Global Market Report - 27 September
Australian shares are set to drop at the open after a Wall Street rally suffered a late collapse overnight in the wake of a widely expected interest rate hike.
Australia
Australian shares are set to drop at the open after a Wall Street rally suffered a late collapse overnight in the wake of a widely expected interest rate hike.
In futures trading on Thursday, the SPI200 futures contract was down 17 points, or 0.28 per cent, to 6164 at 7.30am Sydney time. The Australian dollar is buying 72.58 US cents, down from 72.61 US cents at Wednesday’s close.
The anticipated rate rise from the US Federal Reserve weighed down local banking shares on Wednesday, offsetting gains from the energy and materials sectors, and holding the benchmark ASX 200 flat at the close.
The Dow Jones Industrial Average was up 0.34 per cent at 26,582.16 points, while the S&P 500 gained 0.45 per cent to 2928.75. The Nasdaq Composite added 0.68 per cent to 8062.03.
Locally, APA Group chief Mick McCormack says Malcolm Turnbull’s ousting is expected to delay a government decision on Hong Kong-owned CK Infrastructure's $13 billion takeover of his gas pipeline company, with the Coalition not wanting to give Labor a target before the Wentworth by-election and the federal election.
Asia
Chinese non-financial corporate debt is rising again as a percentage of gross domestic product following a year and a half of deleveraging from its mid-2016 record, according to new data from the Bank for International Settlements.
The Hang Seng index rose 1.2 per cent, to 27,816.87, while the China Enterprises Index gained 1.5 per cent, to 10,985.60 points.
China shares rose as global index provider MSCI said it will consider quadrupling the weighting of Chinese big-caps in its global benchmarks and as FTSE Russell is expected to include Chinese shares in its benchmark this week.
China's main Shanghai Composite index closed up 0.9 per cent at 2781.14 points, while its blue-chip CSI300 index ended up 1.1 per cent.
Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.2 per cent, while Japan's Nikkei index closed up 0.4 per cent.
Europe
European shares held their ground near four-week highs on Wednesday before a widely expected rate hike by the US Federal Reserve.
The pan-European STOXX 600 benchmark index ended up 0.3 per cent, while London's FTSE 100 and Frankfurt's DAX both advanced about 0.1 per cent.
European shares have been under pressure this summer but they have rebounded over the last few days on hopes the US could resume trade talks with China after the two countries moved ahead with new tariffs on each other's exports.
Easing worries over Brexit and the Italian budget, due on Thursday, helped bring investors' attention back to the region's cheaply valued equity market. Fresh deal-making activity also buoyed the market.
On Wednesday the STOXX was supported by gains in defensive sectors like consumer staples and healthcare, while cyclical stocks that drove most of the recent gains suffered.
North America
US stocks have extended gains after a widely expected interest rate hike by the US Federal Reserve and as investors bet that the central bank is approaching the end of a cycle of tightening monetary policy.
The Fed raised interest rates on Wednesday and left its monetary policy outlook for the coming years largely unchanged amid steady economic growth and a strong job market.
In a policy statement that marked the end of an era of "accommodative" monetary policy, Fed policymakers lifted the benchmark overnight lending rate by a quarter of a percentage point to a range of 2.00 per cent to 2.25 per cent.
The rate-sensitive S&P 500 financial index was 0.43 per cent lower, with bank shares down 0.58 per cent.
The S&P 500 utilities index and real estate index , also both sensitive to interest rates, were down 0.16 per cent and 0.06 per cent, respectively.
The Fed still foresees another rate hike in December, three more next year, and one increase in 2020. An eventual end to the Fed's current rate hike cycle would be viewed as good for stock investors.
The US stock market has enjoyed a boom period and is at record levels. But as rates rise, equities face rising competition for investors' funds not only from bonds, but also from cash, which is now the most attractive it has been in about a decade.
The S&P 500 health index rose 0.88 per cent as biotechs led the gains, while the newly formed communication services index rallied 1.06 per cent, boosted by Facebook, up 2.0 per cent.
Twenty-First Century Fox rose 1.5 per cent after agreeing to sell its stake in Sky to Comcast, which gained 0.83 per cent. Disney, which is buying Fox, jumped 1.86 per cent.
Nike fell 0.86 per cent as the sportswear maker stuck to its full-year forecast even after sales got a boost from a controversial ad campaign featuring former NFL player Colin Kaepernick.
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Lex Hall is content editor, Morningstar Australia
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