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Global Market Report - 17 January

Lex Hall  |  17 Jan 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are poised to steam further ahead into record territory as US markets hit record highs.

The SPI200 futures contract was up 25 points, or 0.38 per cent, at 7041, at 7am Sydney time.

The benchmark Australian stock index smashed past the 7000-point level for the first time on Thursday on a wave of investor confidence that flowed from a signed trade deal between the US and China.

The S&P/ASX200 index on Thursday gained 47 points, or 0.67 per cent, to finish at 7041.8 points, setting a new record for a third straight day. The broader All Ordinaries gained 45.1 points, or 0.63 per cent, to similarly set a record high of 7158.6.

New highs were also hit on Wall Street following the end of the 18-month long tariff war between the two giant economies that had bruised financial markets and hampered growth.

The Australian dollar was buying US68.94 cents at 7am, up from US69.05 cents at Thursday’s close. 

Asia

China’s yuan held steady while stocks fell on Thursday after Beijing and Washington signed a phase one deal to defuse their trade war, with financial markets taking on a cautious tone as many thorny issues remained unresolved.

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Chinese stocks, which have also rallied on optimism over a trade truce, showed little further enthusiasm on the deal’s signing. While the agreement has helped bolster shaky business confidence, it is only expected to give a modest boost to the cooling economy.

The benchmark Shanghai Composite Index, which gained 7.6 per cent from the end of November through to Wednesday’s close, opened higher before stalling on profit-taking. It finished the day down 0.52 per cent. The blue-chip CSI300 index fell 0.42 per cent.

In Hong Kong, the Hang Seng also oscillated between small gains and losses, but eked out a 0.38 per cent gain on the day. The Hang Seng China Enterprises index rose 0.29 per cent.

In Japan, shares were little changed after the trade news. The Nikkei share average added 0.1 per cent to 23,933.13, while the broader Topix eased 0.1 per cent to 1728.72.

Europe

European shares rose on Thursday after the US and China signed an eagerly awaited phase-one trade deal, giving some relief to markets that have been roiled by the 18-month standoff between the world’s two-largest economies.

The pan-European STOXX 600 index was up 0.3 per cent by 0857 GMT.

The deal, signed in Washington on Wednesday, still raises questions over daunting purchase commitments of US goods by China, while leaving existing tariffs in place.

However, the prospect of no further escalation in the economically damaging trade war encouraged a slight risk-on mode.

European utility stocks touched their highest levels since late-2008 on strength in power generator RWE. Shares of the company rose amid reports that the German government plans to compensate RWE with around 2.6 billion euros ($2.9 billion) for costs related to the country’s planned coal exit.

The European retail subindex gained 0.6 per cent, led by an 11 per cent rise in German meal-kit delivery company HelloFresh after it flagged a stronger 2019.

The stock was also the best performer on the STOXX 600.

German shares rose 0.4 per cent after closing lower a day earlier on dismal GDP data.

Economic growth in the euro zone’s largest economy slowed sharply in 2019, highlighting the widespread impact of the trade war on demand for exports from the manufacturing-heavy country.

Oil and gas stocks rose, tracking a rise in oil prices as the trade deal pointed to more Chinese purchases of American energy products, while a drop in US crude inventories also helped.

North America

The S&P 500 rallied through the 3300 mark for the first time on Thursday and the other main US indexes also surged to record highs, fuelled by tech stocks, solid retail sales data and upbeat quarterly earnings from Morgan Stanley.

Morgan Stanley jumped 6.6 per cent to lead the S&P 500 after it beat quarterly profit estimates and raised its performance goals, closing out several big US lenders’ earnings on a strong note.

Sentiment was further lifted by data that showed US retail sales rose 0.3 per cent in December, in line with economists’ estimates.

The retail numbers indicated the US economy maintained a moderate growth pace at the end of 2019 and eased concerns about the sector’s health following disappointing holiday sales reports from Target Corp and J.C. Penney Co Inc.

Technology stocks, which have played an outsized part in the recent rally, made fresh gains. The S&P information technology index added 1.4 per cent to a record high, leading gains among the main sectors. Microsoft Corp rose 1.8 per cent and chipmakers also surged after a strong forecast from top contract chip manufacturer TSMC.

The new highs on Wall Street come after Washington and Beijing on Wednesday signed a deal pausing an 18-month long tariff war that had bruised financial markets and crimped global growth.

China is expected to boost purchases of US goods and services in exchange for the rolling back of some tariffs as part of the deal, but several thorny issues remain unresolved.

Analysts expect profits at S&P 500 companies to have dropped 0.4 per cent in the fourth quarter, but full-year 2020 earnings are estimated to grow 9.6 per cent, according to Refinitiv IBES data. Full-year earnings estimates typically decline as the year advances.

The Russell 2000 index of small-cap stocks jumped 1.36 per cent, its strongest session so far in 2020.

The Dow Jones Industrial Average jumped 0.92 per cent to end at 29,297.64 points, while the S&P 500 gained 0.84 per cent to 3316.89.

The Nasdaq Composite added 1.06 per cent to 9357.13, bringing its gain in 2020 to 4.29 per cent.

Among other stocks, Signet Jewelers soared 40 per cent after raising its 2020 adjusted earnings estimate.

Bank of New York Mellon Corp tumbled 7.8 per cent to the bottom of the S&P 500 after the custodian bank missed profit estimates.

 

is senior editor for Morningstar Australia

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