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Global Market Report - 23 September

Lex Hall  |  23 Sep 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open flat as the local currency dipped against the US dollar and trade hopes waned after China cut short a farm trip.

The SPI200 futures contract was up 2 points, or 0.03 per cent, at 6,719.0 at 8am Sydney time, suggesting little change for the benchmark S&P/ASX200 on Monday.

The Australian share market has given up most of its early gains, but still managed to close higher for a 10th day in the past 12 sessions.

After being up as many as 56 points in the morning, the benchmark S&P/ASX200 index closed Friday up just 13.3 points, or 0.2 per cent, to 6,730.8 points.

On Wall Street on Friday, the Dow Jones Industrial Average finished down 0.59 per cent, the S&P 500 was down 0.49 and the tech-heavy Nasdaq Composite was down 0.80 per cent.

The Aussie dollar is buying 67.68 US cents from 68.05 US cents on Friday.

Asia

China stocks firmed on Friday but posted modest weekly losses, after Beijing’s cautious monetary easing this week to support an economy hit by a protracted trade dispute with the US.

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The blue-chip CSI300 index rose 0.3 per cent, to 3,935.65, while the Shanghai Composite Index ended up 0.2 per cent at 3,006.45.

Hong Kong stocks closed the week lower amid lingering worries that anti-government protests could add pressure on the city island’s economy amid a bruising Sino-US trade spat.

The Hang Seng index ended down 0.1 per cent at 26,435.67 on Friday, while the China Enterprises Index also lost 0.1 per cent to 10,375.65.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.5 per cent, while Japan’s Nikkei index closed up 0.16 per cent.

Europe

European stocks clocked their fifth straight week of gains on Friday with investors buying into the oil and gas and banking sectors, and Novo Nordisk rising after US approval of its oral diabetes drug.

Investors also sought refuge in the so-called defensive sectors such as utilities, real-estate and food and beverages ahead of a week packed with economic data.

The United Nations general assembly will also provide clues on the fallout from attacks on Saudi oil facilities last weekend and indications of a potential meeting between the presidents of Iran and the US.

The pan-European STOXX 600 index closed up 0.3 per cent in a volatile session, taking weekly gains to 0.3 per cent.

Novo Nordisk rose 2.6 per cent after the US Food and Drug Administration approved an oral version of its diabetes drug, semaglutide.

Global equity markets were spooked at the start of the week by the Saudi attacks that sent oil prices soaring and fanned geopolitical concerns. But cues of further monetary stimulus by central banks around the world calmed investor nerves later in the week.

The oil and gas sector gained 3.4 per cent in the week - its biggest weekly increase in four months.

Retailers also led the benchmark STOXX 600 higher, with shares of Casino up 3.8 per cent after the debt-laden company said it was in talks to sell its discount store chain, Leader Price, to German rival Aldi.

Friday’s volatility also stemmed from “quadruple witching”, where investors unwound positions in futures and options contracts before they expired.

In the week ahead, investors will also be watching for economic data from the euro zone and the US, including preliminary PMIs and economic growth figures.

Shares in some of the biggest outperformers this year were weighing on the STOXX 600. Airbus, up 43 per cent so far this year, was down 3.2 per cent, and steady dividend-paying companies including Unilever and British American Tobacco were down at least 1.5 per cent.

The London-listed of these companies pushed the FTSE down 0.2 per cent. It ended the week 0.3 per cent lower, breaking a three-week streak of gains.

The past few weeks saw investors rotate out of growth sectors and into value stocks, with beaten-down shares of banks in popular demand. However, the European banking index closed the week down 1 per cent as investors went back into the safety sectors.

North America

Wall Street has dropped, and also finished the week lower, after a Chinese agriculture delegation cancelled a planned visit to Montana, dampening optimism about US-China trade talks.

The delegates, who had been set to visit US farm states next week, will return to China sooner than originally scheduled, the Montana Farm Bureau said on Friday.

Major stock indexes fell into negative territory after the cancellation, which came as trade talks were held in Washington and US President Donald Trump said he wanted a complete trade deal, not just an agreement for China to buy more US agricultural goods. Before the news, the S&P 500 and Dow industrials were in positive territory.

For months, Wall Street has bounced up and down with signs of improvement or deterioration in trade talks, often based on comments or tweets from Trump, a cycle investors have grown accustomed to.

Trade optimism in recent weeks helped elevate the S&P 500 to just shy of its all-time high hit in July.

Eight of the 11 major S&P sectors fell on Friday. The S&P 500 consumer discretionary index and tariff-sensitive S&P 500 information technology index declined the most, down 1.2 per cent and 1.1 per cent, respectively. The Philadelphia chip index slid 1.8 per cent.

The Dow Jones Industrial Average fell 0.59 per cent to end the week at 26,934.46 points, while the S&P 500 lost 0.49 per cent to 2,991.99.

The Nasdaq Composite dropped 0.8 per cent to 8,117.67.

For the week, the S&P 500 fell 0.52 per cent, the Dow lost 1.05 per cent and the Nasdaq declined 0.72 per cent.

Netflix tumbled 5.5 per cent after CEO Reed Hastings made comments underscoring growing costs and rising competition from Walt Disney, Apple and other video streaming services.

Adding to Netflix's woes, Evercore ISI said recent data painted an uncertain picture of the company's international subscriber growth.

The S&P 500 healthcare index, which has been the worst performing S&P sector this year, clocked the biggest gain among the 11 major sectors, up 0.6 per cent.

Merck gained 1.4 per cent after the company's drugs Pifeltro and Delstrigo received FDA approval for use in certain adult patients with HIV-1 who are "virally suppressed".

Roku slumped 19.2 per cent after Pivotal Research started coverage of its shares with a "sell" rating.

Xilinx dropped 6.8 per cent after chief financial officer Lorenzo Flores said he would step down, prompting Bank of America Merrill to downgrade the chipmaker to "neutral".

is senior editor for Morningstar Australia

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