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Global Market Report - 24 October

Lex Hall  |  24 Oct 2018Text size  Decrease  Increase  |  
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Australia

Australian shares are poised for a mildly positive open after Wall Street climbed back from sharp overnight losses.

At 8am Sydney time, the SPI200 futures contract was up 10 points, signalling small gains at the open. It comes after the ASX closed lower again yesterday, with energy and materials stocks dragging it back toward last week’s six-month low.

The Australian dollar climbed slightly overnight and is buying 70.89 US cents, up from 70.65 US cents yesterday.

US stocks cut their losses in late Wall Street trading, with the tech-heavy Nasdaq briefly turning higher as investors bought back beaten-down shares, though worries about company earnings outlooks kept a lid on the market.

Asia

Major indexes in Shanghai, Japan and Hong Kong tumbled yesterday after Chinese officials moved to ramp up financing for private firms, the latest step they have taken to try to stabilise the country’s financial markets and reverse slowing growth.

The MSCI Asia Pacific Index dropped 2.1 per cent, while Japan’s Topix index closed 2.6 per cent lower and China’s Shanghai Composite Index – which led the gains on Monday – closed down 2.3 per cent.

Against against this backdrop, Turkey's leader Recep Tayyip Erdogan blamed Saudi Arabia for the death of journalist Jamal Khashoggi, saying it was a planned operation. This occurred as Saudi Arabia Investment Initiative conference begins in Riyadh.

Europe

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European stocks picked up where Asia left off, with Frankfurt closing over two per cent down.

Adding to Frankfurt’s plunge was a share price drop in chemicals and pharmaceuticals giant Bayer after a San Francisco judge upheld a jury verdict that found Bayer-owned Monsanto liable for not warning a groundskeeper that its weedkiller product Roundup might cause cancer.

London closed down 1.2 per cent, and Paris was down 1.7 per cent.

The European Commission is set to take the unprecedented step of formally demanding that member state Italy revise and resubmit its budget.

North America

Wall Street has sunk more than 1 per cent as disappointing forecasts from industrial bellwethers Caterpillar and 3M piled on to concerns over Saudi Arabia's diplomatic isolation, Italy's finances and trade war fears.

All the three major Wall Street indexes were trading below their 200-day moving averages, a key technical indicator of long-term momentum and all 11 major S&P sectors were in the red on Tuesday, continuing what has been a punishing month for US stocks.

Caterpillar tumbled 8.3 per cent after the heavy-duty equipment maker maintained its 2018 earnings forecast, while 3M Co slid 6.4 per cent after the company cut its full-year profit forecast over currency headwinds.

The forecasts from the two Dow Industrials triggered alarm bells over the impact of rising borrowing costs, wages and tariffs on corporate profits. Industrial stocks slid 1.90 per cent.

Technology stocks also buckled and slid 2.14 per cent, in tandem with global peers, over concerns of slowing growth in China and a tepid forecast from Apple supplier AMS. Chipmaker NVIDIA fell 4.4 per cent.

Growth is expected to slow further in the fourth quarter, as the effects of US tax cuts fade and the impact of tariffs and rising costs rise.

Amazon, Alphabet, Microsoft and Intel, all due to report this week, were down between 1.7 per cent and 2.6 per cent. Apple fell 1.6 per cent.

 

is senior editor for Morningstar Australia

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