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Global Market Report - 28 August

Lex Hall  |  28 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after a negative lead from Wall Street, spurred by a deepening yield curve inversion, which has stirred recession fears.

The SPI200 futures contract was down 10 points, or 0.16 per cent, at 6,420.0 at 7am Sydney time, suggesting a dip for the benchmark S&P/ASX200 on Wednesday.

The tech sector has led the Australian share market higher after Donald Trump said trade talks with China would resume and he was hopeful for a deal.

The benchmark S&P/ASX200 index finished Tuesday up 31.1 points, or 0.48 per cent, to 6,471.2 points, while the broader All Ordinaries was up 34.6 points, or 0.53 per cent, to 6,565.6 points.

A deepening of the inversion in the yield curve between the two-year and 10-year US Treasuries underscored worries about a weakening global economy.

On Wall Street overnight, the Dow Jones Industrial Average finished down 0.47 per cent, the S&P 500 was down 0.32 per cent and the tech-heavy Nasdaq Composite was down 0.34 per cent.

The Aussie dollar is buying 67.51 US cents, unchanged from Tuesday.

Asia

China stocks rallied on Tuesday, bolstered by upbeat industrial profits in July, while possible easing in Sino-US trade tension also aided sentiment.

The blue-chip CSI300 index rose 1.4 per cent to 3,816.95, while the Shanghai Composite Index also closed 1.4 per cent higher at 2,902.19.

Stocks in Hong Kong ended slightly lower on Tuesday as the Chinese-ruled city’s biggest political crisis in decades dented sentiment and offset renewed hopes of a Sino-US trade deal.

The Hang Seng index ended down 0.1 per cent at 25,664.07, while the China Enterprises Index lost 0.2 per cent to 9,996.19.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.29 per cent, while Japan’s Nikkei index closed up 0.96 per cent.

Europe

European markets eased off their lows on Tuesday, as Italian stocks rallied on hopes that a snap election could be avoided by an arrangement to form a new government in Rome.

Milan's FTSE MIB rose 0.7 per cent as the ruling 5-Star Movement and the opposition Democratic Party appeared on the verge of a deal after the PD indicated it had abandoned a veto on Giuseppe Conte serving another term as prime minister.

The pan-European STOXX 600 index was down 0.09 per cent by 0805 GMT after paring losses of almost 0.3 per cent, with London's FTSE 100 index slipping 0.4 per cent.

British stocks - HSBC Holdings Plc , British American Tobacco and AstraZeneca - fell between 0.3 per cent and 1.3 per cent, and were the biggest drags on the STOXX 600.

Worries that major economies are on the brink of a recession has put the European market on pace to end August about 4 per cent lower, but hopes that major central banks and governments would step in to counter the impact of trade war limited losses.

Heightened US-China trade tensions drove a near 0.6 per cent fall initially on Monday, but stocks stabilized to close marginally lower after US President Donald Trump predicted a trade deal with China.

In a bright spot, Flughafen Zuerich rose about 4 per cent and was the biggest gainer on the STOXX 600, after the Zurich airport operator posted better-than-expected first half results.

North America

Wall Street has slipped, weighed down by financial stocks as a deepening of the Treasury yield curve inversion raised US recession worries and uncertainty over any progress in trade negotiations between the US and China took a toll.

US stocks initially advanced, building on Monday's bounce, as President Donald Trump forecast another round of talks with Beijing. China's foreign ministry, however, reiterated on Tuesday that it had not received any recent US telephone call on trade.

The Dow Jones Industrial Average on Tuesday fell 120.93 points, or 0.47 per cent, to 25,777.90; the S&P 500 lost 9.22 points, or 0.32 per cent, to 2,869.16; and the Nasdaq Composite dropped 26.79 points, or 0.34 per cent, to 7,826.95.

Financial shares, which tend to weaken in lower-rate and soft economic environments, lost 0.72 per cent, while the defensive utilities sector led advancing groups, edging up 0.14 per cent.

The S&P 500 has lost nearly 4 per cent in August on worries over the impact of the intensifying US-China trade war on the slowing global economy and corporate profits, along with uncertainty around the pace of US interest rate cuts from the Federal Reserve.

With the next Federal Reserve meeting scheduled for mid-September, investors are gauging the strength of the US economy for clues on where rates are headed. The release next week of the government's closely watched monthly jobs report and manufacturing data will give investors factors to consider before the policy announcement.

Among individual stocks, Johnson & Johnson shares rose 1.44 per cent after an Oklahoma judge said the drug-maker must pay $US572.1 million ($847 million) for its part in fuelling the US opioid epidemic, a sum that was substantially less than what investors had expected.

Philip Morris International shares fell 7.76 per cent after the tobacco-maker said it was in talks with Altria Group to combine in an all-stock merger of equals. Altria's shares were down 3.95 per cent.

Shares of JM Smucker tumbled 8.18 per cent after the packaged food-maker cut its full-year earnings forecast and missed estimates for quarterly profit and sales.

is content editor for Morningstar Australia

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