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Global Market Report - 3 December

Lex Hall  |  03 Dec 2019Text size  Decrease  Increase  |  
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Australia

Australian shares are set to tumble at the open amid negative leads overseas and the US’s move to restore tariffs on US metal imports from Brazil and Argentina.

The SPI200 futures contract was down 86 points, or 1.25 per cent, at 6,781 at 7am Sydney time, suggesting a fall for the benchmark S&P/ASX200 on Tuesday.

The Australian share market set a fresh all-time closing peak on Monday but narrowly missed eclipsing its all-time intraday high set on Friday.

The benchmark S&P/ASX200 index slumped in the final minutes of trading to finish Monday up 16.3 points, or 0.24 per cent, to 6,862.3 points, while the broader All Ordinaries was up 17.3 points, or 0.25 per cent, to 6,965.3 points.

Wall Street closed lower on Monday, with the Dow Jones Industrial Average down 0.94 per cent, the S&P 500 down 0.85 per cent and the tech-heavy Nasdaq Composite down 1.12 per cent.

Sentiment worldwide took a hit after US President Donald Trump said on Monday he would immediately restore tariffs on US steel and aluminum imports from Brazil and Argentina, accusing them of devaluing their currencies to the detriment of US farmers.

“Brazil and Argentina have been presiding over a massive devaluation of their currencies,” which is hurting American farmers, Trump said on Twitter.

Brazil’s President Jair Bolsonaro, who considers himself an ideological ally of Trump, sought to play down the issue Monday after appearing to have been taken by surprise.

The Aussie dollar has leapt 0.80 per cent and is buying 68.20 US cents.

Asia

China stocks ended higher on Monday after upbeat factory activity reports, but gains were limited by anxiety over the prospects of a proposed Sino-US trade deal.

The blue-chip CSI300 index rose 0.2 per cent, to 3,836.06, while the Shanghai Composite Index added 0.1 per cent to 2,875.81.

China’s factory activity expanded at the quickest pace in almost three years in November, with solid increases in output and new orders, a private business survey showed on Monday.

Stocks in Hong Kong ended higher, boosted by the upbeat factory data on the mainland, while cloudy outlook over the interim trade deal and pro-democracy protests in the Asian financial hub kept gains in check.

The Hang Seng index ended 0.4 per cent firmer at 26,444.72, while the China Enterprises Index gained 0.6 per cent to 10,363.91.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.23 per cent, while Japan’s Nikkei index closed up 1.01 per cent.

Europe

European shares posted their biggest daily drop in two months on Monday, with most major markets including Germany and France slumping more than 2 per cent, as a reimposition of US metal tariffs on Brazil and Argentina triggered a decline in global sentiment.

After an upbeat November, its third straight month of gains, the pan-European STOXX 600 index closed down 1.6 per cent, erasing session gains after positive factory activity data from China and major euro zone economies had earlier taken it to near four-year peaks.

Sentiment worldwide took a hit after US President Donald Trump said on Monday he would immediately restore tariffs on US steel and aluminum imports from Brazil and Argentina, accusing them of devaluing their currencies to the detriment of US farmers.

The STOXX 600 index has gained over the past few months and approached record highs on expectations that Beijing and Washington will hammer out a “phase one” trade deal this year.

Losses were broad-based with a 2.7 per cent fall in utility stocks leading declines, with Latin America-exposed Italian utility Enel sliding 3.7 per cent.

Steel and aluminum producers such as Norsk Hydro and ArcelorMittal weighed on the materials sector, but it lost the least among major sectors as mining giants BHP and Rio Tinto gained on higher iron ore and copper prices.

Rising oil prices limited slippage in the energy sector .SXEP to 0.8 per cent, while other sectors gave up more than 1 per cent.

At the bottom of STOXX 600 was British online grocer and technology company Ocado, which dropped 7.4 per cent after launching a 500 million pound ($642 million) bond issue, in part to fund construction of robotic warehouses.

North America

Wall Street stepped back from last week’s record highs on Monday, with weak US manufacturing data and fresh trade worries keeping buyers on the sidelines.

All three major US stock averages began the last month of the year in the red as investors returned from the long holiday weekend.

A report from the Institute for Supply Management (ISM) showed US manufacturing activity contracted in November for the fourth consecutive month, stoking concerns that the longest period of economic expansion in US history could be losing steam.

And Cyber Monday sales were expected to hit a record following $11.6 billion in online sales on Thanksgiving and Black Friday.

Earlier, Trump tweeted that he would restore tariffs on steel imported from Brazil and Argentina, boosting shares of US steel makers US Steel Corp and AK Steel Holding Corp by 4.2% and 4.7%, respectively.

Still, it was the latest sign that the multi-front trade between the United States and its global trading partners will continue to dominate markets and hinder global economic growth.

The news comes on the heels of recent Wall Street highs, driven to records last week on hopes of an imminent “phase one” trade agreement between the US and China.

A senior adviser to Trump said on Monday it was still possible that a deal with China could be reached by the end of the year.

The Dow Jones Industrial Average fell 267.35 points, or 0.95%, to 27,784.06, the S&P 500 lost 27 points, or 0.86%, to 3,113.98 and the Nasdaq Composite dropped 97.48 points, or 1.12%, to 8,567.99.

Of the 11 major sectors in the S&P 500, only consumer staples and energy ended the session in positive territory.

Real estate, technology and trade-sensitive industrials were the largest percentage losers.

Monday’s slide in US stocks prompted at least one large investor to pay $31 million to buy stock options that would guard against a sharper hit to stocks into the start of next year.

Among stocks, Roku Inc dropped 15.2% following Morgan Stanley’s downgrade to “underweight”.

is content editor for Morningstar Australia

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