Global Market Report - 22 October
A shock Wentworth byelection result looms over the Australian share market at the start of a new trading week, while a soft lead-in from Wall Street is also expected to knock the local bourse lower at the open.
Australia
A shock Wentworth byelection result looms over the Australian share market at the start of a new trading week, while a soft lead-in from Wall Street is also expected to knock the local bourse lower at the open.
The SPI200 futures contract was down 12 points, or 0.2 per cent, to 5911.0 at 8am Sydney time on Monday, pointing to a slight dip ahead for the ASX, which had edged lower on Friday but still managed to finish a volatile week in the green.
The local financial sector closed higher for the fourth straight session on Friday, but materials sunk to make it eight of the past 10 trading days in the red.
The Coalition's loss in Wentworth to Independent Dr Kerryn Phelps - a result set to create a federal minority government - is also tipped to cause market uncertainty on Monday.
Meanwhile, the US benchmark S&P 500 stock index edged lower at the close of overseas trade, with strong earnings from Procter & Gamble Co offset by ongoing concerns about rising interest rates and tensions over trade policy denting economic growth.
For the week, the S&P gained 0.02 per cent, while the Dow rose 0.4 per cent and the Nasdaq fell 0.6 per cent.
Copper rose and nickel prices rebounded on Friday, while gold edged higher for the third straight week in the wake of a recent sell-off in global stocks.
Oil also jumped on Friday, but still finished lower for the week.
The Australian dollar is flat, buying 71.06 US cents from 71.09 US cents on Friday.
Asia
Chinese stocks jumped the most in more than two months after top financial officials voiced support for the battered equity market.
The Shanghai Composite Index rose 2.6 per cent to 2550.47, its biggest gain since August 7. The gauge earlier fell as much as 1.5 per cent, breaking below the key 2500 level. The Shenzhen Composite Index also gained 2.6 per cent, while the ChiNext Index of smaller companies rallied the most since June.
While the afternoon's accelerated gains raised the question of whether authorities were taking a more direct approach, the gauges still posted a weekly drop.
China's economic growth cooled to its weakest pace since the GFC in the third quarter, with regulators pledging further support and the trade war with the US began to bite.
Japan's Nikkei ended the week on a sour note on Friday, booking its third straight week of decline.
The Nikkei share average at one stage dropped almost 2 per cent to hit a six-week low of 22,212.57. By the closing bell, it was down 0.6 per cent at 22,532.08.
Europe
British Prime Minister Theresa May will insist a Brexit deal with the EU is 95 per cent complete as she faces MPs after a weekend of vicious attacks from within her own ranks.
European stocks ended a choppy trading session broadly flat on Friday but managed to eke out a weekly gain despite mixed third-quarter earnings and while the budget row between Italy's populist government and the European Union heated up.
The pan-European STOXX 600 dipped 0.06 per cent to end the week with a 0.7 per cent gain.
Italy's bank stocks index sustained heavy losses in morning trading and fell to 22-month lows as government bonds were sold off after Brussels sent Rome a letter demanding an explanation for its budget plans. Italian banks gradually pared their losses and limited their daily retreat to 0.4 per cent.
Late Friday afternoon, Moody’s downgraded Italy's debt rating by a notch, citing the "material weakening in Italy's fiscal strength, with the government targeting higher budget deficits for the coming years," as well as debt holding near the current 130 per cent of GDP "rather than start trending down as previously expected."
A crop of results, some with negative outlooks, suggesting growth slowing in China also cast a shadow on the session.
North America
An early rally on Wall Street fizzled on Friday as global bourses finished mixed amid a range of worries that included Italy’s messy budget dispute with Brussels and slowing Chinese growth.
US stocks opened strongly following good earnings reports from Procter & Gamble, American Express and others, but the market lost steam at midday. All three major indices had slumped more than one per cent on Thursday.
The analysts said earnings would be a positive catalyst for stocks over the next two or three weeks, but warned of a medium-term hit after the period of "peak" earnings growth ends.
On Thursday, the European Commission formally warned Italy that its budget plans for 2019 were a serious concern, demanding "clarifications" over Rome's "unprecedented" deviation from EU rules.
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Morningstar with AAP, Reuters
Lex Hall is content editor, Morningstar Australia
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