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Global Market Report - 16 January

Lex Hall  |  16 Jan 2020Text size  Decrease  Increase  |  
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Australia

Australian share prices appeared headed for another record day after US stocks rose with the signing of a long awaited trade deal with China.

The SPI200 futures contract was up 23 points, or 0.33 per cent, at 6953 at 8am on Thursday following a new high on the ASX of 6996.8 points on Wednesday.

The rise comes after the first phase of a new trade agreement between the US-China was signed overnight in the US.

The Dow Jones Industrial Average rose 91.16 points, or 0.31 per cent, to 29,030.83, the S&P 500 gained 6.2 points, or 0.19 per cent, to 3289.35 and the Nasdaq Composite added 7.37 points, or 0.08 per cent, to 9258.70.

The gold price rose after the trade deal was signed between the two biggest economies as details of the agreement failed to soothe investor concerns about trade differences.

The Australian dollar was buying 69.04 US cents, up from 68.96 US cents at Wednesday's close. 

Asia

The Chinese stock market fell on Wednesday, just hours before the world’s largest economies are set to sign a phase one trade deal, as the US Treasury Secretary insisted that tariffs will stay in place.

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At the close, the Shanghai Composite index was 0.5 per cent weaker at 3090.04, while the blue-chip CSI300 index lost 0.6 per cent.

Stocks in Hong Kong edged down on. At the close of trade, the Hang Seng index was down 0.4 per cent at 28,773.59. The Hang Seng China Enterprises index fell 0.5 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.4 per cent, while Japan’s Nikkei index closed down 0.5 per cent.

Europe

European shares ended flat on Wednesday as investors held back from making any big bets ahead of the signing of a phase one trade deal between the US and China.

The pan-European STOXX 600 index closed 0.01 per cent higher after remaining range-bound for most of the day.

Defensive plays led gains, with the utilities, healthcare and food & beverage sectors outperforming.

US President Donald Trump and Chinese Vice Premier Liu He will sign an initial trade deal on Wednesday that will roll back some tariffs and see China boost purchases of US goods and services.

The pact is expected to help defuse an 18-month conflict between the US and China, the world’s two largest economies. The fine print on the deal is yet to be published.

Talks between EU and US trade representatives in Washington this week will be in the spotlight, given the strained relations between the two over US tariffs and aircraft subsidy disputes.

Dutch semiconductor supplier ASM International jumped 8.6 per cent, to the top of the STOXX 600, hitting a record high after it reported a strong fourth-quarter order intake.

Automobile stocks were the worst performers in the euro zone, shedding 1.7 per cent.

German car parts maker Hella GMBH extended losses to a second session after it posted lower first-half earnings and warned that a strong market recovery was unlikely.

Germany's main stock index fell about 0.2 per cent after the EU's biggest economy marked a GDP growth of 0.6 per cent in 2019, the weakest expansion rate since 2013.

North America

The Dow ended above 29,000 for the first time on Wednesday and the S&P 500 also closed at a record high after the US and China signed a phase one trade agreement and pledged to resolve a tariff dispute that has roiled Wall Street for over a year.

The centrepiece of the truce is a pledge by China to purchase at least an additional $200 billion worth of US farm products and other goods and services over two years, over a baseline of $186 billion in purchases in 2017.

The trade agreement clears the way for investors to focus on upcoming quarterly earnings reports, including the outlooks companies provide in light of the deal.

Trump said he would remove all US tariffs on Chinese imports as soon as the two countries complete the phase two trade agreement, on which negotiations will start soon.

The three main stock indexes gave up earlier intraday record highs, with disappointing earnings reports from Bank of America pushing the S&P financial index down 0.55 per cent.

Bank of America Corp reported a better-than-expected quarterly profit, but warned of weak net interest income in the first half of 2020, knocking its shares down 1.8 per cent.

Goldman Sachs Group Inc slipped 0.2 per cent after reporting a bigger-than-expected fall in profit as it set aside more money to cover legal costs.

The Dow Jones Industrial Average rose 0.31 per cent to 29,030.22 points, ending above 29,000 for the first time.

The S&P 500 gained 0.19 per cent to 3289.3, its highest ever close.

The Nasdaq Composite added 0.08 per cent to 9258.70, just short of its record high close set on Monday.

UnitedHealth Group Inc, the largest US health insurer, rose 2.8 per cent as it affirmed its full-year outlook for 2020 adjusted earnings. The S&P healthcare index climbed 1.0 per cent.

Retailer Target Corp slumped 6.6 per cent after it missed its own expectations for 2019 holiday season sales after reporting a drop in online growth and demand for toys and electronics.

Toymakers Mattel and Hasbro fell 4.6 per cent and 2.1 per cent, respectively, while electronics seller Best Buy dropped 1.7 per cent.

 

 

is senior editor for Morningstar Australia

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