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Global Market Report - 29 July

Lex Hall  |  25 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to rise at the start of trading following gains on Wall Street at the end of last week.

The SPI200 futures contract was up 19 points, or 0.28 per cent, at 6,750.0 at 7am Sydney time, suggesting an early bounce for the benchmark S&P/ASX200 on Monday.

The Australian share market has finished broadly lower, despite gains for the mining and energy sectors.

The benchmark S&P/ASX200 index finished down 24.6 points, or 0.36 per cent, to 6,793.4 points, while the broader All Ordinaries was down 22.6 points, or 0.33 per cent, to 6,879.3 points.

On Wall Street on Friday, the Dow Jones Industrial Average finished up 0.19 per cent, the S&P 500 was up 0.74 per cent and the tech-heavy Nasdaq Composite was up 1.11 per cent.

The Aussie dollar is buying 69.06 US cents from 69.42 US cents on Friday.

Asia

China’s major stock indexes climbed on Friday to end the week higher, led by gains in tech firms, as investors cheered a revival in trade hopes and Beijing’s continued tech push.

Most stocks on the newly launched STAR Market dropped on Friday, though they managed to post huge gains for the first week of trading, as investors were encouraged by Beijing’s boldest move yet towards a less-regulated market for initial public offerings and stock trading.

The blue-chip CSI300 index ended up 0.2 per cent at 3,858.57 points, while the Shanghai Composite Index added 0.2 per cent to 2,944.54 points, both up for a fourth consecutive session.

Hong Kong stocks fell on Friday to end the week lower, tracking overnight losses on Wall Street, and after the European Central Bank held interest rates steady unexpectedly.

The Hang Seng index fell 0.7 per cent, to 28,397.74, while the China Enterprises Index lost 0.7 per cent, to 10,853.17.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.59 per cent, while Japan’s Nikkei index closed down 0.45 per cent.

Europe

Large-cap companies pulled European stocks higher on Friday as a surge in Britain’s Vodafone and strong earnings for media businesses and Nestle spurred recovery from a sell-off driven by the European Central Bank.

The pan-European benchmark index rose 0.3 per cent, bouncing back from its worst session in three weeks. London's FTSE 100 outperformed European peers with a 0.8 per cent advance, helped by telecoms companies.

Vodafone gained 10.6 per cent to record it strongest performance since late 2002 on plans to separate its towers unit in Europe into a new company worth upwards of 18 billion euros ($20 billion) with a view to a potential stock market listing.

The STOXX 600 telecoms index rose 2.3 per cent as shares of Cellnex, currently Europe’s biggest towers group, gained 3.3 per cent and Telecom Italia rose 4.1 per cent after Vodafone agreed to jointly roll out 5G in Italy and merge their mobile mast operations.

However, media stocks .SXMP led the gains after upbeat results from France’s Vivendi, satellite operator SES and education company Pearson.

Another blue-chip stock to perform well was Kitkat maker Nestle, which rose nearly 2 per cent after posting its fastest quarterly sales growth in three years.

European shares took a beating on Thursday after ECB chief Mario Draghi all but pledged to ease monetary policy further and even hinted at a reinterpretation of the bank’s inflation target but disappointed some investors who had hoped for an immediate cut to interest rates.

Despite Thursday’s blip, the main STOXX index posted a 0.8 per cent gain on the week, driven partly by hopes of policy easing from the ECB as economic data points to a worsening outlook for Europe’s already slowing economy.

US data showed economic growth slowed less than expected in the second quarter, though it did little to deter expectations that the US Federal Reserve will cut interest rates by 25 basis points next week.

Among the weak spots, Banco Sabadell and Caixabank fell more than 6.5 per cent after the Spanish lenders reduced their 2019 earnings guidance, hurt by low interest rates.

Politics were also in the spotlight after Spain’s parliament rejected Pedro Sanchez’s bid to be confirmed as prime minister on Thursday. Sanchez said he will work to avoid a repeat election but is no longer prepared to offer a coalition government to far-left Podemos.

Luxury stock Kering slumped 7 per cent as its main Gucci brand posted a slower than expected rise in second-quarter sales, hit by a blip in the US.

North America

Robust earnings from Alphabet and Starbucks have pushed the S&P 500 and Nasdaq indexes to record highs, with support from data showing US economic growth slowed less than expected in the second quarter.

The US Commerce Department said GDP increased at an annualised rate of 2.1 per cent in the second quarter, higher than a 1.8 per cent rate forecast by economists polled by Reuters.

The GDP data further solidified wide expectations that the US Federal Reserve will cut interest rates at its policy meeting next week. Those expectations have powered a solid run in stocks this month, helping Wall Street scale record levels.

The data comes on the heels of European Central Bank president Mario Draghi's speech on Monday, which was less dovish than investors had anticipated and led the S&P 500 to post its first loss in the week.

Two weeks into the second-quarter earnings season, about 75 per cent of the 218 S&P 500 companies that have reported so far have topped profit estimates, according to Refinitiv data.

Starbucks rallied 8.9 per cent to a record high after the world's largest coffee chain posted its biggest same-store sales growth in three years.

Alphabet surged 9.6 per cent after beating Wall Street targets on higher ad sales and growth at its cloud unit, a high-margin business it is leaning more on to drive expansion.

Twitter rose 8.9 per cent after it posted better-than-expected quarterly revenue and an uptick in daily users who see advertisements on the site.

Their upbeat earnings pushed the S&P 500 communication services index up 3.25 per cent, the most among S&P sectors.

Lead negotiators for China and the US are set to meet in Shanghai on Tuesday for two days in the next round of talks aimed at settling the US-China trade war. The results of those talks will affect sentiment on Wall Street.

The Dow Jones Industrial Average on Friday rose 0.19 per cent to end the week at 27,192.45 points, while the S&P 500 gained 0.74 per cent to 3,025.86. The Nasdaq Composite added 1.11 per cent to 8,330.21.

For the week, the S&P 500 added 1.7 per cent, the Nasdaq climbed 2.3 per cent and the Dow rose 0.1 per cent.

Even under the cloud of uncertainty related to trade conflict, the S&P 500 has risen 21 per cent so far in 2019.

Also on Friday, McDonald's jumped as much as 2.1 per cent, briefly hitting a record high after beating quarterly sales expectations at established US restaurants.

Amazon.com fell 1.6 per cent and was the biggest drag on the benchmark S&P 500 after the online retailer reported its first profit miss in two years and said income would slump in the current quarter.

Intel lost 1.1 per cent even after the chipmaker gave an upbeat current quarter forecast and raised its full-year revenue guidance.

is content editor for Morningstar Australia

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