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Global Market Report - 30 May

Lex Hall  |  30 May 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to open lower after ending yesterday deep in the red amid deepening fears trade tensions will sap global growth.

The SPI200 futures contract was down 30 points, or 0.48 per cent, at 6,399.0 at 8am Sydney time, suggesting a lower opening for the benchmark S&P/ASX200 on Thursday.

The Australian share market dipped yesterday amid pessimism about global growth prospects and concerns over US-China trade tensions.

The benchmark S&P/ASX200 index closed down 44.8 points, or 0.68 per cent, to 6,440 points on Wednesday, while the broader All Ordinaries was down 43.8 points, or 0.67 per cent, to 6,536.6.

On Wall Street overnight, the Dow Jones Industrial Average closed down 0.87 per cent, the S&P 500 was down 0.69 per cent and the tech-heavy Nasdaq Composite was up 0.79 per cent.

The Aussie dollar is buying 69.17 US cents from 69.25 US cents on Tuesday.

Asia

Chinese blue-chip shares ended lower on Wednesday amid investor concerns over a slowing economy and Beijing’s trade dispute with Washington while foreign investors sold shares, but bargain hunting lifted insurance firms and the benchmark Shanghai index.

The blue-chip CSI300 index ended down 0.23 per cent, with its financial sector sub-index closing flat, the real estate index down 1.55 per cent, while the healthcare sub-index closed 0.89 per cent weaker. However, the Shanghai Composite index rebounded from earlier losses to end 0.16 per cent firmer at 2,914.70.

In Hong Kong, the Hang Seng index was down 155.10 points, or 0.57 per cent, at 27,235.71. The Hang Seng China Enterprises index fell 0.25 per cent to 10,390.45.

Around the region, MSCI’s Asia ex-Japan stock index dropped 0.66 per cent, while Japan’s Nikkei index closed down 1.21 per cent.

Europe

European shares slid on Wednesday as Chinese newspapers warned it could squeeze its supply of rare earth elements to hit the US, sending jitters through the markets and prompting investors to flee for safer ground.

While China has so far not explicitly said it would restrict the sales, Chinese media strongly implied this will happen, in a move that would escalate tensions between the world’s two largest economies.

Italian equities shed 1.3 per cent on the day. The country’s banks have been under pressure this week, during which time yields on the Italian sovereign’s debt have broadly risen against the backdrop of a possible 3 billion euro fine on Italy by the European Commission for breaking EU rules.

Frankfurt’s trade-sensitive DAX fell 1.6 per cent to its lowest close in nearly two months. Data showed German unemployment rose unexpectedly in May for the first time in nearly two years, in a sign that a slowdown in the euro zone’s top economy is spilling over into the labor market.

French stocks shed 1.7 per cent, while their London-traded peers fell 1.2 per cent.

Technology stocks fell 2.2 per cent, underperforming most other STOXX 600 sub-indexes. The sector would be more exposed than most to any supply squeeze of rare earths from China, which is home to most reserves.

Oil and gas stocks dropped 1.7 per cent, with wind turbine maker Vestas Wind Systems sliding 4.2 per cent.

The retailers sub-index posted the steepest losses on the STOXX 600, with Casino Group falling 4 per cent after the indebted French supermarket canceled its interim dividend and suffered a new credit ratings downgrade.

Market researcher Kantar said Britain’s “Big Four” supermarkets all lost market share in the 12 weeks to May 19, sending Tesco shares 5.2 per cent lower, while those of Sainsbury’s dipped 0.2 per cent.

Basic resources stocks shed 2 per cent, with ArcelorMittal diving 4.2 per cent as the world’s top steel maker announced plans to cut its output in Europe.

Athens-traded stocks dipped 0.2 per cent but held near a more than one-year closing peak clocked on Tuesday.

North America

US stocks fell on Wednesday, with the S&P 500 and Nasdaq closing just above key support levels, as worries that a lengthy US-China trade war would crimp global growth pushed investors into the safety of government bonds.

Trade tensions between the two largest economies in the world showed little signs of relaxing as Chinese newspapers warned that Beijing could use rare earth elements to strike back after President Donald Trump remarked on Monday that he was “not yet ready” to make a deal with China over trade. Rare earths are a group of 17 chemical elements used in everything from high-tech consumer electronics to military equipment.

Adding to worries, China’s Huawei Technologies Co filed a lawsuit against the US government late on Tuesday in its latest bid to fight sanctions from Washington.

Each of the major US indexes suffered their fourth decline in five sessions. The S&P is down 5.5 per cent from its April 30 closing high. However, both the S&P 500 and Nasdaq managed to close just above their 200-day moving averages, seen as a key level of support.

The uncertainty in markets has pressured investors to dump equities and seek safety in US government debt, which has led to an inversion of the yield curve between 3-month bills and 10-year Treasury notes, a precursor to a possible recession. Benchmark US 10-year note yields touched a low of 2.21 per cent, the lowest since September 2017.

Federal funds futures indicated that traders saw a nearly 58 per cent chance the US central bank would lower policy rates by at least a quarter of a percentage point at its 17-18 September meeting, compared with a 50 per cent likelihood late on Tuesday.

Each of the 11 major S&P sectors were in negative territory, with utilities the worst performer. The Dow Jones Industrial Average fell 221.36 points, or 0.87 per cent, to 25,126.41, the S&P 500 lost 19.37 points, or 0.69 per cent, to 2,783.02 and the Nasdaq Composite dropped 60.04 points, or 0.79 per cent, to 7,547.31.

The Dow Jones Industrial Average closed at its lowest level since 11 February, while the S&P and Nasdaq ended the session at their lowest closing levels in nearly three months.

The benchmark S&P index briefly fell below its 200-day moving average, a key indicator of long-term momentum during the session.

Among other stocks, Johnson & Johnson dropped 4.19 per cent after a lawsuit that accused the drugmaker of fueling the US opioid epidemic entered its second day of trial, pulling healthcare stocks down 1.20 per cent.

Capri Holdings plunged 9.85 per cent as the worst- performing S&P 500 component after the Michael Kors fashion business owner issued a disappointing first-quarter profit forecast as it spends more on marketing.

General Mills dropped 5.56 per cent after Goldman Sachs downgraded the cereal maker’s stock to “sell.”

is content editor for Morningstar Australia

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