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Global Market Report - 20 August

Lex Hall  |  20 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open slightly higher amid reports of stimulus efforts in China and Germany’s move to calm fears of a global downturn.

The SPI200 futures contract was up 12 points, or 0.19 per cent, at 6,440.0 at 8am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Tuesday.

The Australian share market rallied yesterday to recoup some of last week's stinging losses as global recession fears ease.

The benchmark S&P/ASX200 index finished Monday up 61.9 points, or 0.97 per cent, to 6,467.4 points, while the broader All Ordinaries was up 64.6 points, or 1.0 per cent, to 6,550.5 points.

On Wall Street overnight, the Dow Jones Industrial Average finished up 0.96 per cent, the S&P 500 was up 1.21 per cent and the tech-heavy Nasdaq Composite was up 1.35 per cent.

The Aussie dollar is buying 67.65 US cents from 67.84 US cents on Monday.

Asia

China stocks jumped over 2 per cent on Monday, their best since early July, as investors cheered Beijing’s latest stimulus to prop up an economy hit hard by a never-ending trade war with the US.

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The CSI300 index rose 2.2 per cent, to 3,791.09 points, while the Shanghai Composite Index gained 2.1 per cent, to 2,883.10 points.

In Hong Kong, the Hang Seng index ended up 2.2 per cent at 26,291.84, while the China Enterprises Index gained 1.5 per cent at 10,109.15. ** Both indexes were up for a fourth session in a row.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.25 per cent, while Japan’s Nikkei index closed up 0.71 per cent.

Europe

European shares ended higher for a second straight session on Monday on signs that measures would be adopted to prop up growth in major economies, while bond yields rebounded amid improved global sentiment plagued by recession worries.

The pan-European STOXX 600 index, hammered since the start of August by worries of a possible global slowdown, ended 1.2 per cent higher, with Frankfurt shares up 1.3 per cent, recovering from last week's six-month low.

Friday’s report that Germany’s coalition government may ditch its balanced budget rule to take on new debt and launch stimulus continued to help sentiment. Finance Minister Olaf Scholz said the country possessed the fiscal strength to counter any future economic crisis “with full force.”

The moves from Berlin come on the back of stalled growth across Europe that has been led by a slowdown in the region’s largest economy, with the US-China trade war, Brexit uncertainty and Italy’s political woes adding pressure.

Longer-term bond yields in the euro zone as well as the United States, whose slide below short-term rates last week set off alarm bells about a possible recession, were off their record low levels.

China’s central bank added to the stimulus cheer by unveiling interest rate reforms targeted at lowering corporate borrowing costs. The move comes after Beijing announced plans to spur private consumption to shore up growth last week.

All Europe’s stock market sectors ended the session in the black. Oil stocks chalked up their biggest daily gain since January this year, benefiting from a rise in crude prices due to an attack on Saudi oil installations in Yemen.

Among individual stocks, Norwegian Air rose 4 per cent after agreeing to sell its stake in Norwegian Finans Holding for 2.22 billion crowns ($247 million) in an attempt to boost the loss-making airline’s finances.

Greene King shares jumped nearly 50 per cent after a unit of CK Asset Holdings agreed to buy the British pub operator.

Investors will be watching for minutes from the latest policy meetings of both the US Federal Reserve and the European Central Bank later this week, along with global PMI numbers, to further assess the health of the world economy.

North America

US stocks climbed on Monday as reports of stimulus efforts in China and Germany calmed fears of a severe downturn in the global economy.

The benchmark S&P 500 has recovered most of its losses following Wednesday's brief inversion of the yield curve between 2-year and 10-year Treasuries, commonly viewed as an indicator of a recession within the next two years. After falling nearly 3 per cent on Wednesday, the S&P 500 has risen for the last three sessions.

China's central bank unveiled a key interest rate reform on Saturday to help steer borrowing costs lower for companies. On Sunday, German Finance Minister Olaf Scholz suggested that Berlin could make available up to 50 billion euros ($US55 billion) of extra spending.

Stocks also received a boost as Washington extended by 90 days the window during which China's Huawei Technologies , blacklisted by the US government in May, can buy components from US companies to supply existing customers.

Shares of Apple Inc rose 1.9 per cent to provide the biggest boost to the Nasdaq and the second-largest boost to the S&P 500 and the Dow. President Donald Trump said on Sunday that he had spoken with Apple chief executive officer Tim Cook, who "made a good case" that tariffs could hurt Apple.

The S&P 500 technology index rose 1.6 per cent, while the Philadelphia semiconductor index rose 1.9 per cent.

The Dow Jones Industrial Average rose 249.78 points, or 0.96 per cent, to 26,135.79, the S&P 500 gained 34.97 points, or 1.21 per cent, to 2,923.65 and the Nasdaq Composite added 106.82 points, or 1.35 per cent, to 8,002.81.

All of the 11 major S&P sectors were higher. Energy shares, which rose 2.1 per cent as oil prices advanced, led S&P sectors in percentage gains. Reflecting Monday's risk-on sentiment, defensive sectors such as real estate and utilities lagged the broader index in percentage gains.

Given concerns about economic growth, investors have looked closely for cues from the Federal Reserve on monetary policy. In July, the US central bank cut interest rates for the first time in more than a decade.

Wednesday's release of minutes from the Fed's July policy meeting, as well as Chair Jerome Powell's speech at the Jackson Hole symposium on Friday, might provide indications on whether the central bank will cut rates further, investors said.

Shares of Estee Lauder Cos jumped 12.5 per cent to a record high as the beauty company forecast full-year revenue and profit above estimates, bolstered by booming demand for its premium skincare products in the Asia-Pacific region.

is senior editor for Morningstar Australia

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