Global Market Report - 27 August
Australian shares look set to open largely unchanged despite Wall Street finishing on a high on Friday as Federal Reserve chairman Jerome Powell affirmed the US central bank's current pace of rate hikes.
Australia
Australian shares look set to open largely unchanged despite Wall Street finishing on a high on Friday as Federal Reserve chairman Jerome Powell affirmed the US central bank's current pace of rate hikes.
In futures trading, the SPI200 futures contract was down one point, or 0.02 per cent, to 6220 points at 8.30am Sydney time. The Australian dollar is buying 73.28 US cents, up from 72.84 US cents on Friday.
On Wall Street the Dow Jones Industrial Average finished last week up 133.37 points, or 0.52 per cent at 25,790.35 points, the S&P500 was up 17.71 points or 0.62 per cent at 2874.69 points, while the tech-heavy NASDAQ index was up 67.51 points or 0.86 per cent at 7945.98 points.
Speaking at a research symposium in Wyoming, Powell said the Fed's gradual interest rate
hikes were the best way to protect the economic recovery, maintain strong job growth and keep inflation under control.
His comments did little to change market expectations of a rate hike in September and perhaps again in December.
The US and Mexico are close to reaching a consensus over key issues stunting efforts to renegotiate the North American Free Trade Agreement, officials from both countries said over the weekend.
In local equities, jeweller Michael Hill's full-year profit has plunged 85 per cent after one-off costs associated with the jewellery store chain exiting the US market and closing most of its Emma and Roe stores.
Plumbing supplies giant Reliance Worldwide has reported a flat full-year profit of $66 million, but is flagging greater-than-expected cost savings from this year’s purchase of a UK plastic fittings manufacturer.
Building supplies company Boral and retailer Harvey Norman are expected to paint contrasting picture of the economy when they reveal their earnings results as reporting season winds down this week.
Asia
Oil prices gained more than 1 per cent on Friday, ending a run of weekly declines on signs that Iran sanctions may limit global supply and that a trade war may not curb China’s appetite for US crude.
Brent crude oil settled up US$1.09 a barrel, or 1.5 per cent, at US$75.82 a barrel. US crude was up 89 cents, or 1.3 per cent at US$68.72.
Concerns that an escalating trade war between the US and China could slow economic growth and weigh on crude purchases eased slightly after sources told Reuters that China’s Unipec will resume purchases of crude oil in October, after a two-month halt due to the fight.
Turkey’s lira whipsawed before rebounding against the dollar on Monday, shattering last week’s relative calm when local markets were shut for holidays.
The currency dropped as low as 6.0375 per dollar in early Asian trading on renewed concern the nation’s economy will worsen amid a feud with the US and a deepening current-account deficit. The lira then reversed its losses to trade 0.4 per cent higher against the greenback as at 7.45am in Sydney. The currency has slumped slumped 18 per cent in August.
Europe
European shares were steady on Friday as investors were cautious after the latest round of US-China trade talks yielded no breakthrough.
The pan-European STOXX 600 ended the session up 0.1 per cent, in a thinner-than-usual market in terms of volume.
US and Chinese officials ended two days of talks on Thursday with no major breakthrough, following the implementation of a fresh round of tariffs.
The STOXX 600 also gave up some gains immediately after Jerome Powell said that more rate hikes were likely if the US economy stayed strong.
France's prime minister says the government has lowered its economic growth forecast for next year and unveiled plans to cut public spending.
Prime Minister Edouard Philippe says the government will base its 2019 budget on an estimated growth of 1.7 per cent, down from the 1.9 per cent previously expected.
North America
The benchmark S&P 500 stock index has clinched its longest bull-market run, closing above its previous January high, as Fed chairman Jerome Powell affirmed the US central bank's current pace of rate hikes.
The S&P had last reached a new closing high on January 26, then retreated more than 10 per cent, a correction that lasted until February 8.
Friday's new closing high confirmed that the index's bull run remained intact.
Investors said they were reassured that Powell's comments stayed in line with previous commentary from the Fed regarding policy. Economic data also boosted sentiment.
New orders for key US-made capital goods increased more than expected in July and shipments growth held firm, the Commerce Department said.
For the week, the Dow added 0.47 per cent, the S&P gained 0.87 per cent, and the Nasdaq increased 1.66 per cent.
The small-cap Russell 2000 index also advanced 0.5 per cent to reach a new closing high.
A dip in the dollar after Powell's comments helped lift materials and energy stocks as the prices of oil and metals rose.
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Lex Hall is content editor, Morningstar Australia
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