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Global Market Report - 11 July

Glenn Freeman  |  11 Jul 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open flat despite Wall Street gaining overnight amid optimism that the Fed will cut rates later this month.

The SPI200 futures contract was up 5 points, or 0.08 per cent, at 6,635.0 at 7am Sydney time, suggesting a steady start for the benchmark S&P/ASX200 on Thursday.

The Australian share market closed higher yesterday as every sector except for the miners rallied ahead of highly anticipated testimony by the US Federal Reserve chairman Jerome Powell.

The benchmark S&P/ASX200 index finished up 24.1 points, or 0.36 per cent, to 6,689.8 points on Wednesday, while the broader All Ordinaries was up 27.6 points, or 0.41 per cent, to 6,777.7.

In the US, Federal Reserve chairman Jerome Powell said trade uncertainties and concerns about the global economy continue to weigh on the US economic outlook and the US central bank stands ready to “act as appropriate” to sustain a decade-long expansion.

On Wall Street, the Dow Jones Industrial Average finished up 0.29 per cent, the S&P 500 was up 0.45 per cent and the tech-heavy Nasdaq Composite was up 0.75 per cent.

The Aussie dollar is buying 69.28 US cents from 69.16 US cents on Wednesday.

Asia

Chinese shares fell on Wednesday as flat producer price inflation fuelled concerns about domestic growth, and nine initial public offerings targeting Shanghai’s new tech board diverted funds from the rest of the market. 

At the close, the Shanghai Composite index was down 0.44 per cent at 2,915.30. The blue-chip CSI300 index was down 0.17 per cent, with its financial sector sub-index lower by 0.28 per cent, the consumer staples sector up 0.35 per cent, the real estate index down 0.7 per cent and the healthcare sub-index up 0.53 per cent.

The Hong Kong stock market ended higher on Wednesday in thin trade, as Beijing and Washington restarted trade talks, while investors were cautious ahead of US Federal Reserve Chairman Jerome Powell’s congressional testimony later in the day.

At the close of trade, the Hang Seng index was up 0.3 per cent at 28,204.69. The Hang Seng China Enterprises index rose 0.5 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.31 per cent, while Japan’s Nikkei index closed down 0.15 per cent.

Europe

European shares closed lower for a fourth straight session on Wednesday as concerns about trade tensions and a weak global economy highlighted by Powell overshadowed short-lived optimism of an interest rate cut later in the month.

Markets jumped on the comments as sufficiently dovish pushing the S&P 500 above the 3,000 mark for the first time and sending most European indices into positive territory.

The optimism was however, short-lived with all major indices slipping back into negative territory and the pan-European index STOXX 600 closing 0.2 per cent lower.

Powell’s statements on the global economy come a day after German chemical giant BASF warned that the protracted trade war between the United States and China was likely to eat into corporate earnings, in particular for the agricultural and auto sectors.

Bond proxies such as real estate and telecom were the biggest losers but banks and Milan's bank-heavy FTMIB index outperformed as robust industrial data out of France and Italy earlier in the day helped push eurozone bond yields higher.

A surge in crude prices and gains for metals helped energy and mining majors helped the oil and gas and basic resources sectors gain nearly 0.6 per cent each.

Chip stocks led by AMS also fared better after TSMC reported its best monthly sales in June since December.

Planemaker Airbus rose 1.5 per cent after confirming deliveries rose by 28 per cent in the first-half of the year, putting it ahead of Boeing for the first time in eight years.

Among individual losers, British recruiter Hays was down 6.6 per cent as peer Pagegroup tumbled 15 per cent after issuing a profit warning, while fashion retailer Superdry slid on posting disappointing full-year results.

North America

US stocks have closed higher and the S&P 500 index briefly crossed the 3000-point mark for the first time as remarks by Jerome Powell reassured investors about the potential for an interest rate cut later this month.

The Dow also hit an intraday record while the Nasdaq closed at an all-time high following the release of prepared remarks for Powell's testimony before the US House of Representatives Financial Services Committee.

Powell said the central bank stands ready to "act as appropriate" to support record US economic growth.

The S&P 500 breached the 3000-mark just after the opening on Wednesday, but ended slightly below that level at 2993.07 points. Some investors said the breach may boost confidence in a market that has been breaking to record highs this year.

Other market watchers, however, were less certain.

Amazon, Microsoft and Apple were among the biggest boosts to the indexes.

The Dow Jones Industrial Average rose 76.71 points, or 0.29 per cent, to 26,860.2, the S&P 500 gained 13.44 points, or 0.45 per cent, to 2993.07 and the Nasdaq Composite added 60.80 points, or 0.75 per cent, to 8202.53.

In his testimony, the first instalment of two days on Capitol Hill this week, Powell pointed to "broad" global weakness that was clouding the US economic outlook amid uncertainty about the fallout from the Trump administration's trade dispute with China and other key economies.

Stocks briefly added to gains following minutes from the last meeting of Fed policymakers that showed many US central bank officials thought more stimulus would be needed soon if risks to the economy did not let up.

The S&P 500 index of financial shares including banks, which tend to benefit in a higher interest rate environment, retreated 0.5 per cent after Powell's comments.

Investors say much of this year's gain for stocks has stemmed from a change in outlook for the Fed to be more dovish on interest rate policy.

is senior editor for Morningstar Australia

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