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Global Market Report - 17 October

Lex Hall  |  17 Oct 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after falls on Wall Street overnight.

At 7am Sydney time, the SPI200 futures contract was down 14 points, or 0.21 per cent, at 6,704.0, suggesting a dip for the benchmark S&P/ASX200.

The Australian share market has finished higher for a fifth straight day yesterday, closing with its biggest gains in 6½ weeks.

The benchmark S&P/ASX200 index finished Wednesday up 84.5 points, or 1.27 per cent, to 6,736.5 points, while the broader All Ordinaries was up 79.9 points, or 1.18 per cent, to 6,843.2 points.

On Wall Street, the Dow Jones Industrial Average was down 0.11 per cent, the S&P 500 was down 0.15 per cent and the tech-heavy Nasdaq Composite was down 0.32 per cent.

The Aussie dollar is buying US67.61 cents from US67.38 cents on Wednesday.

Asia

China stocks fell on Wednesday, as optimism over a concrete US-China trade deal faded, with risk appetite also curbed by fresh domestic signs of economic weakness.

The blue-chip CSI300 index closed 0.3 per cent lower to 3,922.69, while the Shanghai Composite Index ended 0.4 per cent down to 2,978.71.

Hong Kong stocks rose to a one-month high on Wednesday, led by property shares, after the city’s leader announced measures aimed at easing a housing shortage and calming anti-government protests.

However, the gain was capped by lingering uncertainty around Sino-US trade talks, as well as worries about China’s economic health.

The Hang Seng index rose 0.6 per cent, to 26,664.28 points, while the China Enterprises index gained 0.3 per cent, to 10,532.17 points.

In Japan, the benchmark Nikkei share average climbed 1.2 per cent to 22,472.92, its highest close since 3 December, having gained 1.9 per cent gains on Tuesday. The broader Topix rose 0.7 per cent to 1,631.51, also closing at its highest in more than 10 months.

Europe

European stocks pulled back slightly on Wednesday from their strongest closing high in more than a year as clashing headlines on Britain’s last-minute efforts to forge a divorce deal with the European Union left investors hanging on the outcome.

Hopes of a breakthrough took the pan-European STOXX 600 to its highest close since May 2018 on Tuesday, but the index closed down 0.1 per cent with London's exporter-laden FTSE 100, which tends to fall when the pound gains, lagging the most with a 0.6 per cent decline.

A report that the main stumbling block to a deal had been removed to news that the talks had hit a “standstill” made for a choppy trading session, but expectations of a no-deal Brexit faded.

Britain's domestically focused midcaps, which have rallied 5 per cent in the past three sessions to reach their highest level in a year, ended flat on Wednesday, while Irish stocks, which have come to be seen as a gauge of Brexit sentiment, fell 0.5 per cent.

Any new deal will still have to go to a fractious British parliament.

Among other regional indices, Germany's DAX gained 0.3 per cent, while France's CAC 40 was flat.

European automakers rose 1.5 per cent as industry data showed car registrations in the bloc rose 14.4 per cent in September, led by robust gains at major brands Volkswagen and Renault.

London-listed shares of Rio Tinto fell 1.7 per cent after the miner said its iron ore shipments rose 5 per cent, but it cut its bauxite and alumina production forecast for the year.

Rio’s shares also took a hit from China iron ore plunging to a six-week low following a weak demand outlook.

The wider European mining sector was down 0.8 per cent, while the financial services .SXFP shed more than 1 per cent on declines in British stocks.

Investor focus shifts now to Europe’s earnings season, which gets under way in earnest next week. Analysts expect an earnings recession to deepen as companies struggle with uncertainties around Brexit, a protracted US-China trade spat and Germany’s manufacturing recession.

STOXX 600 companies are now expected to report a drop of nearly 3.7 per cent in third-quarter earnings, worse than the 3 per cent fall expected a week ago, I/B/E/S data from Refinitiv showed.

Shares in Dutch semiconductor equipment maker ASML, which has surged over 70 per cent this year, declined 4.5 per cent after reporting higher-than-expected quarterly profit and bookings.

Shares in Thyssenkrupp jumped 4.6 per cent after a report said rival bidders Kone and Blackstone teamed up with potential partners to bid for the German group’s elevator business.

North America

Wall Street lost ground on Wednesday as weak US economic data and simmering geopolitical tensions spooked buyers away from the equities market, despite a string of generally positive third-quarter earnings reports.

Technology shares, led by Microsoft, weighed heaviest, pulling all three major US stock averages into the red.

US retail sales contracted in September for the first time in seven months, according to the Commerce Department, in a sign that cracks might be spreading from the troubled manufacturing sector to the broader economy.

US-China trade uncertainties increased after the US House of Representatives riled Beijing by passing pro-democracy legislation in support of Hong Kong.

President Donald Trump said he would probably not sign any trade deal before he meets with Chinese President Xi Jinping at the upcoming APEC Forum in Chile, but said a partial trade deal was being formalised.

Analysts currently expect S&P 500 third-quarter earnings to fall by 3 per cent, which would mark the first year-on-year contraction since the earnings recession that ended in 2016.

However, of the 43 S&P 500 companies to have posted third-quarter results so far, 86 per cent have beaten expectations.

Bank of America rose 1.5 per cent after posting its third-quarter profit beat due to growth in advisory fees and loan book expansion.

United Airlines advanced 1.9 per cent after the airline beat quarterly profit estimates and increased its 2019 guidance.

The Dow Jones Industrial Average fell 22.82 points, or 0.08 per cent, to 27,001.98, the S&P 500 lost 5.99 points, or 0.20 per cent, to 2,989.69 and the Nasdaq Composite dropped 24.52 points, or 0.3 per cent, to 8,124.18.

Of the 11 major sectors in the S&P 500, six closed in negative territory, with energy and tech suffering the largest percentage losses.

In other stocks news, Eli Lilly & Co dropped 1.6 per cent in the wake of a late-stage study that showed its experimental pancreatic cancer treatment failed to meet the overall survival goal.

Drug distributors McKesson, AmerisourceBergen and Cardinal Health rose between 2 per cent and 5 per cent following a report that they were in talks with state and local governments to settle thousands of opioid lawsuits for $18 billion.

General Motors gained 1.1 per cent after the automaker reached a tentative labor deal with the United Auto Workers union.

Netflix shares jumped more than 10 per cent in post-market trading after posting quarterly results.

is content editor for Morningstar Australia

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