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Global Market Report - 3 January

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

Australian shares are tipped to rebound after a dismal start to 2019, though the local dollar has dipped below 70 US cents for the first time in nearly three years.

The SPI200 futures contract was up 87 points, or 1.59 per cent, to 5574.0, at 8am Sydney time on Thursday, hinting the benchmark ASX/200 will surge after fears over weak China factory data underpinned a poor start to the new year.

Yesterday, the Australian share market closed where it was at the end in 2018. The benchmark S&P/ASX200 index fell 88.6 points, or 1.57 per cent, in late afternoon trading to finish at 5557.80 at 4.15pm on Wednesday.

Wall Street is struggling for direction in a rollercoaster first session for 2019 as investors reckon with economic jitters.

The Dow Jones Industrial Average rose 18.78 points, or 0.08 per cent, to 23,346.24, the S&P 500 gained 3.18 points, or 0.13 per cent, to 2510.03 and the Nasdaq Composite added 30.66 points, or 0.46 per cent, to 6665.94.Oil is trading slightly higher, even as concerns remain about weakening global economic growth, which analysts fear could hurt demand.

Copper prices hit 3½-month lows overnight as worries about growth in top consumer China were reinforced by manufacturing data, while iron ore is also lower.

Meanwhile, the Aussie dollar has fallen to its lowest levels against the greenback in nearly three years, currently buying 69.99 US cents, down from 70.20 US cents on Wednesday.

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It dropped to as low as 69.86 US cents overnight.

ASIA

China's factory activity contracted for the first time in 19 months in December, hit by the US-China trade war, with the weakness spilling over to other Asian economies.

The contraction in China data weighed on Hong Kong shares, which had their worst day since 1995. The Hang Seng Index fell 2.8 per cent, extending 2018's 14 per cent retreat.

The Shanghai Composite fell to a four-year low, while the Hang Seng China Enterprises Index fell below the key 10,000 level to close at its lowest level since February 2017.

Japan was closed for trading.

EUROPE

The gloom continued in Europe, where the Purchasing Managers' Index for the euro zone reached its lowest since February 2016. Future output PMIs were at a six-year low.

Markets finished mixed. The pan European STOXX 600 closed 0.2 per cent lower. In Germany, the DAX gained 0.20 per cent, while in London the FTSE 100 rose 0.09 per cent.

It was a different story in France, where the CAC 40 lost 0.87 per cent, amid data showing activity shrank for the first time since late 2016.

NORTH AMERICA

US stocks have started the new year with a more than 1 per cent decline, as weak data in Asia and Europe confirmed fears of a global economic slowdown while the US government shutdown drags on.

All 11 major S&P sectors are lower in early trading on Wednesday, with declines in the technology and healthcare indexes weighing the most on the market.
All 30 of the Dow Industrial components were in the red.

Eurozone manufacturing activity dropped for the fifth month and barely avoided contraction.
The grim readings come ahead of the closely watched US manufacturing survey on Thursday, payrolls data on Friday and the US earnings season later this month, which is expected to show corporate profit shrunk in the October-December quarter.

The Dow Jones Industrial Average rose 18.78 points, or 0.08 per cent, to 23,346.24, the S&P 500 gained 3.18 points, or 0.13 per cent, to 2510.03 and the Nasdaq Composite added 30.66 points, or 0.46 per cent, to 6665.94.

The tech index slipped 1.15 per cent, with Microsoft and Apple down nearly 2 per cent.
Amazon and Netflix fell over 1 per cent to drag the consumer discretionary sector down by 0.9 per cent.

Healthcare, 2018's best performing sector, dropped 1.61 per cent, while energy, last year's worst performing sector, fell 0.94 per cent as concerns about an economic slowdown also hit oil prices.

A low appetite for risk sparked demand for US Treasuries, sending yields on 10-year debt to a 12-month low of 2.647 per cent.

Meanwhile, the US congress is set to reconvene with no signs of a workable plan to end a 12-day-old partial shutdown and Donald Trump not budging on his demand for $US5 billion to fund a border wall.

A Democrat plan to approve a two-part spending package does not include these funds.

Tesla sank 8.6 per cent after the electric carmaker delivered fewer-than-expected Model 3 sedans in the fourth quarter and cut prices for all its vehicles in the US in response to the loss of a green tax credit.

is senior editor for Morningstar Australia

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