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Global Market Report - July 12, 2018

Lex Hall  |  12 Jul 2018Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to slide in the wake of escalating US tariff threats on China and a plunge in oil prices, which has rattled energy stocks.

US stocks fell overnight, breaking a four-session streak of gains after Washington's threat to impose tariffs on an additional $US200 billion ($270 billion) worth of Chinese goods fanned trade war fears. China has accused the US of bullying and warned it will retaliate.

The S&P 500 dropped the most in two weeks, as energy and material producers fell at least 2 per cent on fears that tariffs will stem demand for commodities. West Texas crude fell to 4.7 per cent to $70 a barrel, while metals and crop futures also slid.

The Australian futures index is down 8 points as 6166 at 8.30am Sydney time, while the Australian dollar has lost more ground, buying 73.62 US cents.

Yesterday, the benchmark S&P/ASX200 index was down 42.5 points, or 0.68 per cent, at 6215.6 points, extending Tuesday's 0.44 per cent drop, while the broader All Ordinaries fell 42.6 points, or 0.67 per cent, at 6300.2 points.

Asia

China's stocks slumped Wednesday after three days of gains and the yuan weakened amid the escalating trade dispute.

China's commerce ministry said it was "shocked" by Washington's latest move.

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The Shanghai Composite index fell 1.8 per cent, and the blue-chip CSI300 index dropped 1.7 per cent.

Hong Kong's Hang Seng index fell 1.3 per cent, with the China Enterprises index giving up 1.5 per cent.

Europe

European markets fell overnight after Washington’s trade threats against China.

London's FTSE 100 dropped 1.3 per cent, while the DAX 30 in Frankfurt shed 1.5 per cent as did the CAC 40 in Paris.

All European sectors were in negative territory, with those most exposed to action on tariffs taking the most points off the STOXX.

Basic resources fell 3.3 per cent and autos dropped 1.7 per cent.

North America

The Dow Jones Industrial Average fell 219.21 points, or 0.88 per cent, to 24,700.45, the S&P 500 lost 19.82 points, or 0.71 per cent, to 2774.02 and the Nasdaq Composite dropped 42.59 points, or 0.55 per cent, to 7716.61.

Industrial names including Boeing, 3M and Caterpillar, which have been among the hardest hit by the recent trade dispute, were among the Dow's biggest drags.

Materials, down 1.7 per cent, was another big negative influence on the market, with Freeport-McMoRan down 3.9 per cent as copper prices hit their lowest in about a year.
Investors said trade war worries may slip to the background as investors begin to focus more closely on second-quarter earnings over the coming weeks. Results from JPMorgan Chase and other big banks are due on Friday.

Analysts are forecasting S&P 500 companies' earnings grew about 21 per cent in the second quarter from a year earlier, according to Thomson Reuters data.

Chipmakers, which largely depend on China for their revenue, fell, with the Philadelphia semiconductor index down 2.6 per cent.

The market's drop was not as steep as what was seen in late March and early April when the escalating trade rhetoric between China and the US led to the S&P falling more than 2 per cent on four occasions.

The market slide may have been contained in part by speculation the Trump administration could change its mind by the end of August, when the tariffs are due to come into effect, some strategists said.

The utilities sector was the only one in positive territory, with a 0.9 per cent gain.
Twenty-First Century Fox fell 4 per cent after the media company raised its offer for Britain's Sky, seeing off rival bidder Comcast for now. Comcast shares were up 1.3 per cent.

 

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Lex Hall is a Morningstar content editor, based in Sydney.

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