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Global Market Report - 9 October

Lex Hall  |  09 Oct 2019Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open lower after a negative lead from overseas and pessimism about the prospects for a US-Chinese trade deal.

The SPI200 futures contract was down 64 points, or 0.97 per cent, at 6,502.0 at 8am Sydney time, suggesting an early slump for the benchmark S&P/ASX200 on Wednesday.

The Australian share market closed higher for a third day yesterday ahead of another round of US-China trade talks.

The benchmark S&P/ASX200 index finished Tuesday up 29.8 points, or 0.45 per cent, to 6,593.4 points, while the broader All Ordinaries was up 27 points, or 0.4 per cent, to 6,713.7 points.

Ahead of talks between US and Chinese delegates set to start on Thursday, a media report suggested the US administration was considering limiting capital flows, particularly investments by US government pension funds, to China.

On Wall Street overnight, the Dow Jones Industrial Average was down 1.19 per cent, the S&P 500 was down 1.56 per cent and the tech-heavy Nasdaq Composite was down 1.67 per cent.

The FTSE 100 in London slipped 0.8 per cent and the larger pan-European STOXX 600 index lost 1.0 per cent.

The Aussie dollar is buying 67.28 US cents from 67.51 US cents on Tuesday.

The Australian share market has closed higher for a third day ahead of another round of US-China trade talks.

The benchmark S&P/ASX200 index finished Tuesday up 29.8 points, or 0.45 per cent, to 6,593.4 points, while the broader All Ordinaries was up 27 points, or 0.4 per cent, to 6,713.7 points.

Asia

China stocks ended higher on Tuesday, as a dim services sector survey reinforced hopes that Beijing will roll out more stimulus measures, though uncertainties around Sino-US trade talks curbed gains.

The country's markets on Tuesday re-opened after a week-long holiday.

The blue-chip CSI300 index rose 0.6 per cent to close at 3,837.68, while the Shanghai Composite Index added 0.3 per cent to end at 2,913.57.

China's services sector grew at its slowest pace in seven months in September despite a strong increase in new orders, as operating expenses continued to rise at the end of the third quarter, a private survey showed.

Hong Kong extended gains after the territory’s leader said she had no plans to use the emergency regulation ordinance to introduce other laws.

Hong Kong’s Hang Seng Index  gained 1 per cent as it reopened after a holiday Monday.

Japan’s Nikkei climbed 1.0 per cent while MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.55 per cent, led by gains in tech shares in South Korea and Taiwan.

Europe

European shares fell on Tuesday as an escalation in US-China trade tensions and Brexit worries along with disappointing corporate news dented sentiment.

The US government widened its trade blacklist to include some of China’s top artificial intelligence (AI) startups on Tuesday, and a South China Morning Post report said China had toned down its expectations ahead of high-level talks between Washington and Beijing this week.

The pan-European STOXX 600 index ended down 1.1 per cent. Qiagen’s 21 per cent tumble led losses after the biotech company said its chief executive would step down and warned on third-quarter preliminary sales.

All major sectors in Europe were in the red, and while most of the big markets in the region slid more than 1 per cent, losses in London's FTSE 100 were limited to 0.8 per cent as its exporters benefited from a battered pound.

The currency lost 0.7 per cent after a Downing Street source said German Chancellor Angela Merkel and British Prime Minister Boris Johnson had spoken and that she had made clear a deal was “overwhelmingly unlikely”.

Investors are waiting to know if this is the official response from the European Union to prepare for a hard Brexit, said IG’s Mahony.

Germany's export-reliant DAXI fell 1.1 per cent, with an unexpected rise in August industrial output providing little relief from fears of the economy slipping into recession.

Among stocks, some weak forecast and takeover concerns weighed on the biggest decliners. Shares of London Stock Exchange Group dropped 5.8 per cent after Hong Kong’s bourse withdrew its $39 billion bid.

Energy firm Uniper slumped 8.5 per cent as Finnish utility Fortum got closer to full ownership of the German firm, a move Uniper’s top management had warned could threaten the firm’s credit rating.

Profit-taking got the best of British airline easyJet, with some brokers also disappointed by a lack of positivity in the company’s outlook. The carrier’s 7.5 per cent slide dragged Europe’s travel and leisure sector down 1.8 per cent, the biggest decline among major sectors.

At the other end, shares of Airbus rose 0.4 per cent after the planemaker reported higher orders for the first nine months of the year, putting it well ahead of US rival Boeing. Boeing’s sales have been hampered by the grounding of its fast-selling jet, the 737 MAX, in the wake of two accidents in Indonesia and Ethiopia.

Nordic telecom companies Nokia Oyj and Ericsson rose after a report said the US government had suggested issuing credit to help compete with China’s Huawei.

North America

US stocks ended down sharply and near the day’s lows on Tuesday as news that the US has imposed visa restrictions on Chinese officials overshadowed comments by Federal Reserve Chairman Jerome Powell suggesting openness to further interest rate cuts.

Stocks cut losses following Powell’s remarks but quickly reversed course to fall further in late trading after the US State Department said it has imposed visa restrictions on Chinese government and Communist Party officials it believes responsible for the detention or abuse of Muslim minorities in Xinjiang province.

The move stoked tensions ahead of high-level trade talks in Washington this week and added to the day’s bearishness. Earlier, the US government widened its trade blacklist to include some of China’s top artificial intelligence start-ups.

Losses were broad-based, led by a 2 per cent drop in the interest-rate sensitive S&P 500 financial index, while the Philadelphia Semiconductor index dropped 3.1 per cent.

A Bloomberg report said that Washington was moving ahead with efforts to limit capital flows to China, while a South China Morning Post report said China had toned down expectations ahead of the talks in Washington.

In his remarks, Powell also said the time has come to allow the Fed’s asset holdings to begin to expand again, and that the Fed would “soon announce measures to add to the supply of reserves over time.”

The Dow Jones Industrial Average fell 313.98 points, or 1.19 per cent, to 26,164.04, the S&P 500 lost 45.73 points, or 1.56 per cent, to 2,893.06 and the Nasdaq Composite dropped 132.52 points, or 1.67 per cent, to 7,823.78.

Market expectations have increased that the Fed will cut interest rates by a quarter percentage point in October, according to CME Group’s FedWatch tool.

Those bets were bolstered on Tuesday by data that showed US producer prices unexpectedly fell in September.

The S&P 500 posted 6 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 11 new highs and 148 new lows.

is content editor for Morningstar Australia

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