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Global Market Report - 29 May

Lex Hall  |  29 May 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after a negative lead from overseas as trade tensions keep risk appetite in check.

The SPI200 futures contract was down 43 points, or 0.66 per cent, at 6,441.0 at 8am Sydney time, suggesting an early slump for the benchmark S&P/ASX200 on Wednesday.

The Australian share market closed higher yesterday, boosted by the energy and mining sectors as the price of crude and iron ore gained.

The benchmark S&P/ASX200 index finished up 32.9 points, or 0.51 per cent, to 6,484.8 points on Tuesday, while the broader All Ordinaries closed up 35.6 points, or 0.54 per cent, to 6,580.4.

On Wall Street overnight, the Dow Jones Industrial Average closed down 0.93 per cent, the S&P 500 was down 0.85 per cent and the tech-heavy Nasdaq Composite was up 0.39 per cent.

The Aussie dollar is buying 69.25 US cents from 69.28 US cents on Tuesday.

Asia

China’s major stock indexes extended gains on Tuesday as a chief financial regulator downplayed the impact of the trade war with the US, and as foreign investors bought shares ahead of MSCI’s weighting increase.

The CSI300 index rose 1 per cent to 3,674.14 points at the end of the morning session, while the Shanghai Composite Index gained 0.9 per cent to 2,918.12 points.

Hong Kong stocks ended higher on Tuesday after plumbing a four-month low in the previous session, but gains were capped as investor sentiment remained fragile amid broad uncertainties over trade and economic growth.

The Hang Seng index rose 0.4 per cent, to 27,390.81 points, while the China Enterprises Index gained 0.1 per cent, to 10,416.55 points.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.31 per cent, while Japan’s Nikkei index was up 0.39 per cent.

Europe

European shares dipped on Tuesday, with bank stocks capturing investors’ attention as concerns about a possible fine on Italy due to the indebted country’s yawning budget deficit exacted a heavy toll on risk sentiment.

The pan-region STOXX 600 fell 0.2 per cent, with banks shedding 0.4 per cent and chemicals stocks declining 1 per cent.

London-listed shares edged down as they traded for the first time this week, while Germany’s DAX ended 0.4 per cent lower, matching the decline in Paris-traded equities.

Milan-traded stocks slid 0.5 per cent, with the country’s deputy prime minister saying the European Commission could slap a 3 billion euro ($3.35 billion) fine on the country for breaking EU rules due to its rising debt and structural deficit levels.

Matteo Salvini’s comments sent yields on Italy’s bonds broadly higher while pushing the country’s banking stocks in the other direction.

Italy’s banking index dropped 1.2 per cent to its lowest closing level since early February.

In contrast to Italian lenders, Greece’s banks powered Athens-traded stocks 2.3 per cent higher, to a more than one year closing high on hopes a more business friendly government will emerge from a snap election called on Monday.

Piraeus Bank surged 15 per cent to lead the benchmark’s gainers, followed by Eurobank Ergasias, with a 9.8 per cent rise.

Vienna-traded equities declined 0.2 per cent, a day after conservative Chancellor Sebastian Kurz fell victim to the first successful no-confidence motion against an Austrian government since the country regained its independence in 1955.

Tempering the gloom on European bourses, stocks of carmakers and their suppliers rose for a third straight session, adding 0.7 per cent on the day.

Traders cited a report in China stating the southern province Guangdong has launched stimulus measures to boost car sales and relax curbs on car purchases.

Peugeot added 4.6 per cent while Knorr Bremse rose 1.6 per cent. 

North America

US stocks closed lower on Tuesday, with initial gains giving way to declines as the likelihood of a prolonged trade war between the US and China once again kept risk appetite in check.

US President Donald Trump on Monday said he was “not yet ready” to make a deal with China, although he expected one could be reached in the future. An expanding tariff battle between the two sides has raised concerns the trade war would lead to a global economic slowdown.

Consumer confidence jumped in May as households grew more upbeat about the labour market, although economists said the strong readings likely did not fully capture the impact of the trade standoff between Washington and Beijing.

The uncertainty has pushed investors toward safe-haven assets, which resulted in benchmark 10-year US Treasury yields dropping to their lowest since October 2017, while the spread between the 10-year and 3-month bills narrowed to nearly a 12-year low.

The majority of the 11 S&P sectors were in the red, with only communication services on the plus side.

The benchmark S&P 500 index is now down nearly 5 per cent from its closing high set on 30 April, while the Dow Jones Industrial index declined for a fifth straight week on Friday, its longest weekly losing streak in eight years.

The tech sector, which is down 7.3 per cent this month, also gave up early gains and turned negative despite a boost from a 4.72 per cent jump in Total System Services.

Global Payments said it would buy the payment technology company for about $21.5 billion in stock. Its shares declined 3.04 per cent.

In addition, Advanced Micro Devices shares surged 9.80 per cent after the company unveiled new chips to battle for market share with Intel, which fell 2.24 per cent.

The Dow Jones Industrial Average fell 237.32 points, or 0.93 per cent, to 25,348.37, the S&P 500 lost 23.91 points, or 0.85 per cent, to 2,802.15 and the Nasdaq Composite dropped 29.66 points, or 0.39 per cent, to 7,607.35.

Among other stocks, Activision Blizzard Inc rose 2.86 per cent after Goldman Sachs upgraded its shares to “buy” and said the videogame publisher would benefit from its recent releases.

FedEx Corp slipped 0.93 per cent after Huawei Technologies Co Ltd said it is reviewing its relationship with the US package delivery company after FedEx diverted two parcels destined for Huawei addresses in Asia to the US.

is content editor for Morningstar Australia

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