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Global Market Report - 19 July

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

The Australian share market is expected to open higher after a positive lead from Wall Street and increased momentum for a rate cut.

The SPI200 futures contract was up 16 points, or 0.24 per cent, at 6,594.0 at 7am Sydney time, suggesting an early bounce for the benchmark S&P/ASX200 on Friday.

The Australian share market fell for the fourth time in five days yesterday, with losses from construction giant CIMIC Group and mining titan BHP dragging the market.

The benchmark S&P/ASX200 index closed down 24.2 points, or 0.36 per cent, to 6,649.1 points on Thursday, while the broader All Ordinaries was down 28.6 points, or 0.42 per cent, to 6,735.4.

On Wall Street overnight, the Dow Jones Industrial Average finished up 0.01 per cent, the S&P 500 was up 0.36 per cent and the tech-heavy Nasdaq Composite was up 0.27 per cent.

The Aussie dollar is buying 70.76 US cents from 70.33 US cents on Thursday.

Asia

China stocks fell on Thursday as investors prepared for tepid results from the ongoing earnings season, as weak corporate earnings trends in the US underscored the impact of the trade standoff between Beijing and Washington.

Shenzhen’s tech-heavy board ChiNext led the decline, falling nearly 2 per cent, as the imminent debut of Shanghai’s competing Nasdaq-style board, the STAR Market, diverted attention and liquidity.

The blue-chip CSI300 index fell 1.0 per cent, to 3,768.40, while the Shanghai Composite Index also dropped 1 per cent to 2,901.18

In Hong Kong, the Hang Seng index ended down 0.5 per cent at 28,461.66, while the China Enterprises Index closed 0.6 per cent lower at 10,784.55 points.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.32 per cent, while Japan’s Nikkei index closed down 1.97 per cent.

Europe

European stocks ended lower on Thursday, as earnings worries ran high after poor results from software firm SAP sank technology shares, although hopes of looser monetary policy from the European Central Bank helped indexes bounce off early lows.

After falling as much as 0.7 per cent during the session, the pan-European STOXX 600 index closed down 0.2 per cent, drawing support from a Bloomberg report that ECB staff were studying a potential change to the bank’s inflation goal of near 2 per cent.

Global stock markets have been recovering strongly from a sharp correction in May, helped by expectations that central banks will funnel more cash into the economy to counter a global slowdown driven by the US-China trade war.

But a combination of earnings worries, and some slightly stronger economic numbers which may prevent policymakers from acting, have weakened sentiment globally in the past week.

Shares in Europe’s most valuable tech company fell 5.6 per cent after it said investors would have to wait till next year for a major improvement in margins as the business software group reported a 21 per cent fall in quarterly operating profit.

That drove Germany's DAX to a one-month low, while technology stocks dropped 1.5 per cent.

The Wall Street Journal reported overnight that progress toward a US-China trade deal had stalled while the Trump administration determines how to address Beijing’s demands that it ease restrictions on Huawei Technologies.

That, along with some other disappointing earnings, including those for video streaming leader Netflix on Wednesday, drove a worsening of sentiment on both Wall Street and Asian markets.

London-listed stocks slid 0.5 per cent as the FTSE 100's internationally focused companies were hurt by gains for the pound on strong retail sales numbers and a vote by lawmakers to make a no-deal Brexit harder to achieve.

Another big decliner was Finland’s Wartsila Oyj, which slumped 12 per cent after the engineering firm warned that it expected demand to weaken for its marine and energy businesses.

Italian banks bucked the gloomy trend, with a 0.4 per cent jump after comments from Deputy Prime Minister Luigi Di Maio about the future of a coalition government raised possibility of snap elections that could see a business-friendly centre-right coalition come to power.

Also limiting losses in Europe's blue-chip index STOXX50 was Swiss drugmaker Novartis, up 3 per cent after the company lifted full-year sales and profit targets.

British American Tobacco jumped 5.5. per cent, helped by strong quarterly results and a forecast from US tobacco company Philip Morris.

North America

US stocks have moved higher after a slow start as comments from New York Fed president John Williams helped cement expectations for an interest rate cut from the US central bank at the end of the month.

Williams said that when rates and inflation are low, policymakers cannot afford to keep their "powder dry" and wait for potential economic problems to materialise.

Before Williams' comments, stocks had been lower as shares of Netflix tumbled 10.3 per cent after the company's quarterly results, which missed targets for new subscribers overseas.

Losses in Netflix triggered a 0.9 per cent fall in the communication services sector, which has been one of the best-performing S&P sectors so far this year.

The Dow Jones Industrial Average rose 3.12 points, or 0.01 per cent, to 27,222.97 on Thursday, the S&P 500 gained 10.69 points, or 0.36 per cent, to 2995.11 and the Nasdaq Composite added 22.04 points, or 0.27 per cent, to 8207.24.

Among positive earnings reports, shares of Philip Morris International climbed 8.2 per cent after the tobacco company raised its full-year profit outlook.

Railway operator Union Pacific jumped 5.9 per cent after the company's profit came in ahead of expectations.

International Business Machines rose 4.6 per cent as the company's quarterly profit beat on strong growth in its high-margin cloud business.

Morgan Stanley shares rose 1.5 per cent after the bank posted a better-than-expected quarterly profit.

The S&P 500 banks index was up 0.9 per cent after three days of losses.

UnitedHealth Group shares slipped 2.3 per cent as the insurer said on its conference call that 2019 revenue would not hit its original target.

Profits for S&P 500 companies are expected to rise 0.6 per cent for the second quarter of 2019, according to Refinitiv IBES data.

Until Wednesday, there were expectations of a dip in earnings.

is content editor for Morningstar Australia

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