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Global Market Report - 22 August

Lex Hall  |  22 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open higher as investors await a slew of corporate results while earnings at US retailers point to a boost in consumer demand.

The SPI200 futures contract was up 27 points, or 0.42 per cent, at 6,466.0 at 8am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Thursday.

The Australian share market has given up most of its gains from Tuesday, as markets around the world turned skittish ahead of a key meeting of central bankers.

The benchmark S&P/ASX200 index finished Wednesday down 61.7 points, or 0.94 per cent, to 6,483.3 points, while the broader All Ordinaries was closed down 54.8 points, or 0.83 per cent, to 6,572.6.

On Wall Street overnight, the Dow Jones Industrial Average finished up 0.93 per cent, the S&P 500 was up 0.82 per cent and the tech-heavy Nasdaq Composite was up 0.90 per cent.

Companies releasing results on Thursday include Coles, Coca-Cola Amatil, Flight Centre, Qantas and Nine Entertainment.

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

Asia

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Stocks in Shanghai were little changed on Wednesday as investors awaited more signals on policy easing at home and abroad, with trade risks continuing to weigh on sentiment.

At the midday break, the Shanghai Composite index was flat at 2,880.52 points, the blue-chip CSI300 index was down 0.1 per cent but Hong Kong’s Hang Seng Index was up by the same margin at

26,260.52.

Hong Kong stocks closed a tick higher on Wednesday, while markets bet on central banks to ease policy and stave off fears of global economic slowdown amid consistent headwinds from the Sino-U.S. trade dispute.

At the close of trade, the Hang Seng index was up 0.2 per cent at 26,270.04 points. The Hang Seng China Enterprises index ended 0.4 per cent firmer.

Around the region, MSCI’s Asia ex-Japan stock index was flat while Japan’s Nikkei index was down 0.4 per cent.

Europe

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 over 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 jewelry 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 a 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 U.S. Federal Reserve Chief Jerome Powell and European Central Bank head Mario Draghi are expected.

North America

Wall Street's main indexes have risen as upbeat earnings from retailers pointed to strength in US consumer demand, and held gains after minutes from last month's Federal Reserve meeting showed policymakers had debated a more aggressive interest rate cut.

US stocks moved solidly higher following better-than-expected results from retailers Target and Lowe's.

Target shares surged 20.4 per cent on Wednesday after the big-box retailer raised its annual earnings forecast.

Lowe's shares climbed 10.4 per cent after the home-improvement chain beat profit estimates.

Robust US consumer spending has helped stave off fears of an impending recession.

Concerns about an economic slowdown rose as the yield curve between two-year and 10-year Treasuries briefly inverted last week.

Though the yield curve again briefly inverted on Wednesday, it had little impact on stocks this time around.

Some participants preferred a 50-basis-point cut, but the committee was united in wanting to avoid the appearance of being on a path to further rate cuts.

The Dow Jones Industrial Average rose 240.29 points, or 0.93 per cent, to 26,202.73, the S&P 500 gained 23.92 points, or 0.82 per cent, to 2924.43 and the Nasdaq Composite added 71.65 points, or 0.90 per cent, to 8020.21.

Fed Chair Jerome Powell is scheduled to speak on Friday at the central bankers' conference in Jackson Hole, Wyoming.

Several market strategists said Powell's comments at the conclave would offer greater insight on the course of monetary policy than the minutes from the July Fed meeting given developments since then, including US President Donald Trump's announcement of tariffs on an additional $US300 billion worth of Chinese goods.

On Wednesday, the nonpartisan Congressional Budget Office said changes in US and foreign trade policies since January 2018 would reduce inflation-adjusted US gross domestic product by 0.3 per cent from what it would be otherwise by 2020.

Among individual stocks, shares of Toll Brothers slipped 4.5 per cent after the luxury homebuilder posted a decline in orders, hinting at weaker demand for new homes.

is senior editor for Morningstar Australia

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