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Global Market Report - 16 September

Lex Hall  |  16 Sep 2019Text size  Decrease  Increase  |  
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The Australian share market is expected to open slightly lower after a mixed session on Wall Street at the end of last week, marked by a 1.9 per cent fall in Apple.

The SPI200 futures contract was down 7.0 points, or 0.10 per cent, at 6,667.0 at 8am Sydney time, suggesting a dip for the benchmark S&P/ASX200 on Monday.

The Australian share market has closed slightly higher, rising for a third straight day as gains by banking and industrial stocks outweighed losses by tech companies and energy producers.

The benchmark S&P/ASX200 index finished Friday up 14.3 points, or 0.21 per cent, to 6,669.2 points, while the broader All Ordinaries was up 11.4 points to 6,777.1 points.

On Wall Street on Friday, the Dow Jones Industrial Average finished up 0.14 per cent, the S&P 500 was down 0.07 per cent and the tech-heavy Nasdaq Composite was down 0.22 per cent.

Apple was the biggest drag on the major stock averages, falling 1.9 per cent after Goldman Sachs cut its price target for the iPhone-maker's shares.

The Aussie dollar is buying 68.68 US cents from 68.74 US cents on Friday.


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Mainland China markets were closed for a holiday.

Hong Kong shares ticked up on Friday and clocked their second straight weekly gain on signs of progress in US-China trade talks and tracking broad optimism in regional markets.

At the close of trade, the Hang Seng index was up almost 1 per cent at 27,352.69, its highest close since 1 August. The index was up 2.5 per cent on a weekly basis, its second consecutive weekly gain.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.6 per cent, while Japan’s Nikkei index closed up 1.1 per cent.


A surge in banks, miners and automakers galvanized European stocks on Friday, as continued rotation into the cyclical sectors amid signs of progress in US-China trade talks drove the STOXX 600 to its fourth straight week of gains.

In a week that saw trade tensions between Washington and Beijing thaw and the European Central Bank cut rates deeper into negative territory and relaunch bond purchases with no scheduled end-date, banking shares were the star performers.

Euro zone banks, which wavered after the ECB decision on Thursday, rallied 2.4 per cent, with analysts citing the central bank’s easing of the terms of its long-term loans to banks and introduction of tiered deposit rate as offsetting the pain of negative rates.

The euro zone banks index, up 7 per cent on the week, tacked on its biggest weekly gain since March 2017.

According to Jefferies’ calculation, the old system (without tiering) was costing euro area banks 7.14 billion euros per year, while the new system will cost them 5.62 billion euros per year.

German banks are set to benefit by 295 million euros, Italian banks by 221 million euros and Spanish banks by 234 million euros, analysts at Jefferies said.

Indeed, Italian banks rallied with a 3.2 per cent gain, with main indexes in Milan and Madrid rising between 0.4 per cent and 0.6 per cent, respectively.

Caixabank and Banco Sabadell both up more than 7 per cent, were the top gainers on the STOXX 600.

Deutsche Bank rose 3 per cent after becoming the first of 16 financial services companies to resolve claims that it conspired to rig prices of bonds issued by Fannie Mae and Freddie Mac.

In a change of heart among investors who had been buying defensive stocks for much of this year on worries about global trade disputes tipping the world into a recession, momentum stocks such as automakers and miners saw a huge demand this week.

Trade-reliant commodity-linked miners jumped 2.7 per cent, leading gains among major European sectors, and automotive stocks were boosted by fresh indications that a prolonged trade war between the US and China was thawing.

After Beijing and Washington made tariff concessions to each other, US President Donald Trump said he could consider an interim trade deal with China ahead of high-level negotiations in October.

Both the pan-European STOXX 600 index and the euro zone only index closed about 0.3 higher on the day, while tacking on more than 1 per cent for the week.

The food & beverage index was the biggest decliner on the STOXX 600 as investors continued to rotate out of defensive stocks.

Roche Holding was the biggest boost to main stocks index as it reported positive data from a primary progressive MS study.

Shares of Atlantia tumbled 8 per cent after three employees of companies owned by the Italian infrastructure group were placed under house, as part of an investigation into the safety of motorway viaducts following the collapse of a bridge in Genoa.

Traders said the arrest revived concerns that the government could make good on a threat of revoking the company’s motorway concession.

The London Stock Exchange jumped another 3.6 per cent after it rejected the Hong Kong bourse’s $39 billion takeover offer, opting to stick with its planned purchase of data and analytics group Refinitiv.

Thyssenkrupp’s shares rose 2 per cent to a fresh ten-week high after Singapore’s state investor GIC raised its stake in the ailing German conglomerate. Its shares have surged some 40 per cent since mid-August, boosted by hopes for a sale of its prized elevator division.

North America

The S&P 500 has ended the day down slightly but less than 1 per cent below its all-time high as a drop in Apple stock countered cooling US-China trade tensions.

Tariff-vulnerable industrials helped keep the blue-chip Dow in positive territory, which has now gained in eight straight sessions, its longest winning streak since May 2018.

All three major US stock indexes posted their third straight weekly gains, capping a week that saw signs of a potential thaw in the trade war between the world's two largest economies, which has gripped markets for months.

Beijing announced it would exempt some US agricultural products from additional tariffs after President Donald Trump suggested he could be open to an interim deal, the latest conciliatory gestures by both sides of the trade war ahead of next month's negotiations in Washington.

However, rising Treasury yields did boost interest-rate sensitive financials, which gained 0.8 per cent.

On the economic front, US retail sales increased in August at twice the rate analysts expected, according to the Commerce Department, suggesting that strong consumer spending will continue to support the longest-ever US economic expansion.

Ebbing trade jitters and upbeat retail sales data helped US Treasury yields reach multi-week highs, providing an attractive alternative to risk-averse investors.

Market participants now look to the US Federal Reserve, which is widely expected to cut interest rates by 25 basis points at the conclusion of its monetary policy meeting next week.

The Dow Jones Industrial Average on Friday rose 37.07 points, or 0.14 per cent, to 27,219.52; the S&P 500 lost 2.18 points, or 0.07 per cent, to 3,007.39; and the Nasdaq Composite dropped 17.75 points, or 0.22 per cent, to 8,176.71.

Of the 11 major sectors in the S&P 500, five closed in the red, with real estate suffering the largest percentage loss, 1.3 per cent.

Materials was the biggest percentage winner, gaining 1.1 per cent.

Chipmaker Broadcom slipped 3.4 per cent after the company missed quarterly revenue estimates late on Thursday and said that while semiconductor demand has likely hit bottom, the timing of a recovery remains uncertain.

Progressive fell 5.6 per cent after the insurer reported a 36 per cent year-on-year drop in August net income.

Lumber Liquidators Holdings plunged 13.2 per cent after founder Thomas Sullivan told Bloomberg he was holding off on plans to take the company private.

Tyson Foods, the largest US meat processor, advanced 2.0 per cent on China's tariff exemption announcement.

is senior editor for Morningstar Australia

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