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Global Market Report - 19 August

Lex Hall  |  19 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after a positive lead from overseas at the end of last week.

The SPI200 futures contract was up 41 points, or 0.65 per cent, at 6,395.0 at 8am Sydney time, suggesting an early bounce for the benchmark S&P/ASX200 on Monday.

The Australian share market finished nearly flat on Friday as declines in the energy and mining sectors outweighed gains by the big banks.

The benchmark S&P/ASX200 index closed Friday down 2.6 points, or 0.04 per cent, to 6,405.5 points, while the broader All Ordinaries finished down 4.9 points, or 0.08 per cent, to 6,485.9 points.

On Wall Street on Friday, the Dow Jones Industrial Average finished up 1.20 per cent, the S&P 500 was up 1.44 per cent and the tech-heavy Nasdaq Composite was up 1.67 per cent.

Germany's DAX rose 1.30 per cent on Friday after a news report that the government was considering loosening its balanced budget rule and taking on new debt to counter a possible recession, with the pan-European stocks benchmark gaining 1.20 per cent.

The Aussie dollar is buying 67.82 US cents from 67.83 US cents on Friday.

Asia

China stocks closed up on Friday to end the week higher, aided by gains for consumer firms, as Beijing moves to boost consumption further to tackle slowing economic growth.

The blue-chip CSI300 index rose 0.5 per cent, to 3,710.54, while the Shanghai Composite index rose 0.3 per cent to 2,823.82.

For the week, CSI300 was up 2.1 per cent, while SSEC gained 1.8 per cent.

Hong Kong stocks ended firmer on Friday, but posted their fourth straight weekly decline as sentiment wilted amid worries over global economic slowdown, the Sino-US bruising tariff tussle and violent protests that threatened the island city’s economy.

The Hang Seng index ended up 0.9 per cent at 25,734.22, while the China Enterprises Index gained 0.6 per cent to 9,964.30.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.38 per cent, while Japan’s Nikkei index closed up 0.06 per cent.

Europe

European shares rebounded from six-months lows on Friday, ending a tumultuous week on a positive note as hopes of fiscal stimulus from Germany lifted sentiment and sparked a rally in the battered banks sector, helping them post their best day in 4½ months.

Germany’s right-left coalition government would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession, Der Spiegel magazine reported on Friday.

Germany's DAX, pressured of late by fears of a slide into recession as trade tensions between the US and China flare up, rose 1.3 per cent, and German bonds came off lows after the report.

Banks, which have lost nearly 8 per cent this month pressured by tumbling bond yields, were the top gainers on Friday up 2.4 per cent to log their best session since early April.

With all other sectors also in the black, the pan-European stocks benchmark rose 1.2 per cent, adding to morning gains when stimulus hopes from Beijing had supported risk appetite.

The index, however, extended losses to a third straight week, down 0.5 per cent, as worrying headlines of a global recession kept investors on edge, largely because of the trade drama.

Central bank stimulus hopes also added to the optimism after European Central Bank policymaker Olli Rehn’s comments on Thursday fuelled expectations for aggressive ECB easing soon.

The tech sector rose 1.7 per cent propped up by chipmaker stocks after solid earnings from Nvidia and chip gear maker Applied Materials.

AMS, Infineon Tech and STMicroelectronics rose between 1.2 per cent and 2.1 per cent.

While all major indexes in Europe rose more than 1 per cent, Britain's blue-chip FTSE 100 finished up 0.7 per cent, lagging slightly after an outage at the London Stock Exchange due to a technical glitch cut trading short by almost two hours.

In corporate news, specialty chemicals company IMCD slumped 15 per cent to the bottom of the STOXX 600, after it reported weaker-than-expected organic sales in the second quarter.

North America

US stocks have rebounded as an ebbing bond rally and news of potential German economic stimulus brought buyers back to the equities market, closing the book on a tumultuous week.

While all three major US stock averages ended Friday's session higher, they still logged their third consecutive weekly losses, having been rattled since Monday by growing US-China trade animosity, simmering geopolitical tensions and signals from the bond market that sparked fears of impending recession.

Germany's coalition government is willing to suspend its balanced budget rule and take on debt, according to Der Spiegel magazine, raising hopes that Europe's largest economy could steer itself away from recession and cooling worries over a global economic slowdown.

German stimulus hopes helped the benchmark 10-year US Treasury yield rise from three-year lows, closing the book on a fraught week which saw 10-year yields dip below those of two-year notes, a classic recessionary red flag.

Rising bond yields gave a boost to rate-sensitive banks, sending the S&P 500 Banks index up 2.6 per cent

The Dow Jones Industrial Average on Friday rose 306.62 points, or 1.2 per cent, to 25,886.01; the S&P 500 gained 41.09 points, or 1.44 per cent, to 2,888.69; and the Nasdaq Composite added 129.38 points, or 1.67 per cent, to 7,895.99.

All 11 major sectors of the S&P 500 closed firmly in the black, with industrials, technology and financials enjoying the largest percentage gains.

Nvidia jumped 7.3 per cent after the chipmaker's quarterly results bested analyst estimates, helping the Philadelphia chip index gain 2.8 per cent.

Deere & Co cut its earnings forecast after missing Wall Street's profit estimates in the face of the ongoing US-China trade war. Still, the farm equipment-maker's decision to cut costs sent the stock up 3.8 per cent.

General Electric surged by 9.7 per cent after chief executive officer Larry Culp bought nearly $US2 million ($3 million) in shares after the conglomerate's worst one-day percentage drop in 11 years.

The second-quarter earnings season approaches the finish line, with 459 of the companies in the S&P 500 having posted results. Of those, 73 per cent beat Street estimates, according to Refinitiv data.

Analysts now see S&P 500 second-quarter earnings growth of 2.9 per cent year-on-year, per Refinitiv.

is content editor for Morningstar Australia

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