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Global Market Report - 29 November

Lex Hall  |  29 Nov 2018Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to follow Wall Street higher at the open after caution from US Federal Reserve chair Jerome Powell over the pace of rate hikes.

In his remarks, Powell said that while "there was a great deal to like" about US prospects, "our gradual pace of raising interest rates has been an exercise in balancing risks".

Meanwhile, the Aussie has leapt overnight, buying US73.14 cents at 7am Sydney time, up 1.1 per cent from US72.33 cents yesterday.

The SPI200 futures contract has climbed 27 points, or 0.47 per cent, to 5752.0, pointing to jump for the ASX after mining stocks weighed on the bourse lower during the previous session.

In late trade on Wall Street, the S&P 500 was up 1.9 per cent, while the Dow and the Nasdaq each advanced more than 2 per cent, after Powell told the Economic Club of New York "our gradual pace of raising interest rates has been an exercise in balancing risks."

Out today: Private capital expenditure Q3; ANZ business confidence November.

The Reserve Bank faces a test of whether its upgraded growth forecasts are realistic when the Australian Bureau of Statistics issues capital expenditure numbers on Thursday.

ASIA

Asian markets rose for the third straight day amid caution ahead of the G20 meeting between Donald Trump and Xi Jinping.

Hong Kong shares closed higher on Wednesday, with tech giant Tencent Holdings driving gains after its shares jumped on plans to roll out mobile payment services in Japan.

Tencent's shares touched an eight-week high and closed 3.6 per cent higher; the company enjoys a 9.4 per cent weighting on the Hang Seng index.

At the close, the Hang Seng index was up 1.3 per cent at 26,682.56 points. The index is headed for a 6.8 per cent gain in November, beating every other stock benchmark and surging ahead of the MSCI All-Country World Index by the widest margin since April 2015.

The IT sector rose 3.4 per cent, the financial sector ended 0.9 per cent higher and the property sector closed up 1.5 per cent.

The MSCI Asia Pacific Index gained 0.6 per cent as of 4.30pm in Singapore, with China, Hong Kong and Taiwanese stock gauges up more than 1 per cent each. In Japan, the Nikkei 225 Stock Average climbed by a similar amount.

EUROPE

UK shares faltered on Wednesday as banks and housebuilder stocks fell amid warnings about the impact of a no-deal Brexit on the struggling British economy.

The blue-chip FTSE 100 closed down 0.2 per cent after opening gains ran out of steam, with Brexit worries keeping a lid on investors' risk appetite. The midcap index fell 0.1 per cent.

The British government's assessment of different Brexit options, reinforced by central bank governor Mark Carney's warning of a heavy hit to the British economy in the event of a disorderly exit from the EU, were enough to keep investors cautious.

Acknowledging that any Brexit option would be worse for the economy than staying in the European Union, the government said leaving the bloc without any agreement with Brussels would weigh heavily on growth at least into the 2030s.

Housebuilders and bank stocks were the biggest drags on the FTSE 100 as investors shed stocks seen as most vulnerable to an economic downturn.

NORTH AMERICA

Wall Street has extended its gains after Federal Reserve Chairman Jerome Powell said that the central bank's policy rate was "just below" neutral, hinting at a potential moderation in the pace of policy tightening.

The S&P 500 was up 1.9 per cent, while the Dow and the Nasdaq each advanced more than 2 per cent following Powell's speech to the Economic Club of New York.

Earlier in the day, in its first-ever financial stability report, the Fed cautioned that trade tensions, Brexit, and troubled emerging markets could rock a US financial system where asset prices are "elevated."

This comes on the heels of President Donald Trump's latest attack on the central bank, saying in an interview on Tuesday that the Fed "is way off-base with what they're doing".

The US Commerce Department affirmed that US GDP grew in the third quarter at a 3.5-per cent annual rate, but the goods trade deficit widened, consumer spending was revised lower and sales of new homes tumbled, suggesting clouds are gathering over what is now the second-longest economic expansion on record.

Of the 11 major sectors in the S&P 500, all but utilities were positive. Technology, consumer discretionary healthcare and industrials were the biggest percentage gainers, each up more than 2 per cent.

The S&P 500 Automobile & Components index was up 0.9 per cent after President Trump said he was studying new auto tariffs in the wake of General Motors Co's announcement that it would close plants and cut its workforce.

Meanwhile, GM stock has given up its gains since announcing its restructuring.
Health insurer Humana Inc cut its 2019 forecast for Medicare drug plan enrollment, but upped its estimated enrollment in the company's Medicare Advantage plan. Its stock was up 5.9 per cent.

Salesforce.com beat analysts' earnings estimates and forecast better-than-expected 2020 revenue, sending its shares up 8.4 per cent. Other cloud software makers rose on the news, with the ISE Cloud Index gaining 2.9 per cent.

Microsoft surpassed Apple in market cap, its shares rising 3.2 per cent, as the Windows software maker benefited from optimism about demand for cloud computing services.

Among losers, Tiffany & Co shares dropped 11.3 per cent after the luxury retailer missed quarterly sales estimates on slowing Chinese demand.

 

More from Morningstar

Morningstar fund downgrades for 2018

• Mixed outlook for Aussie equities, credit and property

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