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Global Market Report - 20 August

Glenn Freeman  |  20 Aug 2018Text size  Decrease  Increase  |  
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Australian shares look set to open higher on the back of a strong finish to the week on Wall Street, where investors were buoyed by reports of progress in tariff disputes between the US and trading partners China and Mexico.

In futures trading, the SPI 200 futures contract was up 28 points, or 0.44 per cent, to 6,327 points at 8:00am Sydney time, pointing to a higher open for the Australian stock market on Monday.

On Wall Street on Friday, the Dow Jones Industrial Average ended up 110 points, or 0.43 per cent at 25,669.32 points, the S&P500 rose 9.44 points or 0.33 per cent at 2,850.13 points, while the tech-heavy NASDAQ index added 9.8 points or 0.13 per cent at 7,816.33 points.

In local equities, supermarket giant Woolworths (ASX: WOW), health insurer NIB Holdings (ASX: NHF), and Fortescue Metals (ASX: FMG) will be among the major companies reporting results.

The Australian dollar is buying 73.16 US cents, from 72.71 US cents on Friday.


Japan’s Nikkei rose on Friday, on hopes that talks between China and the United States this week will ease trade tensions, but chip-related stocks fell after Applied Materials posted worse-than-expected earnings forecasts.

The Nikkei share average ended 0.4 percent up, to 22,270.38. The benchmark index edged down 0.1 percent, following two straight weeks of declines. Trade talks in Washington will be held on 21 August and 22 August, US-time, just before $16 billion in new US tariffs on Chinese goods take effect, along with an equal number of retaliatory tariffs from Beijing.

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Some analysts have predicted that if investors high hopes of progress towards ending the escalating trade war aren't realised, stock markets could take a considerable hit.

Cyclical stocks such as shippers, metal firms and financials outperformed. Mitsui OSK Lines surged 2.5 percent, Sumitomo Metal Mining advanced 1.9 percent and Mitsubishi UFJ Financial Group rose 1.9 percent.


European shares slipped on Friday after a tumultuous week, with further turbulence in emerging markets and weakness in tech stocks anticipated this week.

The pan-European STOXX 600 fell 0.1 percent, staying close to the six-week low it hit earlier last week.

The Turkish lira fell around 5 percent on Friday, having enjoyed a brief recovery, after a Turkish court rejected a US Christian pastor's appeal for release from prison. This deepened a diplomatic rift between the two countries and reignited investor fears of a widespread emerging market crisis.
Italian firm Atlantia was among Europe's key movers, up 5.7 per cent after sinking in the previous session in the aftermath of the collapse of a road bridge in Genoa. Atlantia is the parent company of the toll-road operator.

Dutch oil and chemical storage firm Vopak fell 6.4 per cent after reporting a bigger than expected drop in second-quarter profit, driving the firm to consider selling four European petroleum terminals.

Also in the Netherlands, speciality chemicals firm IMCD rose 4 per cent and hit an all-time high after reporting strong first-half profit growth.

The world’s biggest brick maker, Austria’s Wienerberger, rose another 5.2 per cent on the back of its reported earnings and confirmation of 2020 targets.

Europe's tech sector fell 0.4 per cent after U.S. firm Applied Materials, the world’s largest supplier of chip-making equipment, forecast current-quarter profit and revenue below Wall Street estimates.

European chipmakers Infineon, Siltronic, AMS and STMicro fell between 1.4 per cent and 3.9 per cent. 

North America

A steep downturn in heavyweight Chinese internet stocks and recent weakness in half of the so-called FANG group have some investors worried that a key component of Wall Street’s near-decade long rally may be low on fuel.

Wall Street will this week celebrate its longest bull market in history, as share price rises surpass the previous record set in the 1990s market rally.

This comes despite a financial meltdown in Turkey, which has spread across emerging markets, many of which entered bear market territory last week.

North American markets have so far shrugged off concerns about President Donald Trump’s trade wars and turmoil around the world, with the S&P 500 index close to all-time highs.

Low interest rates and quantitative easing have spurred these rises, which have delivered 321 per cent returns since the mid-point of the GFC.

Technology stocks have also had an outsized impact, including outstanding gains in Facebook, Amazon, Netflix and Alphabet, along with the broader tech sector. But the group is widely viewed as overbought and valuations remain expensive.

The S&P 500 technology index is up 16 percent in 2018, making tech Wall Street’s top performer – backed up by strong earnings growth and investor confidence in Silicon Valley’s innovation track-record.

But a recent slump in China’s own superstar technology stocks has increased worries about Wall Street dependence on a handful top-shelf growth companies.


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Glenn Freeman is senior editor, Morningstar Australia

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is senior editor for Morningstar Australia

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