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Global Market Report - June 20, 2018

Lex Hall  |  20 Jun 2018Text size  Decrease  Increase  |  
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Australia

The Australian share market is expected to open slightly firmer despite a drop in commodity prices triggered by US-China trade tensions and sweeping job cuts by Telstra.

Stocks fell close to 4 per cent in China, nearly 3 per cent in Hong Kong and almost 2 per cent in Japan as US president Donald Trump threatened to impose a 10 per cent tariff on another $US200bn ($271bn) of Chinese goods, and Beijing warned it would retaliate. Europe and Wall Street, while faring better, also fell with the Dow Jones Industrial Average closing back in negative territory for the year.

The price of iron ore has fallen more than $US2, copper is almost 2 per cent lower while oil prices are also down with WTI more than one per cent poorer and Brent crude losing nearly half a per cent.

Telstra has announced plans to shed 8000 jobs as part of a plan to split its infrastructure and mobile business as it holds its strategy day today.

At 8.30am (AEST) the Australian futures index was up 36 points at 6142. The Australian share market yesterday dipped as miners were hit by falls in iron ore prices, while the Australian dollar hit a one-year low. The benchmark S&P/ASX200 index was fell 0.03 per cent to 6102.1 points, while the broader All Ordinaries index fell 0.06 per cent to 6208.9 points.

Out today: RBA governor Philip Lowe is slated to participate in a panel discussion at the European Central Bank’s Forum on Central Banking in Portugal.

Austrac’s $700m penalty against Commonwealth Bank is expected to be approved by the Federal Court. Telstra has a strategy update slated.

Asia

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Japanese stocks tumbled to 2-1/2-week lows on Tuesday and posted the biggest daily percentage drop in three months after Chinese stocks were sold sharply amid escalating global trade tussles.

The Nikkei share average ended 1.77 per cent lower at 22,278.48, the lowest closing level since June 1. The index posted the biggest daily percentage drop since mid-March.
The broader Topix declined 1.6 per cent to 1743.92.

Chihiro Ohta, general manager of investment research at SMBC Nikko Securities, said that developments in the global trade war could keep the Nikkei volatile this week, with the immediate support level seen at a recent low of 21,931.65 hit on May 30.

Hong Kong stocks closed at their lowest in more than four months, tracking other Asian markets roiled by escalating China-US trade frictions.

The Hang Seng index closed down 2.78 per cent at 29,468.15, its lowest since early February, while the China Enterprises Index lost 3.2 per cent to 11,492.77, its lowest in six months.

Shanghai stocks tumbled nearly 4 per cent as Washington's fresh tariff threats against China raised the spectre of a full-blown trade war.

The Shanghai Composite Index plunged more than 5 per cent at one point in late trade before finishing the session down 3.78 per cent at 2,907.82 points. The blue chip CSI300 index fell 3.53 per cent to 3621.12.

Europe

UK shares fell on Tuesday on a global selloff prompted by fears of a full-blown trade war between the US and China, and disappointing domestic corporate news including a profit warning by Debenhams.

The FTSE 100 ended down 0.36 per cent at 7603.85 points, while the mid-cap FTSE 250 index fell 0.8 per cent.

Political uncertainty over Prime Minister Theresa May’s Brexit plans are also fuelling anxiety among investors as she prepares to confront pro-EU politicians in another test of her ability to lead a minority government.

Exposing troubles in the UK retail sector, Debenhams fell 10 per cent after the department store chain warned on profit for the third time in six months, blaming increased competitor discounting and weakness in key markets.

European shares extended a sell-off on Tuesday as the trade war escalated, with autos, mining and technology stocks taking the brunt.

Europe's main equity benchmark, the STOXX 600, fell for the third straight session, down 0.7 per cent, although it recovered slightly after German Chancellor Angela Merkel and French President Emmanuel Macron agreed on a eurozone budget, which traders said was a helpful show of unity.

Italian banks, up 1 per cent, were further supported after the European Central Bank's top supervisor said the central bank could adopt a softer approach in pressing banks to reduce bad loans, confirming an earlier Reuters report .

Germany's DAX, home to some of the carmakers that Trump has explicitly targeted in his tariffs rhetoric, fell the most, down 1.22 per cent to 12,677.97.

North America

Trump has threatened to impose a 10 per cent tariff on another $US200 billion ($271 billion) of Chinese goods, and Beijing warned it would retaliate.

Trump said his move followed China's decision to raise tariffs on $US50 billion in US goods, which came after the White House announced similar tariffs on Chinese goods on Friday.

The Dow Jones Industrial Average fell 287.26 points, or 1.15 per cent, to 24,700.21, the S&P 500 lost 11.18 points, or 0.40 per cent, to 2762.57 and the Nasdaq Composite dropped 21.44 points, or 0.28 per cent, to 7725.59.

 

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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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