Global Market Report - 19 October
Australian shares are poised for an opening plunge in the wake of a broad sell-off on Wall Street, where trade war concerns and a hawkish central bank weighed US indexes down by more than 1 per cent.
Australia
Australian shares are poised for an opening plunge in the wake of a broad sell-off on Wall Street, where trade war concerns and a hawkish central bank weighed US indexes down by more than 1 per cent.
The SPI200 futures contract was down 51 points, or 0.86 per cent, to 5871.0 at 8am Sydney time on Friday, pointing to a sharp drop at the open for the ASX, which had edged higher on Thursday thanks to banking and telco stocks.
The Australian dollar has also dropped, buying 70.99 US cents, down from 71.24 US cents at Thursday's close, despite the latest jobs data showing the unemployment rate dropped to a six-year low of five per cent.
US stocks have fallen overnight as weak earnings reports from industrials raised worries over rising expenses and the impact of tariffs, adding to concerns of higher borrowing costs.
Tensions between the US and Saudi Arabia have also caused uncertainty.
The Dow Jones Industrial Average fell 327.23 points, or 1.27 per cent, to 25,379.45, the S&P 500 lost 40.43 points, or 1.44 per cent, to 2768.78 and the Nasdaq Composite dropped 157.56 points, or 2.06 per cent, to 7485.14.
Iron ore and gold prices are up, but copper and oil are down, pointing to a mixed day for the local materials and energy sectors, after the pair dragged on the market yesterday.
The head of National Australia Bank Andrew Thorburn is set to be grilled by federal politicians about the "appalling behaviour" uncovered at the banking royal commission.
Asia
Hong Kong stocks ended flat, after early losses and on pressure from a tepid energy sector. However, risks from the mainland stocks continue to hang over the local market, limiting the room for rebound.
The city's main Hang Seng index ended at 25,454.55, losing just 0.03 pct. The Hang Seng China Enterprises index ended 0.6 per cent lower at 10,198.33.
The indices were weighed down by energy companies, which are pressured by rising oil prices. The sub-index of the Hang Seng tracking energy shares dipped as much as 3 per cent, before closing at 2.4 per cent. China Petroleum & Chemical Corp, which was down 4.3 per cent, was the biggest loser on the Hang Seng and among H-shares.
Europe
Britain's top share index eased as disappointing earnings hurt construction materials companies and consumer giant Unilever, while investors sought sectors seen as safe amid growing economic uncertainty.
The market shrugged off weaker British retail sales data which showed a slump in spending after a hot summer in which Britons splurged on barbecues and outdoor activities.
The FTSE 100 gave up earlier gains to end the session down 0.3 per cent, with CRH the biggest loser on the day as a profit warning from German cement maker Heidelbergcement weighed on basic materials stocks.
The overall market's swing into negative territory underscores the increasingly gloomy sentiment around third quarter earnings. Analysts are downgrading their estimates for the FTSE 100 as well as the mid-cap FTSE 250 index, which closed down 0.3 per cent.
North America
US stocks have fallen more than one per cent as the European Commission issued a warning regarding Italy's budget and concerns mounted over the possibility of strained relations between the United States and Saudi Arabia.
It further dented investors' appetite for risk amid global trade tensions and rising interest rates.
The benchmark S&P 500 index closed just above its 200-day moving average, a key indicator of long-term price trends.
S&P 500 technology and consumer discretionary stocks fell more than 2 per cent, as did the tech-heavy Nasdaq. Among the S&P's major sectors, only utilities and real estate, considered defensive, avoided losses.
Wall Street's major indexes pared early losses in morning trading but reversed course to fall further as European markets closed.
Italian bond yields jumped after the European Commission deemed the country's 2019 budget draft to be in breach of EU rules.
US stocks declined further after US Treasury Secretary Steven Mnuchin pulled out of an investor conference in Saudi Arabia as the White House awaited the outcome of investigations into the disappearance of Saudi journalist Jamal Khashoggi.
Mnuchin's decision sparked worries of potential strain in US-Saudi relations, especially if Saudi leaders were found to have been involved in Khashoggi's disappearance. Investors raised concern that if Saudi Arabia were sanctioned, it could restrict oil supply and prompt a rise in energy prices.
US stocks had opened lower as Chinese stocks fell overnight, sparking fresh worries about the impact of trade tensions on China's economy.
Concerns over rising interest rates following Wednesday's release of the Federal Open Market Committee's minutes from its September meeting also pressured Wall Street's major indexes.
Both those factors were reflected in weak earnings reports from Cessna business jet maker Textron and equipment rental company United Rentals.
Textron shares fell 11.3 per cent and United Rentals shares sank 15 per cent.
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Morningstar with AAP, Reuters
Lex Hall is content editor, Morningstar Australia
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