Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


Global Market Report - 7 May

Lex Hall  |  07 May 2019Text size  Decrease  Increase  |  
Email to Friend


Australian shares are expected to open higher ahead of the central bank's decision on interest rates and despite Donald Trump’s renewed threat to raise tariffs on China.

The SPI200 futures contract was up 25 points, or 0.40 per cent, at 6,275.0 at 7am Sydney time, suggesting a positive start for the benchmark S&P/ASX200 on Tuesday.

Two tweets by Donald Trump yesterday tanked the local bourse - along with markets around the globe - as investors worried the US-China trade war might not be so close to resolution after all.

The benchmark S&P/ASX200 index closed down 52.1 points, or 0.72 per cent, to 6,283.7 points on Monday, while the broader All Ordinaries was down 57.3 points, or 0.89 per cent, to 6,369.9.

On Wall Street overnight, the Dow Jones Industrial Average was down 0.25 per cent, the S&P 500 was down 0.45 per cent and the tech-heavy Nasdaq Composite was down 0.50 per cent to a record high close.

Aninda Mitra, senior sovereign analyst at BNY Mellon Investment Management, says the macro impacts from a limited tariff war is small. “A 10 per cent US import tariff on $200bn of goods imports takes off 0.14 per cent from Chinese GDP, assuming perfect substitution effects from higher tariffs on US import demand. The impact of retaliatory 10 per cent Chinese tariffs is negligible for the US,” Mitra says.

“But a 25 per cent tariff rate across more than $500bn of US imports from China (and more than $100bn of US exports to China) would be much larger. The IMF estimates the bilateral imposition of 25 per cent tariffs could cost China around 1.3 per cent of its baseline GDP and as much as 0.3 per cent of US GDP.”

The Reserve Bank of Australia will announce at 2.30pm whether it has cut the cash rate from the record low of 1.5 per cent.

The Aussie dollar is buying 69.90 US cents from 69.91 US cents on Monday. 


Chinese investors, caught off guard by US President Donald Trump’s tariff threats, dumped stocks and sold the yuan currency on Monday as a fresh deterioration in Sino-US trade tensions roiled Asian financial markets.

The country’s major stock indexes fell the most in more than three years. The blue-chip CSI300 index and the Shanghai Composite Index both tumbled more than 5 per cent, posting their steepest single-day drop since February 2016. Market sentiment was lifted somewhat after China said its trade delegation is preparing to go to the US.

Hong Kong’s Hang Seng index ended down 2.9 per cent, recouping some lost ground in the late afternoon session.

Around the region, Japan's Nikkei 225 is lower by 0.22 per cent. 


European stocks slumped on Monday after the Trump threats.

The pan-European STOXX 600 index ended 0.9 per cent lower, in its worst day in about a month and a half.

Trump’s tweets knocked at a pillar of support - trade optimism - which had underpinned the rise of about 15.6 per cent the STOXX 600 had enjoyed in the year through Friday.

German shares fell 1 per cent in their worst one-day showing in 6½ weeks. The index had tumbled as much as 2.2 per cent during the session.

Stocks in Spain, Italy and France, fell from 0.8 per cent to 1.6 per cent. Equity markets in Britain remained shut for a bank holiday.

Stocks of carmakers and their suppliers, generally sensitive to US-China trade ructions, fell 2.1 per cent to lead broad-based declines among the STOXX 600’s sub-sectors.

Auto supplier Stabilus shed 5.7 per cent after cutting its full-year guidance due to the ongoing weakness in the global auto industry.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Stocks of chipmakers such as Siltronic, STMicro and AMS, which are also highly sensitive to trade war news, shed between 3 per cent and 5.3 per cent.

Paris-listed Total shed 2.4 per cent, amid broad weakness in oil prices seen earlier in the day. The French energy major said it had reached a binding deal with Occidental Petroleum Corp to buy a clutch of Africa-based assets belonging to Anadarko Petroleum Corp.

North America

US stocks pared much of their early losses as healthcare shares rose and some investors remained confident of an eventual trade agreement.

China said on Monday that a delegation is still preparing to go to the US but did not mention if Vice Premier Liu He, its lead official in the negotiations, will be part of the team as originally planned.

Trump's threat inflamed fears of a slowdown in global growth, which have periodically roiled markets over the past year. The benchmark S&P 500 fell as much as 1.6 per cent during the session while US Treasury yields dropped as investors turned to low-risk government bonds.

However, the major indexes recovered much of their losses in afternoon trading as some investors remained hopeful that a trade agreement would soon be reached.

A rise in healthcare shares helped offset the trade-driven losses. The sector got a further lift as Centene Corp shares rose 6.6 per cent after Reuters reported that two hedge funds have built stakes in the health insurer and are exploring a challenge to its planned acquisition of WellCare Health Plans.

On the other hand, materials, industrials and technology shares dropped as investors moved away from cyclical and trade-sensitive sectors.

Boeing Co, the single largest US exporter to China, fell 1.3 per cent. Chipmakers, which get a sizable portion of their revenue from China, also tumbled. The Philadelphia chip index slid 1.7 per cent. Apple shares, which have also been sensitive to signs of weakness in China, declined 1.5 per cent.

The Dow Jones Industrial Average fell 66.47 points, or 0.25 per cent, to 26,438.48, the S&P 500 lost 13.17 points, or 0.45 per cent, to 2,932.47 and the Nasdaq Composite dropped 40.71 points, or 0.5 per cent, to 8,123.29.

In a bright spot, Anadarko Petroleum Corp shares rose 3.8 per cent after Occidental Petroleum Corp increased the cash component of its $38 billion bid, removing a need for any deal to receive the approval of Occidental's shareholders.

Occidental is trying to convince Anadarko to accept its offer and abandon the agreed-upon $33 billion sale to Chevron. Shares of Chevron rose 1 per cent.


is senior editor for Morningstar Australia

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend