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Global Market Report - 26 November

Lex Hall  |  26 Nov 2018Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to start the trading week lower, reversing Friday's gains after a weak session on Wall Street.

The market is likely to stay flat in the week ahead after plunging oil prices caused US stocks to suffer their biggest Thanksgiving-week loss since 2011.

The futures market predicts that the benchmark S&P/ASX200 will fall 0.6 per cent, or 37 points, when Australian trade resumes today.

It follows broadbased selling on US markets with big losses across the tech and resources sector.

The Dow Jones Industrial Average fell 179 points, or 0.73 per cent, to 24,285.95 while the S&P 500 index lost 17.4 points,or 0.66 per cent, to end the shorter holiday session at 2632.56.

AMP Capital’s chief economic Shane Oliver said the losses on Wall Street would wipe last week's gains off local markets.

Energy and commodities stocks will remain volatile after West Texas Intermediate crude hit $50 a barrel, a 34 per cent price drop since October, Dr Oliver said.

"But we have seen a pattern of the market crawling back a lot of losses over the day which could turn out to be OK," he said.

Ahead, investors will watch the G20 summit on Friday amid crucial talks on trade tariffs between the US and China.

US tariffs are set to rise another 25 per cent on January 1. "The best that can be hoped is President Trump will agree to put tariff hikes on hold," Dr Oliver said.

On local markets, Reserve Bank governor Philip Lowe will be watched for clues about tightening credit conditions today, as he gives a speech at the Australian Payment Summit in Sydney.

On Friday the benchmark S&P/ASX200 index ended up 24.9 points, or 0.44 per cent, at 5716.2, while the broader All Ordinaries rose 0.40 per cent.

Out today: RBA Governor Philip Lowe speech

ASIA

The US is urging telcos in allied countries to avoid China's Huawei, the Wall Street Journal reported.

Tech stocks fell on the report. The Shanghai Composite Index tumbled 2.5 per cent, its biggest loss in five weeks.

The measure had climbed nearly 9 per cent from October 18, giving investors some respite from this year's plunge. But the gains of the past month have now evaporated. Foxconn and 360 Security Technology were among the biggest drags on the Shanghai measure. A gauge of telecommunication stocks tumbled 3.4 per cent.

Hong Kong stocks also fell on Friday as investors are worried about global economic growth, and cautious ahead of next week's talks between Donald Trump and Xi Jinping at the G20.

The Hang Seng index fell 0.4 per cent, to 25,927.68. The top gainer on the Hang Seng was CK Infrastructure Holdings, which gained 2.3 per cent, while the biggest loser was Country Garden Holdings, which fell 3.4 per cent.

EUROPE

European stock markets rose on Friday after a volatile week in which company earnings and growth worries hit stocks, although the euro sank after weaker-than-expected business surveys from Germany and the euro zone.

The pan-European STOXX 600 closed up 0.4 per cent, while Italy's FTSE MIB outperformed with a 0.6 per cent rise led by rebounding banks and technology stocks, while Italian equities rallied as bond yields fell.

FTSE 100 was the only major bourse in the red at the close of volatile trading as oil prices sank.

The European oil and gas index sank 2.9 per cent to April lows as the crude rout deepened in afternoon trade.

Airlines benefited from the continued sell-off with Lufthansa up 2.9 per cent and leading the DAX and easyJet up 4.1 per cent. Fuel makes up a significant portion of the sector's costs.

NORTH AMERICA

US stocks have closed lower in a shortened post-holiday trading session as the energy sector tumbled on continued weakness in oil prices, and the benchmark S&P 500 confirmed its second correction of 2018.

The three major US indexes all fell well over 3 per cent for the week, with the Dow industrials and the Nasdaq posting their biggest weekly percentage declines since March.

The S&P 500 ended about 10.2 per cent down from its September 20 closing record high, confirming it had entered a correction.

The S&P last entered a correction earlier this year after posting a then record high in late January, and falling more than 10 per cent by early February. That correction lasted roughly seven months, until the index posted a fresh record high in late August.

On Friday, the S&P 500 energy sector fell 3.3 per cent, dragged down by another plunge in oil prices, amid fears of a supply glut even as major producers consider cutting output. Oil prices have plunged some 30 per cent since the start of October.

Shares of oil majors Chevron and Exxon Mobil dropped 3.4 per cent and 2.7 per cent, respectively.

Aside from energy, declines in Apple and Amazon weighed on the S&P 500, underscoring the drop in technology and internet stocks that has marked this latest swoon in equities.

Trading volume was relatively light with the session ending at 1pm local time on Friday following the Thanksgiving Day holiday, so the day's action might carry less significance.

Volume on US exchanges was about 3.4 billion shares, well below the 8.2 billion average for the full session over the last 20 trading days.

US shoppers formed long lines at store checkout counters on Black Friday to snap up deep discounts on clothing and electronics, offering evidence of stronger consumer spending at the start of retailers' make-or-break holiday season.

The S&P 500 retailing index fell 0.6 per cent.

United Technologies rose 2.6 per cent after the company won Chinese regulatory approval to buy aircraft parts maker Rockwell Collins. Rockwell shares jumped 9.2 per cent.

 

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