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Global Market Report - 21 January

Lex Hall  |  21 Jan 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is tipped for an early lift on renewed optimism over US-China trade relations, but analysts fear the latest Chinese economic data will confirm a significant slowdown for Australia's major trade partner.

The SPI200 futures contract was up 43 points, or 0.74 per cent, at 5864.0 at 8am Sydney time on Monday, indicating the benchmark ASX/200 will follow Wall Street higher at the open, with commodity prices also buoyant.

On Friday, easing US-China trade tensions helped Australia's big miners, energy companies, and tech stocks soar as the local bourse closed the week at a two-month high. The benchmark S&P/ASX200 index was up 29.5 points, or 0.5 per cent, to 5879.6 at 4.15pm Sydney time on Friday, while the broader All Ordinaries was 31.4 points, or 0.53 per cent, higher at 5941.2.

The major US indexes advanced for a fourth consecutive week on Friday, as increased hopes that the US and China would resolve their trade dispute lifted shares across sectors.

The Dow Jones Industrial Average rose 336.25 points, or 1.38 per cent, to 24,706.35, the S&P 500 gained 34.75 points, or 1.32 per cent, to 2670.71 and the Nasdaq Composite added 72.77 points, or 1.03 per cent, to 7157.23.

China's top trade negotiator, Vice Premier Liu He, will head to Washington on 30 January for two days of trade talks with his US counterpart Robert Lighthizer.

Meanwhile, China is expected to report on Monday that economic growth cooled to its slowest in 28 years in 2018 amid weakening domestic demand and bruising US tariffs, adding pressure on Beijing to roll out more support measures to avert a sharper slowdown.

The Aussie dollar is lower, buying 71.66 US cents from 71.92 US cents on Friday. The ABS is set to release lending finance data for November at 11.30am Sydney time.

ASIA

Asian markets closed sharply higher on Friday with shares in China leading the region. The Shanghai Composite is up 1.42 per cent while Japan's Nikkei 225 is up 1.29 per cent and Hong Kong's Hang Seng is up 1.25 per cent.

Among the gainers was Chinese gaming giant Tencent. It posted a 1.75 per cent gain after launching a trial testing of the new mobile title Game of Thrones: Winter is Coming, which it licensed from Warner Bros.

Smartphone and home appliance maker Xiaomi rose 4.3 per cent after launching its first share buy-back action since debuting in July.

EUROPE

The US-China trade optimism helped lift European shares to their highest level in six weeks.

The pan-European STOXX 600 rose 1.8 per cent and Germany's trade-sensitive DAX climbed 2.6 per cent, with industrials, tech and car stocks the biggest drivers of gains across the region.

London's FTSE 100 is up 1.95 per cent and France's CAC 40 gained 1.70 per cent.

NORTH AMERICA

World stock indexes have jumped, with Wall Street posting a fourth straight week of gains, and the US dollar reaching its first positive week since mid-December as optimism increased that an end is in sight to the US-China trade conflict.

Stocks were boosted by a Bloomberg report that said China sought to raise its annual goods imports from the US by more than $US1 trillion in order to reduce its trade surplus to zero by 2024.

That followed a report on Thursday that US Treasury Secretary Steven Mnuchin was considering lifting some or all tariffs imposed on Chinese imports. The Treasury denied Mnuchin had made any such recommendation.

While the equity rally lifted all major sectors, trade-sensitive industrials posted among the biggest S&P 500 sector gains, up 1.9 per cent on the day.

The Philadelphia SE semiconductor index rose more than 2 per cent and Germany's exporter-heavy DAX was up 2.6 per cent.

Adding to strength in equities and supporting US Treasury yields was data that showed US manufacturing output increased the most in 10 months in December.

Some strategists said relatively light equity trading volume this week indicated that some investors were still waiting on the sidelines.

The Dow Jones Industrial Average rose 336.25 points, or 1.38 per cent, to 24,706.35, the S&P 500 gained 34.75 points, or 1.32 per cent, to 2670.71 and the Nasdaq Composite added 72.77 points, or 1.03 per cent, to 7157.23.

The S&P 500 registered its biggest four-week percentage gain since October 2011.
The index is now 8.9 per cent below its September 20 record close after dropping 19.8 per

cent below that level - near the 20-per cent threshold commonly considered to confirm a bear market - on Christmas Eve.

The pan-European STOXX 600 index rose 1.80 per cent and MSCI's gauge of stocks across the globe gained 1.23 per cent.

Chinese Vice Premier Liu He will visit the US on 30-31 January for another round of talks aimed at resolving the trade dispute between the world's two largest economies.

Recent indicators show signs that the Chinese economy is losing momentum.

The trade optimism boosted the dollar against other major currencies.

The dollar index rose 0.31 per cent, with the euro was down 0.26 per cent to $1.1365.

US Treasury yields rose to three-week highs as investors piled back into Wall Street.

Oil prices jumped about 3 per cent, rising after OPEC detailed specifics on its production-cut activity to ease global oversupply.

Brent crude gained $1.52 to settle at $62.70 a barrel, or 2.48 per cent higher. US WTI crude futures added $1.73 to settle at $53.80 a barrel, or 3.32 per cent up.

is content editor for Morningstar Australia

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