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Global Market Report - 22 January

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

The Australian share market is set for a flat open following a downgraded global economic forecast, with no overnight lead from Wall Street on account of a US public holiday.

The SPI200 futures contract was unchanged at 5827.0 at 8am Sydney on Tuesday, indicating the benchmark ASX/200 will be subdued in early trade. Yesterday, the ASX continued its strong start to the year closing higher on Monday, bolstered by energy and financial sectors.

The benchmark S&P/ASX200 index was up 10.8 points, or 0.18 per cent, to 5890.4 at 4.30pm on Monday, while the broader All Ordinaries was up 12.3 points, or 0.21 per cent, higher at 5953.5.

Earlier, the International Monetary Fund has revised its global economic growth forecasts out to 2020, warning that risks to global growth include tightening financial conditions, trade tensions between the US and China, a possible "no deal" exit by the UK from the European Union and a stronger than expected slowdown in China.

Oil prices have shrugged off news China's economy is likely to stagnate further, but industrial metals fell on demand worries from the world's top consumer.

Gold is lower on a stronger US dollar and increased risk appetite.

Wall Street was closed overnight for Martin Luther King Jr Day, but European stocks fell.

The Aussie dollar has also dropped, buying 71.59 US cents from 71.69 US cents on Monday.
Companies including Afterpay and zipPay will face a Senate Inquiry into buy-now-pay-later vendors in Brisbane on Tuesday.

The sector saddled shoppers with nearly $1 billion in debt in 2017/18 and is seen to be increasingly shaping the spending habits of younger consumers, including for health and medical-related needs.

ASIA

Asian markets finished higher today with shares in China leading the region. The Shanghai Composite is up 0.56 per cent while Hong Kong's Hang Seng is up 0.39 per cent and Japan's Nikkei 225 is up 0.26 per cent.

China's economic growth has fallen to a three-decade low in 2018 as business activity lagged amid a tariff war with Washington.

The world's second-largest economy expanded by 6.6 per cent over a year earlier, down from 2017's 6.9 per cent, official data showed on Monday.

Growth in the three months ended December cooled to 6.4 per cent from the previous quarter's 6.5 per cent.

Communist leaders are trying to steer China to slower, more self-sustaining growth based on consumer spending instead of trade and investment.

But the slowdown has been sharper than expected, prompting Beijing to step up government spending and order banks to lend more to shore up growth and avoid politically dangerous job losses.

EUROPE

European markets finished mixed as of the most recent closing prices. The FTSE 100 gained 0.03 per cent, while the DAX led the CAC 40 lower. They fell 0.62 per cent and 0.17 per cent respectively.

German glue and detergent maker Henkel fell 10 per cent after warning its profitability would suffer this year as it increases investment in brands and digital technology in bid to reignite growth.

The IMF forecasts growth in the euro area to moderate from 1.8 per cent in 2018 to 1.6 per cent in 2019 (0.3 lower than projected last fall) and 1.7 percent in 2020. Growth rates have been marked down for many economies, notably Germany.

NORTH AMERICA

Markets were closed in the US. However, futures on the S&P 500 Index sank 0.3 per cent as of 4pm New York time.

The IMF has forecast growth for the US to remain unchanged. However, growth is expected to decline to 2.5 per cent in 2019 and soften further to 1.8 per cent in 2020 with the unwinding of fiscal stimulus and as the federal funds rate temporarily overshoots the neutral rate of interest.

"Nevertheless, the projected pace of expansion is above the US economy's estimated potential growth rate in both years,” the IMF says. “Strong domestic demand growth will support rising imports and contribute to a widening of the US current account deficit."

is content editor for Morningstar Australia

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