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Global Market Report - 24 July

Lex Hall  |  24 Jul 2019Text size  Decrease  Increase  |  
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The Australian share market is expected to open higher following gains on Wall Street overnight, lifted by upbeat results and trade optimism.

The SPI200 futures contract was up 33 points, or 0.50 per cent, at 6,691.0 at 8am Sydney time, suggesting a bounce for the benchmark S&P/ASX200 on Wednesday.

The Australian share market has finished broadly higher with all sectors posting gains.

The benchmark S&P/ASX200 index was up 33.4 points, or 0.5 per cent, to 6,724.6 points, while the broader All Ordinaries was up 31.3 points, or 0.46 per cent, to 6,812.5 points.

Wall Street was buoyed by positive quarterly results from Coca-Cola and United Technologies, with the Dow Jones Industrial Average finishing up 0.65 per cent, the S&P 500 was up 0.68 per cent and the tech-heavy Nasdaq Composite was up 0.58 per cent.

A Bloomberg report that US trade representative Robert Lighthizer would travel to Shanghai next week for face-to-face talks with Chinese officials also helped boost US stocks.

The European Union has congratulated incoming British Prime Minister Boris Johnson but warned of "challenging times ahead" and ruled out heeding his election pledge to renegotiate Brexit.

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The Aussie dollar is buying 70.05 US cents from 70.21 US cents on Tuesday.


China stocks ended higher on Tuesday, aided by gains in infrastructure and IT firms, even as the newly launched Nasdaq-style STAR Market continued to attract attention.

The blue-chip CSI300 index rose 0.2 per cent, to 3,789.91, while the Shanghai Composite Index closed up 0.5 per cent, at 2,899.94.

Companies on China’s new Nasdaq-style bourse retreated on Tuesday, shedding some of the massive gains made on their volatile debut in the previous session, although all remained well above their listing prices.

Hong Kong stocks closed higher on Tuesday, following a global rally boosted by expectations that the European Central Bank and the Federal Reserve will cut interest rates.

The Hang Seng index rose 0.3 per cent to 28,466.48, while the China Enterprises Index gained 0.4 per cent to 10,809.92.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.13 per cent, while Japan’s Nikkei index closed up 0.95 per cent.


A surge in automakers and strong earnings from Europe’s banking heavyweights lifted the main STOXX 600 index to its highest level in more than two weeks on Tuesday, with investors taking political upheaval in Britain and Spain in their stride.

The pan-European benchmark closed at its highest since 4 July as carmakers rallied 3.8 per cent for their strongest performance since early January.

French auto parts supplier Faurecia jumped 11.5 per cent after it maintained first-half profitability despite a China-led decline in production, while Germany’s Continental rose 6.3 per cent despite issuing yet another profit warning the previous day, while rival Hella gained 6.8 per cent.

After a heavy sell-off in May on worries about a protracted US-China trade dispute denting corporate profits, investors have bought back into stock markets in Europe and elsewhere on expectations that leading central banks will loosen monetary policy to encourage growth.

The European Central Bank could set the stage for a September interest rate cut when it meets on Thursday and the US Federal Reserve is expected to cut rates by 25 basis points next week.

Europe’s banking index, which has lagged most other sectors this year on expectations of lower interest rates, gained 2 per cent after Swiss lender UBS reported its best second-quarter results in nearly a decade, lifting its shares by 2.6 per cent.

Austrian chipmaker AMS, meanwhile, climbed by 7.3 per cent after it forecast a strong third quarter, helping to drive a 1 per cent advance for the tech index.

Despite largely positive earnings so far, investors are concerned momentum could soon falter. Data from Refinitiv showed companies listed on the STOXX 600 index are expected to report a 0.5 per cent drop in second-quarter earnings, a reversal from 0.2 per cent growth forecast a week ago.

Away from earnings, German carmaker Daimler rose 4.4 per cent on news that China's Beijing Automotive Group Co had bought a 5 per cent stake in the company. The Auto-heavy German market was Europe's biggest gainer, rising 1.6 per cent.

The weak pound allied with the international exposure of London's FTSE 100 helped the index to firm slightly after Boris Johnson won the contest to be Britain's new prime minister, with investors concerned he could lead Britain towards a no-deal Brexit.

Better than expected results for Spanish lender Santander, which gained 3.6 per cent, helped investors shrug off news that Spain’s Socialist leader Pedro Sanchez failed in a first attempt to win parliament’s backing to form a government. He now has two days to try to strike a deal with the far-left Unidas Podemos before the second vote.

North America

The S&P 500 and Nasdaq have approached record highs, lifted by upbeat quarterly reports from Coca-Cola and United Technologies and on optimism the US would resolve its trade conflict with China.

Stocks extended gains late in the session on Tuesday after Bloomberg reported that US Trade Representative Robert Lighthizer would travel to Shanghai next week for face-to-face trade meetings with Chinese officials.

White House economic adviser Larry Kudlow told reporters on Tuesday the in-person talks to resolve the US-China trade deal were a good sign.

The US corporate earnings season is off to a strong start, with nearly 80 per cent of 104 S&P 500 companies topping earnings expectations so far in the second quarter, according to Refinitiv IBES data.

Coca-Cola surged 6.1 per cent to a record high after the drink-maker beat quarterly earnings expectations and raised its full-year organic revenue forecast.

Fellow Dow component United Technologies gained 1.5 per cent after raising its full-year profit and sales outlook.

Also helping sentiment, US President Donald Trump and US congressional leaders reached a deal on Monday on a two-year extension of the debt limit and federal spending caps that would avert a feared government default later this year. It would, however, add to rising budget deficits.

Expectations the Federal Reserve will cut interest rates at its policy-setting meeting next week have made investors more willing to buy stocks. The S&P 500 and Nasdaq are less than half a per cent below their record high closing levels set earlier this month.

The European Central Bank is expected to signal easier monetary policy when it meets on Thursday.

The International Monetary Fund lowered its forecast for global growth this year and next, warning that more US-China tariffs, car tariffs or a disorderly Brexit could slow growth further.

The Dow Jones Industrial Average rose 0.65 per cent to end at 27,349.19 while the S&P 500 gained 0.68 per cent to 3,005.47 on Tuesday. The Nasdaq Composite added 0.58 per cent to 8,251.40.

Investors also anticipate quarterly reports from top-tier growth companies Facebook on Wednesday, and Amazon.com and Alphabet on Thursday.

Overall profits of S&P 500 companies are expected to rise about 1 per cent in the second quarter, according to Refinitiv, improving from a small decline estimated previously.

The S&P 500 industrials index rose 1.2 per cent, while the materials index climbed 2.0 per cent.

Shares of Travelers Companies fell 1.5 per cent after the insurer's second-quarter profit missed estimates. It said weather-related losses led to an 18 per cent drop in underwriting gains.

Hasbro surged 9.95 per cent and was the biggest gainer among S&P 500 companies after the toymaker reported better-than-expected quarterly revenue.

is senior editor for Morningstar Australia

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