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Global Market Report - 16 October

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

The Australian share market is expected to open higher after a positive lead from Wall Street, prompted by upbeat earnings reports.

The SPI200 futures contract was up 52 points, or 0.78 per cent, at 6,683.0 at 7am Sydney time, suggesting a strong early bounce for the benchmark S&P/ASX200 on Wednesday.

The Australian share market has finished a touch higher despite stocks of media companies and retailers taking a hit amid reports their businesses are suffering.

The benchmark S&P/ASX200 index finished Tuesday up 9.4 points, or 0.14 per cent, to 6,652 points, while the broader All Ordinaries was up 5.4 points, or 0.08 per cent, to 6,763.3 points.

On Wall Street overnight, the Dow Jones Industrial Average was up 0.93 per cent, the S&P 500 was up 1.0 per cent and the tech-heavy Nasdaq Composite was up 1.26 per cent.

The Aussie dollar is buying 67.52 US cents from 67.76 US cents on Tuesday.

Asia

China stocks gave up early gains as a late afternoon slide in property shares wiped out initial optimism triggered by encouraging industrial profit data released over the weekend.

The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 0.9 per cent, to 3,169.73, while the Shanghai Composite Index lost 0.7 percent, to 2,957.82 points.

Hong Kong stocks slipped amid worries over China’s economic health and uncertainties around Sino-US trade talks, but losses were limited as the city’s central bank cut banks’ capital buffer to support the economy.

The Hang Seng index fell 0.1 per cent, to 26,503.93, while the China Enterprises Index lost 0.1 per cent, to 10,500.17 points

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.04 per cent, while Japan’s Nikkei index closed up 1.87 per cent.

Europe

European stocks rose to their highest in nearly three months on Tuesday, with Irish stocks soaring almost 3 per cent, after a news report said negotiators were on the verge of a deal that would avoid Britain crashing out of the European Union.

Shares in Irish companies, which are hugely reliant on UK business and seen as a barometer of market worries about Brexit, hit their highest in more than a year.

Two EU officials said a Bloomberg report of an imminent Brexit deal was “premature”. However, a third official said there had been some “serious convergence of views” in technical talks while chief EU negotiator Michel Barnier and other senior officials said progress was being made.

Any new deal will still have to go to a fractious British parliament which rejected several attempts by Prime Minister Boris Johnson’s predecessor Theresa May to push through the withdrawal agreement she agreed with Brussels.

With the pound surging on the positive noise around Brexit, internationally-focused firms on London's blue chip FTSE 100 came under pressure, while the domestically-focused midcap index climbed 1.3 per cent.

British banks Lloyds, Royal Bank of Scotland and Barclays, considered some of the most vulnerable to the UK economy and Brexit uncertainty, rose between 4 and 5 per cent.

The pan European STOXX 600 index jumped 1.1 per cent, with other major regional indices including Germany's DAX and France's CAC 40 gaining a similar amount.

Also boosting sentiment was an upbeat start to the US quarterly earnings season with better than expected reports from J.P. Morgan and Johnson & Johnson.

Europe’s bank index rose 2.5 per cent, leading gains among the major sectors, while retailers gained 2.4 per cent.

Recruiter Hays Plc jumped 8.1 per cent after it reported steady first-quarter net fees due to strong hiring in the US and China.

Shares in Wirecard, however, slumped 12.8 per cent after the Financial Times published documents on the company’s accounting practices alleging an effort to inflate sales and profits, dealers said.

Dutch semiconductor equipment maker ASML gained 3 per cent after reports that South Korea’s Samsung has agreed to buy high-end lithography machines from the company.

German meal-kit company Hellofresh rose 23.4 per cent after the company raised its full year forecast, hauling Germany’s small-cap index 1.7 per cent higher.

North America

Wall Street advanced on Tuesday as third-quarter reporting season hit with a spate of upbeat earnings reports that brought buyers back to the equities market.

All three major US stock averages gained ground in a broad-based rally, with the S&P 500 and the Nasdaq hitting their highest closing level in more than three weeks.

Investors also welcomed news that Britain and the European Union could reach a deal in time for a leaders' summit this week.

Major financial firms JPMorgan Chase & Co, Citigroup Inc, Goldman Sachs Group Inc and Wells Fargo & Co all posted results, as did healthcare giants Johnson & Johnson and UnitedHealth Group Inc.

Among the big banks, JPMorgan Chase stock hit a record high after it handily beat estimates on bond trading and underwriting strength. Its shares were last up 3.0 per cent.

Citigroup rose 1.4 per cent following its profit beat.

Wells Fargo results were less upbeat, as its profit slid 26 per cent due to sinking mortgage income and legal costs. Goldman Sachs' profit miss was attributed to weak underwriting. Still, Wells Fargo rose 1.7 per cent, while Goldman edged up 0.3 per cent.

Prescription drug sales helped drive Johnson & Johnson's upside surprise, while UnitedHealth raised its 2019 guidance on pharmacy benefit growth. Their shares closed up 1.6 per cent and 8.2 per cent, respectively.

Analysts currently expect S&P 500 third-quarter earnings to have contracted by 3 per cent from last year, down from the 12.1 per cent growth seen a year ago, according to Refinitiv data.

Of the 34 S&P 500 companies that have reported so far, 88.2 per cent have come in above consensus estimates.

The Dow Jones Industrial Average rose 237.44 points, or 0.89 per cent, to 27,024.8, the S&P 500 gained 29.53 points, or 1.00 per cent, to 2,995.68 and the Nasdaq Composite added 100.06 points, or 1.24 per cent, to 8,148.71.

Among the 11 major sectors in the S&P 500, nine ended the session in positive territory, with healthcare, communications services and financials enjoying the largest percentage gains.

Blackrock Inc, the world's largest asset manager, beat analyst estimates on strong inflows into its fixed income and cash management business, sending its stock up 2.4 per cent.

In other news, shares of Roku Inc surged 11.5 per cent after announcing Apple Inc's TV app was available on its platform and Apple TV+ would be available after it was launched.

Bank of America, expected to post results on Wednesday, rose 2.0 per cent after a Bloomberg report that Warren Buffett' Berkshire Hathaway was seeking permission from the Federal Reserve to boost his stake in the bank above 10 per cent.

is content editor for Morningstar Australia

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