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Global Market Report - 19 September

Glenn Freeman  |  19 Sep 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open slightly higher after the US central bank cut interest rates by 25 basis points.

The SPI200 futures contract was up 9 points, or 0.13 per cent, at 6,696.0 at 8am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Thursday.

The US Federal Reserve lowered its benchmark overnight lending rate by a quarter of a percentage point, as expected, and Chairman Jerome Powell said in a subsequent press conference that the central bank was prepared to be "aggressive" if necessary.

On Wall Street, the Dow Jones Industrial Average finished up 0.13 per cent, the S&P 500 was up 0.03 per cent and the tech-heavy Nasdaq Composite was down 0.11 per cent.

In Australia yesterday, energy stocks pulled shares lower amid investor caution ahead of the US Federal Reserve’s rate decision and key domestic employment data.

The S&P/ASX 200 index on Wednesday shed 0.2 per cent or 13.7 points to end at 6,681.60. The benchmark had firmed 0.3 per cent on Tuesday.

The Aussie dollar is buying 68.29 US cents from 68.44 US cents on Wednesday.
Ahead today: the ABS will release its job numbers for August.

Asia

China stocks rose on Wednesday on expectations of lower borrowing costs both domestically and in the United States, as trade talks resume between Beijing and Washington.

China's blue-chip CSI300 index was up 0.5 per cent to 3,910.08 points, while the Shanghai composite index rose 0.3 per cent to 2,985.65.

Consumer and healthcare stocks led the gains in China, while telecommunications and energy stocks fell.

A cut in LPRs - China’s benchmark rates for new loans - could lead to lower borrowing costs for consumers and companies in a slowing economy.

Investors are also closely monitoring development in the US-China trade talks. US and Chinese deputy trade negotiators are due to meet in Washington this week, to the pave way for high-level talks in early October.

Europe

European shares ended flat on Wednesday, as gains for the defensive sectors of real estate and utilities were offset by losses in luxury goods makers as investors exercised caution ahead of the US Fed's interest rate decision.

The pan-European STOXX 600 closed just 0.02 per cent up, having zig-zagged between gains and losses during the session.

Stock markets were mixed after the European Central Bank’s move last week to cut rates deeper into negative territory and relaunch bond purchases with no scheduled end-date.

Defensive sectors were the strongest performers. Real estate and utilities, which tend to move in the opposite direction to interest rates, rose about 1 per cent and 0.9 per cent.

Shares in Italy's biggest utility Enel jumped 2 per cent, helping the index of Milan-listed shares outperform its European peers. The index has gained about 10 per cent from its August lows, largely due to the formation of a new government.

Other major country indexes closed marginally higher, although Greek stocks were prominent gainers, up 1.2 per cent, after a Bloomberg report said the government planned to provide as much as 9 billion euros (US$10 billion) in state guarantees to help banks reduce soured debt.

The benchmark index has gained about 42 per cent so far this year.

Luxury goods were a weak spot, with Swiss luxury goods group Richemont falling 6 per cent, while shares in Italian luxury jacket maker Moncler down 7 per cent after its chief executive said the ongoing unrest in Hong Kong could have an impact on its business this year.

In other areas of the market, DHL owner Deutsche Post also fell, down 1.2 per cent on US rival FedEx's profit warning overnight citing the US-China trade war.

Other European mail delivery firms DSV, Kuehne & Nagel and Royal Mail also fell.
French utility EDF (gained 3.2 per cent after it said there was no need to close any of its nuclear reactors for now following the discovery of problems with weldings.

Apple Inc’s component suppliers AMS, STMicro and Infineon posted some of the biggest gains on the European technology subsector after strong pre-orders for the latest iteration of iPhone.

North America

The S&P 500 ended marginally higher overnight, after Federal Reserve policymakers cut interest rates by a quarter of a percentage point, as expected, but gave mixed signals about their next move.

With continued economic growth and strong hiring "the most likely outcomes", the Fed nevertheless cited "uncertainties" about the outlook and pledged to "act as appropriate" to sustain the expansion.

New projections showed policymakers at the median expected rates to stay within the new range through 2020, bad news for investors hoping for additional cuts to help blunt global economic fallout from the US-China trade war.

Stocks sold off immediately after the Fed's announcement on Wednesday but rebounded during chairman Jerome Powell's press conference.

He told reporters the Fed was prepared to be "aggressive" if necessary.

Expectations of lower rates have supported Wall Street's rally this year, with the benchmark S&P 500 up almost 20 per cent in the year to date and about one per cent below its record high close in July.

The Dow Jones Industrial Average rose 0.13 per cent to end at 27,147.08 points, while the S&P 500 gained 0.03 per cent to 3006.73.

The Nasdaq Composite dropped 0.11 per cent to 8177.39.

Six of the 11 major S&P sectors climbed, led by a 0.5 per cent increase in the S&P utilities index and a 0.4 per cent rise in the financial index.

The interest-rate sensitive S&P 500 banks index rose 0.7 per cent.

The central bank also widened the gap between the interest it pays banks on excess reserves and the top of its policy rate range, a step taken to smooth out problems in money markets that prompted a market intervention by the New York Fed this week.

FedEx shares tumbled 12.9 per cent, posting their deepest one-day percentage drop since the financial crisis after the company blamed US-China trade tensions and a split with Amazon for its dismal full-year profit forecast.

Roku slumped 13.7 after Comcast said it will offer its own streaming media set top box for free to its US internet-only customers.

Beyond Meat dropped 3.9 after Restaurant Brands International's Tim Hortons cut the faux meat maker's burgers and sandwiches from its menu in most Canadian provinces, months after a nationwide rollout at the breakfast chain.

is senior editor for Morningstar Australia

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