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Global Market Report - 21 December

Lex Hall  |  21 Dec 2018Text size  Decrease  Increase  |  
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Australia

Australian shares are set to open flat as Wall Street extends its dreary December run in the wake of the latest Fed Reserve rate hike.

The SPI200 futures contract was down one point, or 0.02 per cent, to 5430.0, at 8am Sydney time on Friday, pointing to a flat open for the benchmark ASX/200 after the bourse slumped to a new two-year low the previous session.

The Aussie dollar has edged higher, buying 71.17 US cents from 70.91 US cents on Thursday.

Yesterday, the ASX fell to a two-year low with equities and risk assets taking a hit from the US Federal Reserve’s less dovish tone. The benchmark S&P/ASX200 index was down 74.8 points, or 1.34 per cent, at 5505.8 on Thursday, while the broader All Ordinaries lost 1.36 per cent per cent.

In late trade on Wall Street, tech stocks were deep in the red and the S&P 500 languished at 15-month lows, with investors jittery after the Fed quashed hopes of a toned-down approach to its interest-rate hike path.

The Dow Jones Industrial Average fell 464.06 points, or 1.99 per cent, to 22,859.6, the S&P 500 lost 39.54 points, or 1.58 per cent, to 2467.42 and the Nasdaq Composite dropped 108.42 points, or 1.63 per cent, to 6528.41.

Oil prices hit their lowest point in more than a year, weighed down by oversupply fears and the outlook for energy demand as equities tumbled.

Aluminium also fell overnight, but iron ore went the other way, while safe-have gold soared by more than $18 an ounce as investors flocked to the safe haven.

ASIA

Japan's Nikkei has skidded to a 15-month low after the US Federal Reserve largely retained its plans to increase interest rates next year despite rising risks to growth, triggering a sell-off in global stocks.

The Nikkei share average tumbled 2.8 per cent to 20,392.58, the weakest closing point since September 2017.

The broader Topix declined 2.5 per cent to 1517.16, the lowest closing level since April 2017.
Shares of telecoms operator SoftBank Corp remained volatile after tumbling 15 per cent on its debut the previous day.

The slide inflicted big losses on retail investors who bought into the household name in Japan's biggest ever IPO. SoftBank Corp shared ended a roller-coaster session down 4.7 per cent.

The Fed's rate hike also rattled indices in Hong Kong and China. The Hang Seng Index lost 0.9 per cent, or 241.86 points, to 25,623.53, with banking and financial stocks leading the declines.

HSBC fell 0.9 per cent, China Construction Bank lost 0.8 per cent and Ping An Insurance fell 2.2 per cent.

In China, the Shanghai Composite Index fell 0.5 per cent, or 13.3 points, to 2536.27. The blue-chip CSI 300 index lost 0.8 per cent, or 23.71 points, to 3067.42

EUROPE

European shares fell 1.2 per cent, with bourses in Germany, Britain and France all hitting their lowest since December 2016.

MSCI's global equity index fell to its lowest since May 2017, shedding 0.4 per cent as it headed for a fifth straight day of losses.

UK shares fell to their lowest in more than two years on Thursday. The FTSE 100 was down 0.8 per cent with the mid-cap index 0.9 per cent lower, after hitting multi-year lows in early trading.

Oil heavyweights Shell and BP were the biggest drags on the main index, as crude prices slipped back into negative territory.

The pan-European STOXX 600 index lost 1.4 per cent, as did Germany's DAX while France's CAC fell 1.8 per cent.

German 10-year government bond yields fell to their lowest in nearly seven months, and other high grade euro zone bond yields also fell.

NORTH AMERICA

US stocks have slid, with the Nasdaq on the cusp of confirming bear market territory, as the Federal Reserve's plan to continue its balance sheet reduction and the threat of a partial government shutdown fuelled investor anxieties.

At its session low on Thursday, the Nasdaq had tumbled 2.85 per cent, pushing the tech-heavy index more than 20 per cent below its August 29 closing high.

The index, along with the Dow and the benchmark S&P 500, pared losses as the session continued. The Nasdaq ended down 19.5 per cent from its closing high, just shy of confirming a bear market.

The Fed's move on Wednesday to largely adhere to its plan for more rate hikes during the next two years and keep its balance sheet reduction plan on "autopilot" spooked investors already worried about slowing economic growth.

Adding to the gloom was the possibility of a partial US government shutdown on Friday.
President Donald Trump told Republican congressional leaders he would not sign a government funding bill because it fails to include enough funding for border security.

Of the S&P's 11 major sectors, only utilities ended in positive territory. Energy stocks slid 2.8 per cent as oil prices dropped to their lowest levels in a year.

Technology and consumer discretionary stocks - among the top contributors to Wall Street's gains in the past few years - registered heavy declines.

Gloomy corporate results and forecasts also weighed on US stocks.

Shares of Walgreens Boots Alliance dropped 5 per cent on the drugstore chain's weak retail sales, while shares of Conagra Brands Inc slid 16.5 per cent after the packaged foods maker gave an underwhelming profit forecast for 2019.

Also declining as a result of disappointing corporate earnings forecasts were shares of Accenture and Carnival Corp, which fell 4.9 per cent and 9.5 per cent, respectively.

Nike dropped 2.1 per cent before the athletic footwear company's quarterly results.

is content editor for Morningstar Australia

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