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Global Market Report - 30 October

Lex Hall  |  30 Oct 2018Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to slide at the open amid renewed volatility on Wall Street and lingering trade tensions.

The SPI200 futures contract was down 51 points, or 0.89 per cent, to 5653 at 8am Sydney time on Tuesday, pointing to a dive for the ASX at the open, after the local market defied gloomy predictions on Monday to ride materials and healthcare stocks to a higher close.

That bounce steered the bourse away from what was tracking to be its worst month since October 2008. It is still on track for worst its month in three years.

A volatile overnight session on Wall St saw US stocks fall, with the S&P 500 just shy of confirming its second correction of 2018, hurt by fresh worries US-China trade tensions will escalate, as well as a sharp drop in big tech and internet names.

The Dow Jones Industrial Average fell 245.39 points, or 0.99 per cent, to 24,442.92, the S&P 500 lost 17.44 points, or 0.66 per cent, to 2641.25 and the Nasdaq Composite dropped 116.92 points, or 1.63 per cent, to 7050.29.

The Australian dollar has lost ground overnight, and is buying 70.55 US cents from 70.99 US cents.

Meanwhile, oil prices are down after Russia signalled that output will remain high, while copper has steadied and iron ore is flat. Gold has slid off a more than three-month peak thanks to a strong US dollar.

Locally, AMP says its banking arm will reduce or remove 20 fees to simplify its product offering to customers, after saying last week it was losing clients at its flagship wealth management division.

Out today: Origin Energy is expected to detail its September quarter production, while the ABS is set to release building approvals data for September.

ANZ this week kicks off what is likely to be a "tough" reporting season for the big banks, with customer compensation and royal commission costs set to hit lenders where it hurts.

Asia

China's major stock indexes fell sharply as earnings reports on industrial and consumer firms rattled the market, raising concerns about the slowdown in economic growth and the impact of policy support so far.

The blue-chip CSI300 index closed 3 per cent lower at 3076.89 points, while the Shanghai Composite Index broke below 2600 points to end 2.2 per cent down at 2542.10, bucking a modestly firmer tone to stocks in Asia ex-Japan.

Both indexes are on track for their worst monthly performances since January 2016, with the Shanghai Composite down 9.9 per cent and the CSI300 down 10.5 per cent.

In Hong Kong, the main Hang Seng index gained 0.4 per cent and the index for Chinese companies listed in the city slipped 0.5 per cent.

Europe

The pound drifted lower on Monday as Britain’s Chancellor Philip Hammond laid out the prospect of an end to austerity so long as Britain agrees a Brexit deal with the EU.

German Chancellor Angela Merkel said she would not seek re-election as party chairwoman and that her fourth term as chancellor would be her last.

Hammond held out the prospect on Monday of an end to austerity provided the government secures a Brexit deal with the EU, putting pressure on rebels in the ruling Conservative Party to back Prime Minister Theresa May.

Delivering his annual budget speech to parliament, Hammond announced a fall in Britain's expected borrowing needs between now and the mid-2020s, as well as a series of measures to increase public spending and cut taxes for households.

The STOXX 600 benchmark index ended 0.9 per cent higher as investors cheered a solid update from bank heavyweight HSBC as well as Standard & Poor's decision to leave Italy's sovereign rating unchanged.

Despite the bounce, the STOXX 600 remained on track for its worst monthly performance since August 2015.

North America

US stocks have fallen in a volatile session, with the S&P 500 ending just shy of confirming its second correction of 2018, hurt by fresh worries of an escalation of US-China trade tensions and a sharp drop in big tech and Internet names.

Following a morning rally, major US indexes pulled back steeply after a Bloomberg report that the US is preparing to announce tariffs on all remaining Chinese imports by early December if talks next month between presidents Donald Trump and Xi Jinping falter.

After the S&P 500 dropped more than 10 per cent from its September 20 record closing high during the session, the benchmark index pared its losses late to close down 9.9 per cent from its peak. The Dow industrials also fell more than 10 per cent from its October 3 record close during the session, before ending down 8.9 per cent from the mark.

Major tech and growth stocks, such as Amazon.com, Google parent Alphabet and Netflix, posted sharp declines. The S&P 500 technology sector fell 1.8 per cent.

The industrials sector, which is seen as sensitive to trade issues, dropped 1.7 per cent, with Boeing Co tumbling 6.6 per cent.

Market volatility has spiked in recent weeks, stemming from higher interest rates and worries about the economy and trade tensions. Investors also may be increasingly nervous about uncertainty surrounding US congressional elections, now just a week away.

Internet stocks also may have been wounded by Britain's plan to tax the revenue from online platforms.

In corporate news, shares of software maker Red Hat surged 45.4 per cent after the company agreed to be bought by IBM for $34 billion. But IBM shares fell 4.1 per cent, weighing on the Dow and S&P.

Investors who are bullish about stocks point to strong corporate profits this year and economic strength. But there are also concerns about the extent of a slowdown in earnings growth next year, while weak housing data has raised some worries about the economy.

 

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Morningstar with AAP, Reuters

Lex Hall is content editor, Morningstar Australia

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

is content editor for Morningstar Australia

© 2020 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

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