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Global Market Report - 22 October

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

The Australian share market is expected to open higher after a positive lead from overseas, including further signs of progress toward resolution of the US-China trade war.

The SPI200 futures contract was up 20 points, or 0.30 per cent, at 6,639.0 at 8am Sydney time, suggesting a rise for the benchmark S&P/ASX200 on Tuesday.

The Australian share market has closed flat, boosted by the property sector and dragged by turmoil in tech stocks.

The benchmark S&P/ASX200 index shrugged off early losses to finish Monday on the highs of the day, up 2.8 points, or 0.04 per cent, to 6,652.5 point.

The benchmark S&P 500 stock index has risen within striking distance of a record high as further signs of progress toward resolution of the US-China trade war boosted shares in sectors sensitive to trade and the global economy.

On Wall Street overnight, the Dow Jones Industrial Average was up 0.21 per cent, the S&P 500 was up 0.69 per cent and the tech-heavy Nasdaq Composite was up 0.91 per cent.

US President Donald Trump continued to strike optimistic tones, while White House adviser Larry Kudlow said tariffs on Chinese goods scheduled for December could be withdrawn if talks go well.

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The Aussie dollar is buying 68.68 US cents from 68.59 US cents on Monday.

Asia

China stocks closed up on Monday, on hopes China and the United States could sign a trade deal and that Beijing would continue its policy support for the economy.

The blue-chip CSI300 index rose 0.3 per cent, to 3,880.84, while the Shanghai Composite Index added 0.1 per cent to 2,939.62.

Hong Kong stocks closed flat on Monday, amid concerns around political protests in the city, while investors also waited for more details on the potential Sino-US trade deal.

The Hang Seng index was unchanged at 26,725.68, while the China Enterprises Index was also flat at 10,543.41.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.28 per cent, while Japan’s Nikkei index closed up 0.25 per cent.

Europe

European shares broke a three-day run of losses on Monday, as investors stuck to hopes that Britain will avoid a disorderly exit from the European Union, while positive corporate updates and comments on US-China trade talks added to the upbeat mood.

The pan-European STOXX 600 index ended the session 0.6 per cent higher, barely budging on news House of Commons speaker John Bercow refused to allow a vote on Prime Minister Boris Johnson’s Brexit divorce deal, saying the same issue had been discussed on Saturday.

A spokesman said the government would now introduce Brexit legislation this week. Lawmakers on Saturday forced the British government to seek a delay to the 31 October deadline, which analysts said reduced the chances of a no-deal Brexit.

London's blue-chip FTSE 100 was up 0.2 per cent, lagging the broader markets due to a strong pound, while the FTSE mid-cap index of domestically focused stocks closed up 0.4 per cent.

Germany’s DAX jumped 0.9 per cent, leading gains among major regional indexes.

Business software group SAP’s shares gained 2.5 per cent after saying it had reached a three-year deal with Microsoft to help its enterprise customers move their business processes into the cloud. The company also reiterated its forecast for the year and through to 2023.

German payments company Wirecard jumped 6 per cent on news the firm was hiring KPMG to conduct an independent audit to address allegations in the Financial Times that its finance team had sought to inflate its reported sales and profits.

Most sub-sectors were in the black, led by miners and banks, but defensive sectors including healthcare and real estate lagged the broader market.

Aiding sentiment, a White House official said that US tariffs scheduled for December on Chinese goods could be withdrawn if negotiations continue to go well.

Investors will be scanning third-quarter report cards from European firms to assess their health amid lingering Brexit and trade uncertainties. UK-listed RBS and Barclays are scheduled to report this week, kicking off bank earnings.

Companies listed in STOXX 600 are expected to report a 3.7 per cent drop in third-quarter earnings, worse than the 3 per cent fall expected a week ago, according to Refinitiv IBES data.

However, early reports were positive, with shares of Swedish engineering firm Atlas Copco jumping nearly 10 per cent to the top of STOXX 600 after it reported forecast-beating third-quarter earnings and order bookings on strong demand from chipmakers.

By contrast Smith+Nephew sank 9 per cent after the medical device maker said its Chief Executive Namal Nawana was stepping down after just 17 months in the role.

Meanwhile, the Berlin government’s move to freeze rents put real estate companies such as Deutsche Wohnen, Ado Properties and Vonovia under pressure. Their shares fell between 1 per cent and 2.6 per cent.

North America

Trade-sensitive technology stocks rose 1.1 per cent, adding the most to the S&P 500. Semiconductor companies, which derive much of their revenue from China, especially climbed. The Philadelphia SE Semiconductor Index advanced 1.9 per cent.

The economically sensitive energy and financial sectors led percentage gains on the S&P 500. Energy shares gained 1.9 per cent while financials rose 1.4 per cent.

Stocks have also benefited from the steepening US Treasury yield curve as well as better-than-expected corporate earnings thus far, said Mona Mahajan, US investment strategist at Allianz Global Investors in New York. In Monday's trading, the S&P 500 rose above 3000 to come within 0.7 per cent of its record closing high.

Losses in Boeing Co capped gains in the Dow Jones Industrial Average. Boeing shares shed 3.8 per cent as several brokerages downgraded ratings on the stock following reports that cast doubt on when the 737 MAX jet will return to service.

The Dow Jones Industrial Average rose 57.44 points, or 0.21 per cent, to 26,827.64, the S&P 500 gained 20.52 points, or 0.69 per cent, to 3,006.72 and the Nasdaq Composite added 73.44 points, or 0.91 per cent, to 8,162.99.

This week's earnings line-up includes high-profile companies such as Boeing, Microsoft Corp, Procter & Gamble Co, United Parcel Service Inc and Caterpillar Inc .

According to data from Refinitiv, analysts have projected the first earnings contraction since 2016 for S&P 500 companies. But of the 75 companies that have reported results so far, only 12 per cent have come short of earnings estimates.

Halliburton Co shares gained 6.4 per cent after the oilfield services provider detailed further planned cost reductions.

Coty Inc shares surged 13.4 per cent after the cosmetics maker said it planned to sell its professional beauty business with brands such as Wella and OPI.

US-listed shares of Teva Pharmaceutical Industries jumped 8.7 per cent after the company announced progress toward settling remaining opioid-related litigation.

is senior editor for Morningstar Australia

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