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Global Market Report - 16 August

Lex Hall  |  16 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after a mixed session on Wall Street where investors juggled mixed messages of a strong consumer and dropping US Treasury yields.

The SPI200 futures contract was down 23 points, or 0.36 per cent, at 6,351.0 at 8am Sydney time, suggesting a fall for the benchmark S&P/ASX200 on Friday.

The Australian share market has shed more than $63 billion in its worst day in 18 months amid a global market meltdown as investors worry a recession is near.

The benchmark S&P/ASX200 index on Thursday tumbled 187.8 points, or 2.85 per cent, to 6,408.1 points while the broader All Ordinaries shed 186.7 points, or 2.8 per cent, to 6,490.8 points.

On Wall Street overnight, the Dow Jones Industrial Average finished up 0.39 per cent, the S&P 500 was up 0.25 per cent and the tech-heavy Nasdaq Composite was down 0.09 per cent.

The Aussie dollar is buying 67.75 US cents from 67.83 US cents on Thursday.

Asia

China shares reversed course to end higher on Thursday, led by technology stocks, as Beijing pushed to seek technological independence amid a bruising Sino-US trade war.

The blue-chip CSI300 index rose 0.3 per cent to 3,694.00, while the Shanghai Composite Index and added 0.3 per cent to 2,815.80.

Hong Kong stocks staged a reversal on Thursday, bouncing back from a seven-month low, as mainland investors hunted for bargains through the Stock Connect.

The Hang Seng index rose 0.8 per cent to 25,495.46, while the China Enterprises Index gained 0.4 per cent to 9,903.41.

Japan’s Nikkei hit a nine-day low on Thursday as resurgent global recession fears triggered a Wall Street slide and sent the safe-haven yen higher, weighing heavily on the country’s export firms.

The Nikkei share average ended the day down 1.21 per cent at 20,405.65. During the day, it touched 20,184.85, its lowest since 6 August.

Europe

European shares hit six-month lows in a volatile session on Thursday, with London stocks losing more than 1 per cent, as China warned of retaliation against US tariffs, heightening fears of the continued impact of their trade war on global growth.

But the pan-European STOXX 600 index made up for some losses after US stock futures turned positive and strong retail sales numbers from the United States subsequently helped Wall Street open higher.

The STOXX 600 closed down 0.3 per cent, having fallen as much as 1 per cent earlier in the session to its lowest since 11 February.

China on Thursday vowed to counter the latest US tariffs on $300 billion of Chinese goods but called on Washington to meet it halfway on a potential trade deal, as President Donald Trump said any pact would have to be on the United States’ terms.

Trump said on Wednesday he would strike a trade deal with China only after China found a humane resolution to weeks of protests in Hong Kong.

Stocks have had a rollercoaster ride over the past two weeks, buffeted by new US tariff threats on China, their subsequent postponement, recession fears, political turmoil in Italy and the unrest in Hong Kong.

If falls were to continue at this pace, Europe’s main index could fall beyond May’s 5.7 per cent slump which was the most in more than three years.

Weighing on the benchmark index the most on Thursday was a drop automakers and commodity stocks, the sectors that tend to fall the most during trade uncertainties due to their reliance on exports and demand from China.

Lower oil prices pressured oil stocks which weighed on London's FTSE 100 along with several heavyweight stocks that traded without dividend entitlement. A rally in the pound on strong UK retail sales also added to the FTSE's woes.

In earnings news, strong numbers from beer maker Carlsberg and food retailer ICA pushed shares of both companies to the top of the pan-region index.

Markets in Italy, Austria and Greece were shut for a public holiday.

North America

The S&P 500 and the Dow gained ground in a late rally on Thursday as upbeat retail sales data offset recessionary fears amid the simmering US-China trade tensions.

Wall Street zig-zagged from red to black and back much of the day as investors juggled mixed messages of a strong consumer and dropping US Treasury yields.

The Nasdaq closed lower, weighed by a plunge in the shares of Cisco Systems Inc.

Walmart Inc beat second-quarter analyst estimates and raised its full-year earnings outlook, sending shares of the world’s largest retailer up 6.1 per cent and soothing concerns about waning consumer demand.

Those concerns were further eased when retail sales data surpassed analyst expectations. Consumers, who account for about 70 per cent of the US economy, stepped up their spending across the board in July, according to the Commerce Department.

Other economic data was less sanguine. Manufacturing output shrank more than expected in July, according to the US Federal Reserve, and new claims for unemployment benefits came in above economist forecasts.

Belligerent rhetoric kept US-China trade tensions at a low boil, as China vowed it would counter the last round of tariffs on Chinese imports and called on the United States to meet it halfway, while US President Donald Trump said in an interview any deal must be made “on our terms.”

The prolonged escalation of the trade war between the world’s two largest economies and the economic fallout have vexed global markets for months and have begun to drag on some companies’ top lines.

Impending US tariffs weighed on Cisco Systems, which plunged 8.6 per cent after reporting a 25 per cent drop in China sales and set sales and revenue forecasts well below analyst estimates.

Trade tensions also sent the US 30-year Treasury yield to a record low and the benchmark 10-year yield to a three-year trough.

The Dow Jones Industrial Average rose 99.97 points, or 0.39 per cent, to 25,579.39, the S&P 500 gained 7 points, or 0.25 per cent, to 2,847.6, and the Nasdaq Composite dropped 7.32 points, or 0.09 per cent, to 7,766.62.

Of the 11 major sectors of the S&P 500, six closed the day in positive territory, with consumer staples enjoying the largest percentage gain.

Shares of JC Penney Co Inc surged 2.2 per cent after the struggling department store operator posted a smaller quarterly loss than analysts estimated.

General Electric Co shares dropped 11.3 per cent on the heels of a report from whistleblower Harry Markopolos accusing the conglomerate of hiding $38.1 billion in potential losses and claiming its cash situation was far worse than disclosed.

is content editor for Morningstar Australia

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