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Global Market Report - 30 January

Lex Hall  |  30 Jan 2020Text size  Decrease  Increase  |  
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Australia

The Australian stock market looks set to open flat as Wall Street lost steam overnight after the Fed held rates and said "uncertainties remain".

The SPI200 futures contract was down 10 points, or 0.14 per cent, at 6954 at 8.20am on Thursday.

The benchmark S&P/ASX200 index finished Wednesday up 37 points, or 0.53 per cent, while the All Ordinaries lifted 37.5 points, or 0.53 per cent, to 7135.9 as most sectors rose.

US equities were slightly higher on Wednesday amid a mix of solid company earnings and coronavirus news.

The Dow Jones Industrial Average rose 0.04 per cent to 28,735.09, the S&P 500 lost 0.08 per cent and the Nasdaq Composite added 0.06 per cent.

The Federal Reserve held interest rates steady at its first policy meeting of the year, with officials pointing to continued moderate US economic growth and a "strong" job market.

The Australian dollar was buying US67.58 cents, down from US67.70 cents at the market closed on Wednesday.

Asia

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Hong Kong’s stock market tumbled almost 3 per cent on Wednesday in the first trading session since the spread of a virus in China accelerated over the Lunar New Year holidays.

The Hang Seng index hit a seven-week low, with shares of China-exposed stocks, financials and the travel and tourism sectors leading declines as investors braced for the economic impact from the epidemic, which originated late last year in Wuhan in central China.

Transport has been all but shutdown in parts of the country, travellers have cancelled bookings and some shops, restaurants, cinemas and tourist sites have closed.

The Hang Seng ended down 791.99 points or 2.83 per cent at 27,289.55. The Hang Seng China Enterprises index fell 3.38 per cent to 10,650.43.

Macau casino operators Galaxy Entertainment and Melco International Development each fell more than 5 per cent. Airline Cathay Pacific dropped 3 per cent.

The biggest H-shares percentage decliners were Byd Co and Country Garden Holdings Co Ltd, both of which fell more than 6 per cent.

The drop in the Hang Seng index dragged MSCI’s Asia-Pacific share index down, extending four days of falls, though markets elsewhere in the region were largely firmer after several days of heavy selling.

China’s stock, currency and bond markets have all been closed since 23 January for the Lunar New Year celebrations and are scheduled to reopen on 3 February.

Japanese shares bounced back modestly on Wednesday, partially clawing back hefty losses from the previous two sessions, although gains were limited by worries over the fast-spreading coronavirus from China.

The Nikkei share average rose 0.71 per cent to 23,379.40, while the broader Topix added 0.45 per cent to 1699.95.

Europe

Banco Santander and Safran ensured European shares ended higher on Wednesday, even as investors weighed the potential impact of the fast-spreading coronavirus and an economist’s prediction on the world No. 2 economy further dampened sentiment.

Spain's IBEX led regional bourses, lifted by a 4.4 per cent rise in Santander after the lender posted a higher quarterly net profit, boosted by solid underlying performance in its main market Brazil and capital gains.

Along with a rally in Swedish banking group SEB, which topped fourth-quarter earnings, the euro zone banks index climbed 1 per cent.

Boeing supplier Safran was also a major boost to the pan-region index after the planemaker’s shares rose despite a surprise annual loss with analysts saying much of the bad news had been priced in.

After a recovery day on Tuesday, the pan-European STOXX 600 and most major country indexes traded not more than half a percent higher as sentiment still remained subdued on worries over the economic damage from the flu-like virus that originated in China.

The STOXX 600 shed nearly 3 per cent on Monday as outbreak fears gripped markets. The virus has claimed 133 lives so far and infected more than 5000 people in China, prompting a Chinese government economist to warn that the country’s economic growth may drop to 5 per cent or even lower.

German shares lagged regional peers, closing up 0.2 per cent after dipping into the red during the session. China is Germany's most important trading partner.

Germany’s economy minister raised the economic growth outlook for the country but cut expectations for 2021.

British shares closed flat as a slip in oil prices weighed on oil majors.

LVMH, Louis Vuitton owner, was one of the biggest drags on the STOXX 600 as slowing sales growth in the fourth quarter dented shares. Luxury stocks, which derive a chunk of their demand from China, had attempted a recovery on Tuesday.

Friday will mark the UK’s official departure from the European Union.

North America

The S&P 500 ended slightly lower on Wednesday, as an initial boost from the likes of Apple, Boeing and General Electric following their quarterly results faded in the wake of a policy announcement from the Federal Reserve.

Stocks initially showed little reaction to the Fed’s policy statement but steadily lost ground on the heels of a news conference by chairman Jerome Powell.

The Fed held rates steady as expected while offering no new guidance on its balance sheet, but Powell noted “uncertainties about the outlook remain” and noted the coronavirus outbreak in China.

Since the Fed’s last rate cut in October, its third reduction of 2019, policymakers have agreed to keep their target policy rate in the current range of 1.50 per cent and 1.75 per cent.

Apple Inc gained 2.09 per cent after the iPhone maker late on Tuesday reported earnings for the holiday shopping quarter that topped analysts’ expectations, even as it braced for more disruptions in virus-hit China.

Boeing Co rose 1.72 per cent after the planemaker forecast nearly $19 billion in costs related to the grounding of its 737 MAX jets, smaller than what many analysts had expected, and helping offset the company’s report of its first annual loss since 1997.

Several companies have warned of disruption to their operations due to the coronavirus outbreak, and a Chinese government economist was quoted as saying the country’s economic growth may drop to 5 per cent or even lower.

The Dow Jones Industrial Average rose 11.6 points, or 0.04 per cent, to 28,734.45, the S&P 500 lost 2.84 points, or 0.09 per cent, to 3273.4 and the Nasdaq Composite added 5.48 points, or 0.06 per cent, to 9275.16.

As earnings gather pace, analysts expect profit for S&P 500 companies to be flat in the fourth quarter, an improvement over the 0.6 per cent decline estimated at the start of the season, according to Refinitiv data.

General Electric jumped 10.32 per cent after the industrial conglomerate set a higher cash target for 2020.

Starbucks Corp dropped 2.12 per cent after warning of a financial hit as it closed thousands of restaurants and adjusted operating hours in China.

is content editor for Morningstar Australia

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