Global Market Report - 23 October
The Australian share market is set to extend its subdued start to the week following mixed results on Wall Street overnight.
Australia
The Australian share market is set to extend its subdued start to the week following mixed results on Wall Street overnight.
The SPI200 futures contract was down 12 points, or 0.2 per cent, to 5,879.0 at 8am Sydney time on Tuesday, hinting that the ASX will edge lower at the open, having erased most of last week's gains on Monday.
The Australian dollar has also slipped, and is buying 70.81 US cents from 71.09 US cents on Monday.
In overnight trade, the S&P 500 and Dow slipped during choppy trading following losses in energy and financial stocks, but gains in technology sectors helped limit losses and lifted the Nasdaq.
The Dow fell 126.93 points, or 0.5 per cent, to 25,317.41, the S&P 500 lost 11.9 points, or 0.43 per cent, to 2755.88 and the Nasdaq rose 19.6 points, or 0.26 per cent, to 7468.63.
Back home, and the federal government looks set for minority rule due to its apparent Wentworth by-election loss at the weekend, but analysts said Monday's market dive was largely due to international tensions rather than domestic uncertainty.
Iron ore and copper are both up, while the oil price is largely unchanged despite Saudi Arabia's pledge to raise crude production to a record high.
Meanwhile, Bega Cheese will hold its annual general meeting today, and coal miner Coronado Global resources, which owns Queensland's Bowen Basin mine and three more in the US, is set to start trading on the ASX.
The Australian economy's journey toward surplus could become increasingly turbulent over the next year as politicians at state and federal level jockey for votes, according to prominent economist Chris Richardson from Deloitte Access Economics.
Out today: RBA's Michelle Bullock, Guy Debelle set to speak; Eurozone consumer confidence is published.
Asia
In China, Shanghai blue chips had gained 4.3 per cent in their biggest one-day gain since November 2015, after Beijing promised stimulus support for stock markets in the world's second-largest economy.
The blue-chip CSI300 index rose 4.3 per cent, to 3270.27, its best day since November 2015. The Shanghai Composite Index jumped 4.1 per cent, its biggest one-day gain since March 2016. Shenzhen's start-up board ChiNext surged 5.2 per cent.
The gains extended to Hong Kong, where the Hang Seng index added 2.3 per cent to 26,153.15 points and the China Enterprises Index ended 2.6 per cent higher.
Despite Monday's surge, the Shanghai Composite index is still down 19.7 per cent for the year, while the CSI300 has fallen 18.9 per cent. The Hang Seng is down 12.6 per cent for the year to date.
In Tokyo, the Nikkei share average rose 0.4 per cent to close at 22,614.82, moving off a six-week low of 22,212.57 hit during the previous session.
Still, Japan's benchmark index is now down around 7.5 per cent since hitting a 27-year high on October 2.
Europe
European shares have crept higher on relief over Italy's budget, tracking rallies in Asia markets after China promised to provide stimulus to stabilise its economy and offset the impact of US tariffs.
European stocks climbed 0.2 per cent after Moody's kept Italy's sovereign rating stable on Friday instead of cutting it to negative. The decision fuelled a rally in Italian government bonds and boosted shares in the country's banks.
In London, the FTSE eased down 0.1 per cent. In Paris the CAC was down 0.6 per cent, and Germany’s DAX retreated 0.3 per cent.
The Moody's report and China's verbal support for its economy helped markets look beyond worries over the impact on global growth from policy tightening by the Federal reserve and the US-China trade war, market participants said.
The outlook for global growth in 2019 has dimmed for the first time, according to Reuters polls of economists, who cautioned that the US-China trade war and tightening financial conditions would trigger the next downturn.
Sterling, meanwhile, slipped 0.4 per cent to $US1.3022 ($1.8323) as Brexit worries rose ahead of a speech to Britain's parliament by Prime Minister Theresa May.
North America
US stocks have closed lower after choppy trade with some investors showing signs of earnings season nerves, while political worries in Europe led the US dollar to strengthen against the euro and sterling.
The euro continued its slide on Monday on uncertainty over Italy's budget and the British pound fell on news that Brexit negotiations with the European Union over Northern Ireland remain in deadlock.
The US Treasury yield curve was the flattest in more than two weeks, while two-year note yields hit their highest level in a decade. Gains in longer-dated notes were limited due to worries about rising inflation pressures and further US Federal Reserve rate hikes.
Fixed income trading appeared to weigh on US financial companies, making the sector the biggest drag on the S&P 500. A flat yield curve tends to hurt bank profits.
The third-quarter earnings season and US midterm elections were also dampening equity investor enthusiasm, along with the rising US dollar, according to money managers.
Investors looked ahead to the peak week for the US earnings season, with Amazon, Alphabet, Microsoft and Caterpillar among the companies reporting.
Helped by a strong economy and deep corporate tax cuts, S&P 500 earnings per share are expected to grow 22 per cent in the third quarter, according to Refinitiv estimates.
The US dollar index rose 0.32 per cent, with the euro down 0.41 per cent to $US1.1466.
Sterling, meanwhile, was down 0.8 per cent against the US dollar. British Prime Minister
Theresa May said the majority of Britain's deal to exit the EU has been agreed upon but repeated her opposition to an EU proposal regarding the Irish border.
Benchmark 10-year notes last rose 1/32 in price to yield 3.1978 per cent, from 3.202 per cent late on Friday.
US crude rose 0.42 per cent to $US69.57 per barrel and Brent was last at $US80.11, up 0.41 per cent on the day.
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Morningstar with AAP, Reuters
Lex Hall is content editor, Morningstar Australia
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