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Global Market Report - July 17, 2018

Lex Hall  |  17 Jul 2018Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to open lower amid a flat night on Wall Street, a plunge in oil and an IMF warning on escalating trade tensions.

The Australian futures is down 12 points at 6180 at 8.30am Sydney time. The Australian dollar is buying 74.19 US cents.

On Wall Street, the Dow Jones Industrial Average is up 44.95, or 0.18 per cent at 25,064 points. The S&P 500 is down 2.88, or 0.10 per cent at 2798. The Nasdaq is down 20.26, or 0.26 per cent at 7805.

US stock index futures are trading flat as a strong report from Bank of America reinforced expectations of a strong earnings season, but a drop in crude oil priced capped some early gains.

Sketching out potential damage from the full brunt of US President Donald Trump's tariff threats and subsequent retaliation from trading partners, the IMF said that if realised, these could reduce annual global economic output by 0.5 per cent from projections for 2020.

That translates to nearly $US500 billion in lost annual output based on IMF projections, the equivalent of subtracting an economy the size of Thailand.

Locally, the paypackets of CEOs at Australia’s 100 biggest companies have swollen to their fattest since before the global financial crisis, a survey by the Australian Council of Superannuation Investors shows.

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Domino's Pizza chief Don Meij topped the list with $36.84 million 2017 after he exercised options to acquire shares worth $35.7 million.

Out today: RBA minutes for July.

Asia

Hong Kong's benchmark index ended little changed on Monday, as China posted a moderate second-quarter economic slowdown that was in line with expectations. At the close of trade, the Hang Seng index was steady at 28,539.66 points. The Hang Seng China Enterprises index ended 0.4 per cent lower to 10,704.26.

China's GDP growth slows to 6.7 per cent in second quarter amid trade war fears: China's growth is slowing as the central government's clampdown on risky debt holds back investment and concerns about the impact of a trade war with the US worry investors.

Hong Kong's exchange described as "temporary" a dispute with its Shanghai and Shenzhen counterparts over plans to bar investor access to dual-class shares, as shares in smartphone maker Xiaomi Corp recovered from the depths of its 10-per cent slide on Monday.

The blue-chip CSI300 index fell 0.6 per cent, to 3472.09 points, while the Shanghai Composite Index closed down 0.6 per cent at 2814.04 points.

Europe

The pan-European STOXX 600 index fell 0.3 per cent, with the energy sector the biggest drag as crude prices fell sharply as concerns about supply disruptions eased.

Basic resources and autos were also lower as data from key commodity consumer China showed economic growth slowed in the second quarter amid growing worries over a trade war with Washington.

On the plus side, second-quarter earnings for the STOXX 600 are expected to grow 8.1 per cent year-on-year, an improvement on the first quarter.

Deutsche Bank shares jumped 7.3 per cent to a six-week high after the German lender reported preliminary second-quarter results above consensus with a better-than-expected capital buffer.

Worries over the bank's solvency have cratered its shares, down 36 per cent year-to-date. Its gains on Monday helped lift the banking sector index 0.3 per cent.

North America

Facebook, Amazon.com and Google parent Alphabet - the other FANG stocks - were down more than 1 per cent in after-hours trading. The stocks have led the technology and consumer discretionary sectors back to record-high levels in recent days.

During the regular session, the S&P energy sector fell 1.2 per cent, leading percentage declines among the 11 major S&P sectors. Shares of Exxon Mobil slid 1.0 per cent and Chevron fell 0.9 per cent. The stocks were among the biggest drags on the benchmark index, along with Microsoft , down 0.5 per cent.

Oil prices slumped more than 4 per cent as Libyan ports reopened and traders eyed potential supply increases by Russia and other producers.

Bank stocks rose, reversing their slide on Friday, when JPMorgan Chase, Citigroup and Well Fargo reported results. The S&P 500 financial index gained 1.8 per cent, leading sector gains.

Bank of America rose 4.3 per cent after the lender's quarterly profit beat analysts' expectations on lower expenses and growth in loans and deposits. Goldman Sachs shares were up 2.2 per cent ahead of its results, due Tuesday.

That wasn't enough to extend recent gains in the S&P 500, which on Friday had its highest close in more than five months.

Investors may be reluctant to make big trades ahead of the pickup in earnings reports this week and Federal Reserve Chairman Jerome Powell's first congressional testimony Tuesday and Wednesday, said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

Sixty S&P 500 companies were due to report this week.

Analysts have forecast second-quarter earnings increased 21.1 per cent from a year ago according to Thomson Reuters data.

Of the companies that have reported earnings through last week, 86.7 per cent have topped earnings expectations, above the 75-per cent average of the past four quarters.

 

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

© 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 senior editor for Morningstar Australia

© 2021 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 'regulated financial advice' under New Zealand law has 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. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. 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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