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Global Market Report - 18 July

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

The Australian share market is expected to open lower following losses on Wall Street overnight, stoking fears the trade war might hurt corporate earnings.

The SPI200 futures contract was down 15 points, or 0.23 per cent, at 6,591.0 at 7am Sydney time, suggesting an early fall for the benchmark S&P/ASX200 on Thursday.

The Australian share market closed down for a third day yesterday, its first three-day losing streak since late May.

The benchmark S&P/ASX200 index finished down 12 points, or 0.18 per cent, to 6,641 points on Tuesday, while the broader All Ordinaries was down 10.4 points, or 0.15 per cent, to 6,735.8.

On Wall Street, the Dow Jones Industrial Average finished down 0.42 per cent, the S&P 500 was down 0.65 per cent and the tech-heavy Nasdaq Composite was down 0.46 per cent.

The Aussie dollar is buying 70.10 US cents from 70.06 US cents on Wednesday.

Out today: Labor force June, NAB business confidence second quarter.

Asia

Shares in China finished lower in thin trade on Wednesday, extending the previous day’s small losses as investors continued to fret over slowing growth and the impact of the Sino-US trade dispute, and await more signs of support from Beijing.

At the close, the Shanghai Composite index was down 0.2 per cent at 2,931.69

The blue-chip CSI300 index was down 0.06 per cent, with its financial sector sub-index lower by 0.18 per cent, the consumer staples sector down 0.16 per cent, the real estate index up 0.63 per cent and the healthcare sub-index up 0.08 per cent.

In Hong Kong, the Hang Seng index was down 26.45 points, or 0.09 per cent, at 28,593.17. The Hang Seng China Enterprises index fell 0.16 per cent to 10,847.91.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.26 per cent, while Japan’s Nikkei index closed down 0.31 per cent.

Europe

European stock markets lost ground on Wednesday after three straight days of gains, with Swedish share prices hit by a slew of poor quarterly results and oil majors across the region reeling from this week’s slide in oil prices.

The pan-European STOXX 600 ended down 0.4 per cent, with Stockholm-listed shares suffering their biggest percentage loss since May on falls for Ericsson, Swedbank and engineering group Alfa Laval.

European banks underperformed broadly as quarterly results from Wall Street lenders raised questions about the sector’s profitability going forward if major central banks proceed with more cuts in interest rates to fight a global slowdown.

Traders expect the US Federal Reserve to embark on a new cycle of monetary easing next week, while the European Central Bank is also expected to keep the door open to more stimulus measures as trade disputes take a toll on growth.

After a bullish six weeks driven by expectations of a series of those kinds of moves, however, doubts have begun to emerge about whether the US economy, for example, may really need as many as the three quarter-point rate cuts markets have been pricing in.

At the same time, investors remain deeply concerned about President Donald Trump’s trade wars and their impact on growth. Trump said on Tuesday that a deal with China was a long way off and that he could still impose tariffs on an additional $325 billion worth of Chinese goods if needed.

The biggest percentage loser among European sectors was the oil and gas sector, down 2 per cent, as energy heavyweights BP and Total were hit by the slide in the oil price to a one-week low on Tuesday.

Swiss stocks were a bright spot with shares in Swatch jumping 6 per cent, its strongest performance in more than six years after the watchmaker issued a positive outlook for its biggest markets.

Dutch chipmaker ASML also rose 5.2 per cent after it reported better-than-expected quarterly results and kept to its forecast of solid growth for the rest of the year.

Ericsson fell about 12 per cent, the most on the STOXX 600, after warning costs related to winning new contracts for its network business would hit profit margins later this year.

North America

US stock indexes fell on Wednesday as weak results from CSX Corp stoked concerns that the protracted trade war between the US and China could hurt corporate earnings.

CSX shares tumbled 10.3 per cent, their biggest one-day drop since 2008, after the rail freight company posted lower-than-expected quarterly profit and cut its full-year revenue forecast. Ongoing trade tensions have contributed to a decline in truck and rail freight volumes in the first half of 2019.

CSX was one of the biggest drags on the S&P 500 index, along with Union Pacific Corp and Berkshire Hathaway, which owns BNSF Railway. Union Pacific, whose shares dropped 6.1 per cent, reports results on Thursday.

The losses in shares of rail companies helped push down the S&P 500 industrials index, whose 2.2 per cent slide was the largest among the S&P’s 11 major sectors. The Dow Jones Transportation Average fell 3.6 per cent.

The Federal Reserve’s Beige Book, a compendium of anecdotes from US businesses, also pointed to trade-related pressures on transportation and manufacturing companies.

The anticipation of rate cuts has helped propel US stocks to new highs in the past week.

The Dow Jones Industrial Average fell 115.78 points, or 0.42 per cent, to 27,219.85, the S&P 500 lost 19.62 points, or 0.65 per cent, to 2,984.42 and the Nasdaq Composite dropped 37.59 points, or 0.46 per cent, to 8,185.21.

Bank of America Corp rose 0.7 per cent after posting a profit beat, though the company lowered its annual net interest income forecast.

Netflix Inc shares tumbled in aftermarket trade after the company reported quarterly results. They were last down nearly 11 per cent.

Profit for S&P 500 companies is expected to rise 0.4 per cent in the second quarter from a year ago, according to Refinitiv IBES data.

Abbott Laboratories shares rose 3.1 per cent after the medical device maker topped quarterly profit estimates and lifted its full-year adjusted earnings forecast.

is content editor for Morningstar Australia

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