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Global Market Report - 18 February

Lex Hall  |  18 Feb 2019Text size  Decrease  Increase  |  
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Australia

A positive open is tipped for the Australian share market on the back of encouraging trade talks between the US and China.

The benchmark S&P/ASX 200 is expected to climb 53 points when trade resumes on Monday after finishing at 6,066.1 points on Friday.

The optimism has also boosted the Australian dollar which jumped about half a cent to 71.4 US cents after finishing on 70.92 US cents on Friday.

The Dow Jones also finished higher by 440 points or 1.7 per cent on Friday.

The release of economic data in the US suggests there's no need to think about moving interest rates in Australia which is giving comfort to investors.

Investors will be looking out for the Reserve Bank board minutes and the testimony from the Reserve Bank governor which are expected to shed light on interest rates and the Australian economy.

The December quarter wage price index and January's unemployment figures will also dominate the agenda this week.

There will also be a raft of companies reporting earnings results including BHP Billiton, Coles Group, Woolworths Group, Qantas Airways and Sydney Airport.

The price of oil finished the week up 2.2 per cent while there was a modest 2.7 per cent fall in iron ore.

US financial markets are closed on Monday as George Washington's Birthday/President's Day public holiday is observed.

ASIA

Asian markets finished sharply lower on Friday amid slowing China inflation and unexpectedly worse US retail sales figures.

The Hang Seng fell 1.87 per cent while China's Shanghai Composite is off 1.37 per cent and Japan's Nikkei 225 lower by 1.13 per cent.

Tencent fell 2.34 per cent, and HSBC was off 1.27 per cent.

Japan's Nikkei fell as bleak US retail sales data dampened investor risk appetite and dragged down the broader market, with exporters and financial firms underperforming.
The Nikkei share average dropped 1.1 per cent to 20,900.63, retreating from a two-month high of 21,235.62 hit on Thursday. For the week, the index rose 2.8 per cent.

EUROPE

Reports of progress in US-China trade negotiations and hopes of a new scheme to support euro zone banks drove a strong rally in European stocks, which posted their best week since November and reclaimed three-month highs.

Germany’s DAX led the gains, up 1.89 per cent while France's CAC 40 is up 1.79 per cent and London's FTSE 100 is up 0.55 per cent.

Spanish Prime Minister Pedro Sanchez called a snap election, pitching the country into a period of fresh political uncertainty after a parliament veto of his budget.

The trade-sensitive German index jumped 1.9 per cent while the STOXX 600 rallied 1.4 per cent on the day and made a weekly gain of 3 per cent.

Mining stocks jumped 1.95 percent to a four-month high and China-sensitive autos stocks rose 2.1 per cent, a big reversal from early losses after weak European car sales data.

Bank stocks were also top movers with the index climbing 2.75 per cent.

NORTH AMERICA

Wall Street rallied on Friday, with the Dow and the Nasdaq posting their eighth straight weekly gains as investors grew hopeful that the US and China can arrive at a deal to resolve their protracted trade war.

All three major US indexes ended the session higher, and for the fourth straight session, the S&P 500 held above its 200-day moving average, a key technical level.

The Dow Jones finished higher by 440 points or 1.7 per cent on Friday, at 25,883.25. The S&P500 is up 443 points, or 1.09 per cent, at 2775.60. And the Nasdaq Composite finished up 45.46 points, or 0.61 per cent, at 7472.41.

To date, 79 per cent of the companies in the S&P 500 have reported actual results for Q4 2018. In terms of earnings, the percentage of companies reporting actual EPS above estimates (70 per cent) is below the five-year average.

This week 49 S&P 500 companies are scheduled to report results for the fourth quarter.

Talks between the US and China will resume in Washington next week, with both sides saying progress has been made toward resolving the two countries' contentious trade dispute.

Tariff-vulnerable industrials provided the biggest lift to the blue-chip Dow, led by bellwethers Boeing, 3M, United Technologies and Caterpillar.

With nearly 80 per cent of S&P 500 companies having reported, fourth-quarter earnings season is largely in the rearview mirror. Analysts now see a profit increase of 16.2 per cent for the quarter, according to Refinitiv data.

The outlook however continues to worsen. First quarter earnings are currently seen falling by 0.5 per cent, the first year-on-year decline since mid-2016.

is content editor for Morningstar Australia

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