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Global Market Report - 20 September

Glenn Freeman  |  20 Sep 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher after a mixed lead from Wall Street overnight as markets absorb the Fed’s rate cut and talk of further easing.

The SPI200 futures contract was up 10 points, or 0.15 per cent, at 6,721.0 at 8am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Friday.

The Australian share market has had its best day in two weeks, with most sectors posting gains after the US Federal Reserve cut a key interest rate.

The Fed, in announcing its second quarter-percentage point cut this year, said future reductions would be "largely data-dependent".

Traders see a nearly 50 per cent chance for another 25 basis point rate cut in October, according to CME Group's FedWatch tool.

The benchmark S&P/ASX200 index closed Thursday up 35.9 points, or 0.54 per cent, to 6,717.5 points. The broader All Ordinaries was up 34 points, or 0.5 per cent, to 6,825.2 points.

On Wall Street, the Dow Jones Industrial Average finished down 0.19 per cent, the S&P 500 was flat and the tech-heavy Nasdaq Composite was up 0.07 per cent.

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The Aussie dollar is buying 67.95 US cents from 67.81 US cents on Thursday.

Asia

China stocks closed higher on Thursday, on rising investor bets Beijing will lower a key domestic rate to help bolster the economy following a US Federal Reserve rate cut.

The blue-chip CSI300 index rose 0.4 per cent, to 3,924.38, while the Shanghai Composite Index added 0.5 per cent to 2,999.28 points.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.58 per cent, while Japan’s Nikkei index closed up 0.38 per cent.

Hong Kong stocks posted a fourth consecutive losing session on Thursday on lingering worries over political protests. The Hang Seng index fell 1.1 per cent, to 26,468.95, while the China Enterprises Index lost 0.9 per cent, to 10,385.35.

Europe

European stocks rallied on Thursday as investors snapped up battered shares of eurozone banks after the US Federal Reserve toned down expectations of further interest rate cuts.

The eurozone banks index .SX7E, which has underperformed broader markets this year, jumped 2.4 per cent to end a three-day run of losses while an index of eurozone stocks rose 0.6 per cent.

Shares of Italian and Spanish banks including Bankia, UBI Banca and Banco Sabadell were among the top gainers on the STOXX 600 after the Fed cut rates as expected on Wednesday, but signaled there would be a higher bar to further cut in borrowing costs.

European banks, along with sectors such as miners and automakers, have gained in the recent weeks as investors rotated into cyclical sectors due to signs of easing US-China trade tensions and assurances of support from major central banks.

Spain's and Italy's indexes, which are heavily exposed to banks, outperformed the broader markets with a 1.2 per cent and 0.8 per cent gain, respectively.

London-listed shares rose about 0.6 per cent, with banks leading gains after the Bank of England kept interest rates on hold as expected.

The top gainer on the STOXX 600 was Britain’s online trading platform IG Group, which jumped 10.3 per cent after it said it added more clients and saw improved trading activity in August. Rivals Plus500 and CMC Markets also rose on the news.

Clothing retailer Next PLC was the biggest decliner on the STOXX 600 after saying the first few weeks of the autumn season had been disappointing.

European steel stocks ArcelorMittal, Salzgitter, SSAB, Outokumpu and Thyssenkrupp fell between 1.6 per cent and 4.8 per cent after United States Steel’s gloomy current-quarter earnings forecast.

Swiss shares rose 0.5 per cent as the Swiss National Bank held its main policy rate at -0.75 per cent and said it expected to stick to its ultra-loose monetary stance.

Shares in major lenders Credit Suisse and UBS rose more than 1 per cent as the central bank increased the threshold above which commercial banks who park their money with the central bank have to pay negative interest.

Oslo-listed shares closed flat after Norway's central bank raised its main interest rate as expected, but said further policy tightening had become less likely.

North America

Wall Street has ended mixed, with a gain in Microsoft offsetting a dip in Apple, a day after the Federal Reserve cut interest rates as expected and left the door open for further monetary easing.

Microsoft rose 1.8 per cent after unveiling a $US40 billion stock buyback plan, while Apple declined 0.8 per cent and the S&P 500 ended virtually unchanged.

The S&P 500 was than less than 1 per cent below its closing record high hit in July on Thursday, as investors became more optimistic about the resumption of talks between the US and China aimed at laying the groundwork for high-level trade negotiations in early October.

A recent easing in trade tensions has helped the three main indexes recover from losses from August.

The S&P 500 healthcare index climbed 0.5 per cent after US House of Representatives Speaker Nancy Pelosi released a proposal on drug pricing policy.

Of 11 sector indexes, healthcare is the worst performer so far in 2019, with a gain of six per cent.

Expectations of another rate cut by the Fed, following the US central bank's 25-basis-point reduction on Wednesday, also drove sentiment.

The Fed injected another $US75 billion into the US banking system on Wednesday, restoring a measure of order after the central bank's benchmark interest rate rose above its targeted range for the first time since the financial crisis.

The Dow Jones Industrial Average declined 0.19 per cent to end at 27,094.79 points, while the Nasdaq Composite crept up 0.07 per cent to 8182.88. The S&P 500 stood at 3006.79 points, up less than one point from Wednesday

With the S&P 500 up nearly 20 per cent in 2019, the benchmark index is trading at about 17 times expected earnings, up from about 15 at the end of last year, according to Refinitiv's Datastream.

Shares of Target rose 0.8 per cent after the retailer announced a $US5 billion share buyback plan.

is senior editor for Morningstar Australia

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