Global Markets Report - 6 June

Australia

Australian shares are leaning lower this morning following a disappointing day on Wall Street. US stocks declined after economic data showed the services sector expanded more slowly than expected in May.

ASX futures were 39 points or 0.5% lower as of 6:00am on Tuesday, suggesting losses at the open.

US stocks closed lower Monday despite a positive start to the session. The S&P 500 lost 0.2%, the Dow Jones Industrial Average dropped 0.6% and the Nasdaq Composite ticked 0.1% lower.

With the debt ceiling resolved and earnings season out of the way, investors are shifting their focus toward the Federal Reserve's meeting next week. Economic activity in the services sector expanded more slowly than forecast in May, according to the Institute for Supply Management.

In commodity markets, Brent crude oil gained 0.6% to US$76.62 a barrel while gold added 0.7% to US$1,961.91.

Australian government bonds were higher, with the 2 Year yield rising to 3.75% and the 10 Year yield climbing to 3.78%. US Treasury notes were also higher, with the 2 Year yield increasing to 4.48% and the 10 Year yield rising to 3.70%.

The Australian dollar jumped to 66.21 US cents from its previous close of 65.97. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, declined to 97.71.

Asia

Chinese shares ended mixed amid diverging economic signals. China's official PMI (Purchasing Managers’ Index) for May released last week fell deeper into contraction while private gauges of both factory and service activities expanded more than expected. Media and consumption stocks led gains. Focus Media Information Technology added 1.1% and Yonghui Superstores advanced 0.6%. Among losers were insurers and property companies. China Life Insurance dropped 1.8%. China Vanke lost 1.1% and Seazen Holdings declined 2.1%, reversing Friday's gains on speculation that the government may introduce more supportive policies to boost property sales. The Shanghai Composite Index rose 0.1% to 3232.44. The Shenzhen Composite Index dropped 0.1% and the ChiNext Price Index closed 1.4% lower.

Hong Kong stocks ended Monday higher, following muted morning trade, to sustain a broad upturn in recent sessions. The benchmark Hang Seng Index climbed 0.8% to settle at 19108.50. Analysts have signaled optimism that this recovery trend could continue for the near term, as the market's valuations have likely hit a bottom. A wide range of sectors led gains. Chip maker SMIC jumped 6.3%, Trip.com advanced 4.4% and Hang Seng Bank added 2.7%.

The Nikkei Stock Average of Japan rose 2.2% to 32217.43, closing above the 32000 mark for the first time since July 1990, as strong US jobs data brightened the global economic outlook. Gains were led by auto, machinery and electronics stocks. Car maker Subaru added 4.1%, Yaskawa Electric advanced 6.5% and Komatsu climbed 5.1%.

India's benchmark Sensex index rose 0.4% to close at 62787.47, led by gains in auto and bank stocks. The overall reading of recent US economic data, particularly labor market data, suggest that worries about the US economy entering a recession may have been overblown, said Naeem Aslam, chief investment officer at Zaye Capital Markets. Mahindra & Mahindra climbed 4.0% and Tata Motors added 2.0%, while Axis Bank rose 2.7% and ICICI Bank was up 1.1%. Meanwhile, Tech Mahindra fell 1.2% and Asian Paints (India) lost 1.1%.

Europe

European stocks fell after the latest services purchasing managers' index (PMI) for Europe and the US missed expectations. The pan-European Stoxx Europe 600 and the German DAX each lost 0.5%, while the French CAC 40 shed 1.0%.

"A raft of weaker services surveys have weighed on sentiment in Europe," Oanda analyst Craig Erlam wrote. "The services PMIs today have broadly disappointed despite remaining in a healthy position." The S&P's final eurozone and US services PMIs for May were both unexpectedly revised lower, while ISM's May US services PMI fell by more than expected. Still, all the readings remained above the 50 level that signals an expansion in sector activity.

In London, the FTSE 100 index closed Monday down 0.1% at 7599, in line with European peers. Oil-exposed stocks Shell and BP dragged the index lower amid a lack of positive catalysts after a dull reaction to Saudi Arabia's output cut, IG Group analyst Chris Beauchamp explained.

"While OPEC might hope it can buck the market, the muted reaction shows that investors are still maintaining their bearish outlook for oil," Beauchamp said. Retailer Ocado was the UK’s top faller as its shares lost 4.1%, slipping to 2017 levels, followed by Endeavour Mining and Natwest, down 3.8% and 2.45%, respectively. Abrdn shares gained 3.2%, leading a short list of risers.

North America

US stocks closed lower Monday despite a positive start to the session. The S&P 500 lost 0.2%, the Dow Jones Industrial Average dropped 0.6% and the Nasdaq Composite ticked 0.1% lower.

With the debt ceiling resolved and earnings season out of the way, investors are shifting their focus toward the Federal Reserve's meeting next week. Economic activity in the services sector expanded more slowly than forecast in May, according to the Institute for Supply Management.

Oil prices rose following a contentious OPEC meeting, during which Saudi Arabia pledged to cut production to bolster the market.

Among individual stocks, Apple rose about 1% ahead of the tech giant's unveiling of its first major new product in nearly a decade.

Palo Alto Networks shares rose 5.5% after news it would replace Dish Network in the S&P 500. Dish Network shares fell.

Crypto prices slid after the Securities and Exchange Commission accused crypto exchange Binance of operating an illegal trading platform in the US.