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Global Market Report - 23 August

Lex Hall  |  23 Aug 2019Text size  Decrease  Increase  |  
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Australia

The Australian market is set to edge lower as investors await signals from central bankers on whether monetary policy will ease.

The SPI futures index was down 5 points or 0.1 per cent to 6457 points at 7am Sydney time.
The Australian share market closed modestly up yesterday as investors digested a flurry of company results.

The benchmark S&P/ASX200 index closed Thursday up 18.5 points, or 0.29 per cent, to 6,501.8 points, while the broader All Ordinaries was up 20.4 points, or 0.31 per cent, to 6,593 points.

In the US, The benchmark S&P 500 ended little changed on Thursday as a fall in U.S. jobless claims offset data showing a contraction in U.S. manufacturing activity while investors awaited Federal Reserve Chair Jerome Powell’s speech on Friday for clues on the central bank’s monetary policy.The Dow Jones Industrial Average rose 51.21 points, or 0.2 per cent,

to 26,253.94, the S&P 500 lost 1.37 points, or 0.05 per cent, to 2,923.06 and the Nasdaq Composite dropped 28.82 points, or 0.36 per cent, to 7,991.39.

The Australian dollar is down 0.3 per cent and is buying 67.58 US cents.

Asia

Asian shares drifted off on Thursday as uncertainty over the outlook for both U.S. interest rates and the chance of global fiscal stimulus sucked the life out of markets.

Not helping was a fresh slide in the Chinese yuan to an 11-year low, which dealers said prompted defensive buying from state-owned banks.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5 per cent in light volumes.
Japan’s Nikkei ended a touch higher while Shanghai blue chips climbed 0.3 per cent. Hong Kong’s Hang Seng index was among the biggest losers, down more than 1 per cent as unrest in the Chinese-ruled territory disrupt business and investment.

Japan’s flash PMI showed factories and exports remained subdued in July, though service activity expanded at the fastest pace in almost two years.

Europe

European shares traded close to flat on Thursday as upbeat surveys on Germany and the euro zone offset signs that U.S. policymakers had not intended to start a cycle of interest rate cuts with last month’s move.

Germany's DAX shrugged off a weak open, to trade 0.1 per cent higher, after Markit's flash composite Purchasing Managers' Index (PMI), which tracks the manufacturing and services sectors, rose to 51.4 in August, above expectations of 50.5.

The leading indicator also showed French business activity expanded in August, pointing to resilience in the euro zone’s two biggest economies after Germany contracted in the second quarter.

A similar survey showed Euro zone business growth picked up a touch in August, helped by brisk services activity and as manufacturing contracted at a slower pace.

The data helped the pan-European STOXX 600 index to recover from solid initial losses to trade just 0.1 per cent lower by 0815 GMT, with Italian stocks outperforming with a 0.39 per cent rise.

Italy reversed earlier losses after Reuters reported President Sergio Mattarella wanted clear signs of a possible deal to form a new government by the end of the day.

Hopes of stimulus moves by governments and central banks have steadied major stock markets in the past week but most are still on course to end August lower after a two-week sell-off driven by concerns that major economies were heading for recession.

The Federal Reserve minutes on Wednesday showed policymakers were deeply divided over whether to cut rates in July, but united in wanting to signal they were not on a preset path to more cuts that would support economic growth.

The biggest gainer on the STOXX was NMC Health, up 26 per cent, after Reuters reported that two groups, including one backed by China’s Fosun, have made competing offers to buy a 40 per cent stake.

Shares of Ambu plunged 15.2 per cent, to the bottom of the STOXX 600, after the company issued its second profit warning in three months.

North America

The benchmark S&P 500 ended little changed on Thursday as a fall in U.S. jobless claims offset data showing a contraction in U.S. manufacturing activity while investors awaited Federal Reserve Chair Jerome Powell’s speech on Friday for clues on the central bank’s monetary policy.

Data from the U.S. Labor Department showed initial claims for state unemployment benefits dropped more than expected last week, suggesting the labor market was holding firm despite a manufacturing slowdown and concerns the economy is on a path toward recession.

However, IHS Markit’s Flash Purchasing Managers’ Index showed manufacturing activity contracting in August for the first time in nearly a decade. The reading prompted concern among some investors that economic weakness abroad and an escalating trade war with China could drag down the U.S. economy. Following the data release, the yield curve between two-year and 10-year Treasury notes briefly inverted.

For much of the session, the S&P 500 oscillated between gains and losses. Several market strategists said investors were pausing ahead of Fed Chair Powell’s speech on Friday at an annual gathering of central bankers in Jackson Hole, Wyoming, which is expected to yield some clues on whether the Fed will cut interest rates further.

The benchmark index dipped lower in intraday trade after Philadelphia Fed President Patrick Harker and Kansas City Fed President Esther George hinted at less dovish stances, saying the U.S. economy does not need more stimulus at this point.

The Dow Jones Industrial Average rose 49.51 points, or 0.19 per cent, to 26,252.24, the S&P 500 lost 1.48 points, or 0.05 per cent, to 2,922.95 and the Nasdaq Composite dropped 28.82 points, or 0.36 per cent, to 7,991.39.

Shares of Nordstrom Inc jumped 15.9 per cent, the biggest percentage gain on the S&P 500, after the department store’s quarterly profit beat estimates, joining Target Corp and Lowe’s Cos Inc in delivering upbeat retail numbers.

The Dow received a boost from Boeing Co shares, which rose 4.2 per cent as Reuters reported the planemaker is looking to increase production of its grounded 737 MAX jets as early as October, suggesting the aircraft’s return to service may be on track for the fourth quarter.

is content editor for Morningstar Australia

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