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Global Market Report - 20 November

Lex Hall  |  20 Nov 2018Text size  Decrease  Increase  |  
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The Australian share market is set to follow Wall Street's overnight dive, with lingering China-US trade tensions adding to weaknesses in tech-based stocks.

The SPI200 futures contract is down 16 points, or 0.28 per cent, to 5675.0, at 8am Sydney time on Tuesday, pointing to dip for the ASX at the open, after APEC trade tensions helped weigh the bourse down to three-week lows on Monday.

The Aussie dollar has also receded, dropping from Monday's high of 73.25 cents, to 72.92 US cents.

US stocks tumbled overnight, with the S&P 500 and Dow Jones industrial Average shedding close to two per cent and the Nasdaq down more than three per cent at one stage as sliding Apple shares battered the tech sector.

In late trade the Dow Jones Industrial Average fell 391.7 points, or 1.54 per cent, to 25,021.52, the S&P 500 lost 41.9 points, or 1.53 per cent, to 2,694.37 and the Nasdaq Composite dropped 195.74 points, or 2.7 per cent, to 7052.14.

Metals and gold prices have risen overnight, while oil had a mixed session.

In local finance news on Tuesday, the A2 Milk Company and the Australian Agricultural Company will hold their annual general meetings, while the Reserve Bank is due to release the minutes of its most recent monetary policy meeting, and RBA governor Lowe is speaking.

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US housing starts for October, and building permits for October.


Nissan Motor chairman Carlos Ghosn was arrested on Monday for alleged financial misconduct and will be fired from the board this week, a dramatic fall for a leader hailed for rescuing the Japanese carmaker from close to bankruptcy.

Renault shares tumbled 11 per cent in Paris to be among the worst performing stocks in Europe. Nissan's German-listed securities dropped 10 per cent.

Renault owns 43.4 per cent of Nissan, while Nissan owns 15 per cent of Renault, with no voting rights in a partnership that began in 1999. Since 2016 Nissan has held a 34 per cent controlling stake in its smaller Japanese rival, Mitsubishi.

Monday's news is likely to raise questions about Nissan's accountability at a time when Japan has been pushing companies for better governance.

Shares in Hong Kong closed higher as mainland developers rose amid speculation of policy loosening, but ongoing concerns over US-China trade continue to cloud investor sentiment.

At the close, the Hang Seng index was 0.7 per cent higher at 26,372.00, while the China Enterprises Index gained 0.5 per cent to 10,631.66.

China’s main Shanghai Composite Index ended 0.9 per cent higher at 2703.51. The blue-chip CSI300 index rose 1.1 per cent to 3294.60.


The pan-European STOXX 600 opened up 0.6 per cent but ran out of steam to close down 0.7 percent, its fourth straight day of losses.

With the earnings season petering out, management issues, broker notes and M&A were the main drivers of the market.

Renault was the top faller on the STOXX 600 following news of the Ghosn arrest.

Tech stocks were the biggest sectoral fallers, down 2 to a 20-month closing low, with the sector hit by a slide in Apple shares on concerns about iPhone demand.

A report by the Wall Street Journal said Apple had cut production orders in recent weeks for all three iPhone models launched in September.

Apple suppliers ams, Infineon and BE Semiconductor fell between 0.2 and 3 per cent, while STMicro added 0.3 per cent.


The Nasdaq has slumped nearly 3 per cent and the Dow and S&P fell more than 1 per cent as investors pulled out of Apple and internet shares, while conflicting signals over the US-China trade dispute added to caution.

Shares of Apple fell 3.5 per cent after the Wall Street Journal reported the company had cut production orders in recent weeks for all three iPhone models launched in September.

The iPhone maker's stock is now down about 20 per cent from a record high in October following a disappointing holiday quarter sales forecast and weak outlooks from several suppliers. The S&P 500 technology index, down 3.5 per cent, led sector losses.

Other market leaders - including the 'FANG' stocks - also fell sharply, underscoring the view that their leadership was on shaky ground. Shares of Facebook were down 5.1 per cent, Amazon.com was down 4.3 per cent, Netflix was down 4.9 per cent and Alphabet fell 3.4 per cent.

Since the FANG outperformance run peaked on August 30, the group has underperformed the S&P 500 by 16.25 per cent. That is their worst underperformance since the first half of 2014 when they underperformed by around 20 per cent.

Over the weekend, Asia-Pacific leaders meeting in Papua New Guinea failed to agree on a communique for the first time, with US-China trade worries on the forefront.

US Vice President Mike Pence said in a blunt speech on Saturday the US will not back down from its trade dispute with China unless Beijing bows to US demands, dampening Friday's trade optimism that was fuelled by comments from President Donald Trump.

Comments by New York Fed President John Williams on Monday that the US central bank is pushing ahead with gradual rate-hike plans next month as it marches toward a more normal policy stance may have added pressure to stocks.

Some investors questioned whether the Fed will be able to continue raising interest rates, possibly harming growth.

Richard Clarida, the Fed's newly appointed vice chair, said on Friday that US rates are nearing Fed estimates of a neutral rate, which "makes sense."

Shares of Apple suppliers were also hit, including Lumentum Holdings Inc, Universal Display Corp, Cirrus Logic and Skyworks Solutions.

The Philadelphia SE Semiconductor index, which also includes some Apple suppliers, dropped 3.1 per cent, extending losses from the previous session.


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Morningstar with AAP, Reuters

Lex Hall is content editor, Morningstar Australia

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