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Global Market Report - 7 December

Lex Hall  |  07 Dec 2018Text size  Decrease  Increase  |  
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Australian shares are poised to slide as trade uncertainty and global growth concerns weigh on Wall Street, which resumed trade overnight after a one-day break.

At 7am Sydney time on Friday, the SPI200 futures contract was down 15 points, or 0.27 per cent, to 5642.0. The Aussie edged lower again overnight, buying US72.22 cents, down from US72.27 cents yesterday.

The ASX closed lower on Thursday. The benchmark S&P/ASX200 index dropped 10.8 points, or 0.19 per cent, to 5657.6, while the broader All Ordinaries fell 0.22 per cent.

US stocks are sharply down on mounting worries of slowing global growth after a fresh twist in China-US tensions, as well as lower oil prices and US bond yields.

Globally, stock markets have slumped for a third day running as the arrest of a top executive of Chinese tech giant Huawei in Canada for extradition to the US fed fears of fresh tensions between the two economic superpowers.

The arrest of Huawei's chief financial officer Meng Wanzhou, who is also the daughter of the company’s founder, reignited tensions just as Washington and Beijing prepare for crucial trade talks.

Meng's arrest is part of an ongoing investigation by US prosecutors into whether Huawei violated banking laws as it sought to evade sanctions against Iran by routing a series of transactions through HSBC Holdings, according to Bloomberg.

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A Chinese government statement said Meng broke no US or Canadian laws and demanded Canada "immediately correct the mistake" and release her.

Elsewhere, oil fell about 3 per cent in choppy overnight trade after OPEC and allied exporting countries ended a meeting without announcing a decision to cut crude output, and prepared to debate the matter the next day.


Asian markets took a beating in the wake of the arrest of Meng. Huawei is not listed but China's second-largest telecom equipment maker ZTE Corp sank 9 per cent in Hong Kong while most of the nearby national bourses lost at least 2 per cent.

MSCI's ex-Japan Asia-Pacific index lost 2.0 per cent too, Hong Kong's Hang Seng dropped 2.5 per cent while Chinese bluechips lost 2.1 per cent to take their 2018 slump to 20 per cent.

Japan's Nikkei shed 1.9 per cent, closing at its lowest level since October 30, with semi-conductor related shares leading the losses. Huawei is one of the world's largest makers of smartphones and telecommunications network equipment.

Mog, the fashion-and-cosmetics online retailer backed by Chinese monolith Tencent, fell as much as 14 per cent in its US trading debut after earlier scaling back ambitions for its US listing.


Europe slumped too in early trading on Thursday as 3 per cent falls for the tech sector, miners and also carmakers kicked London, Frankfurt and Paris to two-year lows.

The Stoxx Europe 600 has lost as much as $US1.4 trillion in market value since the end of September as fears of rising US interest rates and slowing economic growth fuelled the sell-off.

The FTSE fell 3.2 per cent to 6674.01 points, its worst performance since the Brexit vote in June 2016. The midcap FTSE 250 fell 2.8 per cent with domestically focused stocks slightly less affected than the wider European market before the Brexit vote next week.

The DAX in Germany fell 3.9 per cent, while France's CAC 40 lost 3.7 per cent.


US stocks have closed slightly lower, but well above their session lows, as the arrest of a Chinese technology executive fanned fears of US-China tensions over trade, while some beaten-up big technology and internet shares posted gains.

Following a rare midweek US trading holiday, stocks tumbled at the outset of the trading, with the benchmark S&P 500 dropping as much as 2.9 per cent. But from midday stocks began paring their losses and the tech-heavy Nasdaq ended in positive territory.

The initial selling followed news of the Huawei arrest. The arrest came as investor enthusiasm had already faded following a truce reached over the weekend in talks between the US and China, which had prompted some hope about resolving differences over trade that have clouded the stock market's outlook this year.

Stocks seemed to gain further support from a report in the Wall Street Journal that Federal Reserve officials are considering whether to signal a new wait-and-see mentality after a likely interest-rate increase at their meeting in December.

The Dow Jones Industrial Average fell 79.4 points, or 0.32 per cent, to 24,947.67, the S&P 500 lost 4.11 points, or 0.15 per cent, to 2,695.95 and the Nasdaq Composite added 29.83 points, or 0.42 per cent, to 7,188.26.

Aside from trade, concerns over bond yields and interest rates have pressured the stock market in recent days.

US Treasury yields fell on Thursday, with 10-year yields hitting three-month lows, as traders scaled back expectations on the number of rate hikes the Fed would implement amid weakening economic data and market volatility.

Financial shares, which are sensitive to bond yield swings, fell 1.4 per cent.

The energy sector slumped 1.8 per cent and was the worst performing group, as oil fell after OPEC and allied exporting countries ended a meeting without announcing a decision to cut crude output.

Losses for the S&P 500 were mitigated by gains for Amazon , Netflix and some of the other technology and internet stocks that have been hit particularly hard during the market's pullback in recent months.

The major indexes fell more than three per cent each on Tuesday. Markets were closed on Wednesday for a day of mourning for former President George H.W. Bush, who died on Friday.

US jobs data showed the addition of 179,000 jobs in November, which was short of consensus estimates of 195,000.

Bitcoin is now trading near its lowest level since 2017. It fell almost 5 per cent overnight to $3549, near its previous 2018 low of $3522 set November 26.


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is senior editor for Morningstar Australia

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