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Global Market Report - 21 August

Lex Hall  |  21 Aug 2019Text size  Decrease  Increase  |  
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The local share market is expected to open lower after stocks on Wall Street retreated overnight, dragged lower by financials as they sweat on upcoming remarks from Jerome Powell.

The SPI200 futures contract was down 46 points, or 0.71 per cent, at 6,454.0 at 8am Sydney time, suggesting a fall for the benchmark S&P/ASX200 on Wednesday.

The Australian share market has enjoyed strong gains for a second straight day, with every sector advancing.

The benchmark S&P/ASX200 index finished Tuesday up 77.6 points, or 1.2 per cent, to 6,545 points, while the broader All Ordinaries was up 76.9 points, or 1.17 per cent, to 6,627.4 points.

On Wall Street, the Dow Jones Industrial Average finished down 0.66 per cent, the S&P 500 was down 0.79 per cent and the tech-heavy Nasdaq Composite was down 0.68 per cent.

Investors said they were looking forward to Friday’s speech from the Fed’s Powell at the Jackson Hole central bankers’ conference for more clues on the course of monetary policy and interest rates.

Hints on the US central bank’s plans may also be found in minutes from the Fed’s July policy meeting, which will be released on Wednesday.

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The Aussie dollar is buying 67.76 US cents from 67.83 US cents on Tuesday.


China stocks ended slightly lower on Tuesday as investors took a breather following a strong rally in the previous session and pondered the extent and impact of Beijing’s interest rate reform.

The blue-chip CSI300 index fell 0.1 per cent, to 3,787.73, while the Shanghai Composite Index eased 0.1 per cent, to 2,880.00 points.

In Hong Kong, stocks ended lower on Tuesday as investors locked in profit after a four-day winning streak following Beijing’s interest rate reform, which boosted riskier assets and tempered recession fears.

The Hang Seng index ended down 0.2 per cent at 26,231.54, while the China Enterprises Index closed 0.2 per cent higher at 10,132.77.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.36%, while Japan’s Nikkei index closed up 0.55 per cent.


European shares fell on Tuesday after two sessions of robust gains as optimism over hopes of stimulus in major economies waned and investors awaited more guidance from central banks.

Concerns about Italy’s government further dented sentiment, though Italian bond yields fell after Prime Minister Giuseppe Conte said he would resign, potentially paving the way for a new coalition government.

Markets in Italy have been volatile since the leader of the League, Matteo Salvini, pulled support from his coalition arrangement with the 5-Star Movement on 8 August.

Milan's blue-chip index ended 1.1 per cent lower, a reaction that analysts said was relatively mild because the possibility of the prime minister's resignation was more or less priced in and after Salvini said he was ready to keep the coalition government alive to approve a 2020 budget before heading to early elections.

The pan-European STOXX 600 index which rose in the early hours of trading reversed course in the afternoon to end 0.7 per cent lower. Madrid shares led the declines.

All sub-sectors ended in the negative with interest-rate sensitive banks weighing the most on the benchmark index. Eurozone bond yields also fell back towards record lows.

The basic resources sector fell more than 1 per cent after BHP said that headwinds to global growth could hit demand for its main commodities, iron ore and copper.

In a bright spot, Pandora, the Danish jewellery maker, jumped over 10 per cent to the top of the STOXX 600 index. Despite a drop in second-quarter earnings, Pandora maintained its full-year forecast

European equities had staged a comeback in the last two sessions on growing hopes that central banks and governments will step in to help global economies stave off a recession.

However, the pan European STOXX 600 index is still down 3.4 per cent for month so far, lagging the 10-year average.

Investors will now be looking forward to the Jackson Hole Symposium on Thursday where substantive comments from US Federal Reserve Chief Jerome Powell and European Central Bank head Mario Draghi are expected.

North America

Financial shares led US stocks lower on Tuesday to end a three-day rally as investors awaited comments from Federal Reserve Chair Jerome Powell at the end of the week.

The S&P 500 financial index dropped 1.4 per cent and the group weighed most heavily on the benchmark index among its major sectors, which all registered losses.

Prior to Tuesday’s session, US stocks had recovered most of their losses from a steep sell-off last Wednesday, which was triggered by a brief inversion of the yield curve between 2-year and 10-year Treasuries, widely considered a harbinger of a recession.

Reports of stimulus efforts in China and Germany, along with the subsequent steepening of the yield curve, helped assuage recession fears.

The S&P 500 is now 4.1 per cent shy of its record closing high in July after having fallen as much as 6.2 per cent below that level.

The Fed’s moves have drawn close attention as US economic growth has moderated and the US-China trade dispute has weighed on business confidence. On Tuesday, President Donald Trump said his administration was looking at cuts to payroll and capital gains taxes.

The Dow Jones Industrial Average fell 173.35 points, or 0.66 per cent, to 25,962.44, the S&P 500 lost 23.14 points, or 0.79 per cent, to 2,900.51 and the Nasdaq Composite dropped 54.25 points, or 0.68 per cent, to 7,948.56.

Shares of Netflix fell 3.4 per cent after Walt Disney Co announced its streaming service would launch in Canada and the Netherlands in November.

Facebook shares dropped 1.3 per cent as the company said it was tweaking its policies to allow users to see and control the data that other websites and apps share with the social network to improve targeted advertising. A Bloomberg report that Facebook’s Libra digital currency faces an anti-trust probe by the European Union also weighed on the shares.

Home Depot Inc shares climbed 4.4 per cent to lead in percentage gains on the S&P 500 after the home improvement retailer’s quarterly earnings beat estimates. Shares of rival Lowe’s Companies Inc also rose, up 3.0 per cent.

Medtronic Plc shares rose 2.6 per cent, also among the biggest percentage gains on the S&P 500, after the medical device maker raised its full-year adjusted profit forecast.

is senior editor for Morningstar Australia

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