057.04.

Indexes also gained for the week, with the Dow and Nasdaq each up 0.9 per cent and the S&P 500 up 0.6 per cent.

Analysts expect S&P 500 earnings to have declined 3.2 per cent year-on-year in the third quarter, which would mark the first decline since 2016, according to IBES data from Refinitiv.

Bets for another interest rate cut by the Federal Reserve fell after data showed a rise in consumer sentiment for the month of October.

Apple's stock rose as Wedbush raised its price target, citing confidence in the company's new video streaming service.

The industrial index was boosted by a surge in shares of Fastenal Co after the industrial distributor beat quarterly profit expectations.

is content editor for Morningstar Australia

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