Global Market Report - 13 August
Australian futures are pointing to a higher start for the ASX but the currency crisis in Turkey has jolted global markets and local stocks face an uncertain day amid the volatility.
Australia
Australian futures are pointing to a higher start for the ASX but the currency crisis in Turkey has jolted global markets and local stocks face an uncertain day amid the volatility.
In futures trading, the SPI200 futures contract was up 11 points, or 0.18 per cent, to 6229 points on the latest reading. The Australian dollar is buying 72.76 US cents, from 73.17 US cents on Friday.
On Wall Street the Dow Jones Industrial Average finished last week down 196.09 points, or 0.77 per cent at 25,313 points, while the S&P500 was down 20.3 points or 0.71 per cent at 2833 points.
The tech-heavy NASDAQ index was down 52.67 points or 0.67 per cent at 7839 points.
Turkey’s finance minister says the government has prepared “an action plan” aimed at easing market concerns that have led to a slump in the value of the nation’s currency.
Turkey was hit by a financial shockwave this past week as the lira nosedived 14 per cent Friday over concerns about the government’s economic policies and a trade and diplomatic dispute with the US. The currency’s value has fallen more than 40 per cent since the start of the year.
Out today: Earnings results for JB Hi-Fi, BlueScope, Aurizon.
Asia
China's central bank said it would maintain its prudent and neutral monetary policy to ensure ample liquidity and keep the yuan largely stable.
Hong Kong shares finished lower on Friday, in line with their Asian peers, pulled down by mounting global trade war tensions. The Hang Seng index ended down 240.68 points or 0.8 per cent at 28,366.62 points. The Hang Seng China Enterprises index dropped 0.7 per cent to 10,943.08 points.
The sub-index of the Hang Seng tracking energy shares ended 1.6 per cent lower, while the IT sector closed down 0.5 per cent, the financial sector finished 1 per cent lower and property sector ended 0.2 per cent down. The top gainer on Hang Seng was China Overseas Land & Investment up 2.6 per cent, while the biggest loser was Hang Seng Bank, which closed down 3.4 per cent.
China stocks edged up on Friday to post their best week in a month, aided by strong gains in tech companies. The blue-chip CSI300 index ended 0.2 per cent higher at 3405.02 points while the Shanghai Composite Index closed flat at 2795.31 points.
For the week, CSI300 rose 2.7 per cent while the SSEC gained 2 per cent, both posting their best week since mid-July. However, both the SSEC and CSI300 are down more than 10 per cent since late May.
Technology shares have rallied after China said it has revamped a national leadership group charged with planning and studying its key technological development strategies, signalling a potential policy boost for home-grown tech firms.
A pick-up in retail sales and industrial production is expected from Chinese economic data on Tuesday, alongside fairly soft investment figures.
Europe
The fallout from Turkey hurt European shares on Friday, with banks such as Spain's BBVA and Italy's UniCredit hit by worries over their exposure.
The pan-European STOXX 600 index closed down 1.1 per cent, losing 0.9 per cent on the week, as investors fretted about the political and economic repercussions.
Germany's exporter-heavy DAX index fell 2 per cent, underperforming the broader market, while Milan was the hardest-hit major European index and lost 2.5 per cent, its lowest level since July last year.
Banks were among the biggest fallers after the Financial Times reported that the European Central Bank is concerned about the exposure of some of the euro area's biggest lenders to Turkey in light of the currency fall.
Shares in France's BNP Paribas, Italy's UniCredit and Spain's BBVA fell 3 per cent, 4.7 per cent and 5.1 per cent respectively.
Both banks have said a 10 per cent fall in the Lira could shave 2 basis points off their capital adequacy ratio.
Elsewhere, a profit warning from K+S sent shares in the German potash miner tumbling 7.2 per cent, to the bottom of the STOXX index.
North America
US stocks slid on Friday as the Turkey crisis dragged on bank shares and triggered a move out of riskier assets.
The Dow and S&P 500 posted declines for the week following five straight weeks of gains, but the S&P 500 remains just 1.4 per cent below its record high from January 26.
A drop in technology shares added to the day's bearish tone. The S&P technology index fell 0.8 per cent, with Intel down 2.6 per cent after Goldman Sachs downgraded the stock to "sell."
Microchip Technology shares fell 10.9 per cent after a disappointing second-quarter revenue forecast.
A slump in the Turkish lira worsened after US President Donald Trump doubled tariffs on steel and aluminum imported from the country.
Investors fled to safe-haven assets, pushing the dollar higher and weighing on US bond yields.
The S&P financial index fell 1.2 per cent, among the biggest drags on the S&P 500.
The Dow Jones Industrial Average fell 196.09 points, or 0.77 per cent, to 25,313.14, the S&P 500 lost 20.3 points, or 0.71 per cent, to 2833.28 and the Nasdaq Composite dropped 52.67 points, or 0.67 per cent, to 7839.11.
For the week, the Dow fell 0.6 per cent and the S&P 500 dipped 0.3 per cent. The Nasdaq gained 0.3 per cent for the week after strong gains in some technology shares.
Citigroup, the most global of the major US banks, fell 2.4 per cent. JPMorgan, Wells Fargo and Bank of America were also lower.
Tesla shares ended up 0.9 per cent. The number of Tesla shares sold short rebounded and are now higher than before chief executive Elon Musk on Tuesday proposed taking the electric car maker private, according to data from financial technology and analytics firm S3 Partners.
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Lex Hall is a Morningstar content editor, based in Sydney.
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