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Global Market Report - 16 July

Lex Hall  |  16 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open flat ahead of the release of the central bank's minutes from its last meeting.

The SPI200 futures contract was down 5 points, or 0.08 per cent, at 6,592.0 at 7am Sydney time, suggesting little change at the start of trade for the benchmark S&P/ASX200 on Tuesday.

The Australian share market fell for a second day on Monday, with nearly every sector in the red despite a positive lead from Wall Street last week.

The benchmark S&P/ASX200 index was down 43.5 points, or 0.65 per cent, to 6,653 points on Monday, while the broader All Ordinaries was down 42.6 points, or 0.63 per cent, to 6,746.2.

Wall Street closed higher overnight after a choppy session, with the Dow Jones Industrial Average finishing up 0.10 per cent, the S&P 500 up 0.02 per cent and the tech-heavy Nasdaq Composite up 0.17 per cent.

The Reserve Bank of Australia is set to give further clues about its decision to cut the cash rate to a record low of 1.0 per cent when the minutes of its July meeting are released at 11.30am Sydney time.

The Aussie dollar is buying 70.39 US cents from 70.33 US cents on Monday.

Asia

Chinese shares closed firmer on Monday as China’s upbeat retail sales and factory output numbers pointed to some stabilization, with second-quarter economic data meeting expectations, while technology shares rebounded from previous week’s sharp declines.

At the close, the Shanghai Composite index was up 0.4 per cent at 2,942.19.

The blue-chip CSI300 index climbed 0.41 per cent, with its financial sector sub-index ending up 0.17 per cent, the consumer staples sector closing 0.07 per cent higher, the real estate index down 0.11 per cent and the healthcare sub-index up 0.35 per cent.

China’s economic growth slowed to 6.2 per cent in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting US trade pressure.

Hong Kong shares rose on Monday after China’s upbeat numbers.

At the close of trade, the Hang Seng index was up 83.26 points, or 0.29 per cent, at 28,554.88. The Hang Seng China Enterprises index rose 0.47 per cent to 10,838.99.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.29 per cent, while Japan’s Nikkei index closed 0.2 per cent higher.

Europe

European stocks ended higher on Monday as trade-sensitive German equities took heart from surprisingly strong Chinese data after worries about domestic growth led to a shaky start.

Frankfurt-listed shares had briefly dipped into the red in early trade after Germany's economy ministry pointed to weakness in the manufacturing and services sectors, suggesting a subdued second quarter for Europe's largest economy.

The DAX index ended 0.52 per cent higher, however, with investors counting on the European Central Bank to signal further easing of monetary policy at a meeting next week given slowing growth.

The pan-European STOXX 600 rose about 0.4 per cent in a choppy trading session, with sectors exposed to trade headlines including automakers, chemicals and basic resources companies topping gains.

Buoying risk sentiment was data from China that showed factory output and retail sales topped forecasts in June. Although economic growth slowed to 6.2 per cent in the second quarter, its weakest pace in at least 27 years, it was in line with analysts’ expectations.

Regional chipmakers gained after a senior US official said the United States may approve licenses for companies to re-start new sales to blacklisted Chinese telecoms equipment maker Huawei in as little as two weeks.

Infineon, ASM and STMicroelectronics rose between 0.6 per cent and 3.7 per cent.

Shares of Belgian-Dutch biotech firm Galapagos jumped 19 per cent to a record high after US drugmaker Gilead Sciences said it would invest $5.1 billion in the company.

Banking stocks ended flat, drawing little cheer from US lender Citigroup’s better-than-expected results, as Italian banks dragged.

Investors will turn to earnings from heavyweights in Europe, with technology major SAP, semiconductor player ASML and drugmaker Novartis among those due to report second-quarter results this week.

Companies listed on the pan-European STOXX 600 index are expected to report 0.8 per cent earnings growth in the second quarter, down sharply from an estimate of 1.8 per cent a week ago, according to data from Refinitiv.

North America

The benchmark S&P 500 index ended little changed on Monday after oscillating between positive and negative territory throughout the session after Citigroup kicked off the earnings season with a mixed quarterly report.

The bank reported a better-than-expected profit but also a decline in its net interest margin. The fall in net interest margin triggered a fall in shares of other banks on concerns that it would presage lower profits across the industry as interest rates have dropped.

Though Citigroup shares erased nearly all their losses to end just 0.1 per cent lower, the S&P 500 bank index slid 1.0 per cent. Shares of JPMorgan Chase & Co, Goldman Sachs Group and Wells Fargo & Co - all set to report results on Tuesday - declined more than 1 per cent.

As a result, financial shares fell 0.5 per cent to weigh most heavily on the S&P 500 among its 11 major sectors.

Gains in technology and healthcare shares offset the losses in financial shares, however. Those sectors helped the Nasdaq edge higher to notch its fourth consecutive record closing high.

Second-quarter earnings start in earnest this week, and analysts expect S&P 500 companies to report a 0.3 per cent fall in profit, which would be the first quarterly drop in three years, according to Refinitiv IBES data.

US stocks will likely be muted until more results come in, said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York. The three main indexes ended last week at record closing highs as dovish comments from Federal Reserve Chairman Jerome Powell bolstered hopes the central bank would cut interest rates later this month.

The Dow Jones Industrial Average rose 27.13 points, or 0.1 per cent, to 27,359.16, the S&P 500 gained 0.53 point, or 0.02 per cent, to 3,014.3 and the Nasdaq Composite added 14.04 points, or 0.17 per cent, to 8,258.19.

Gilead Sciences shares rose 2.7 per cent, helping to boost the S&P 500 healthcare index, as the drugmaker said it would invest $5.1 billion in a major expansion of its partnership with biotech Galapagos.

Boeing Co shares slipped 1 per cent following a Wall Street Journal report here on Sunday that its 737 MAX jet could stay grounded until early 2020.

Symantec Corp shares tumbled 10.7 per cent, the biggest percentage drop among S&P 500 companies, after a report that the cybersecurity company and Broadcom have ceased deal talks. Broadcom shares rose 1 per cent.

is content editor for Morningstar Australia

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