Australia

Australian shares are set to bleed red as scepticism builds over the US-China trade truce, with Wall Street coming down hard from its post-G20 sugar hit.

The SPI200 futures contract is down 75 points, or 1.32 per cent, to 5625.0, at 8am Sydney time on Wednesday, pointing to sharp opening drop for the ASX.

An early fall would extend Tuesday's broad-based losses, with positive sentiment from the trade truce brokered between US President Donald Trump and Chinese President Xi Jinping dissipating.

On Wall Street, the major US indexes are lagging nearly per cent each on trade fears and worrisome signs about economic growth from the US bonds market

In late trade the Dow Jones Industrial Average fell 741.58 points, or 2.87 per cent, to 25,084.85, the S&P 500 lost 83.01 points, or 2.97 per cent, to 2,707.36 and the Nasdaq dropped 245.4567 points, or 3.3 per cent, to 7196.0553.

The Aussie has also softened, buying 73.37 US cents, down from 73.70 US cents on Tuesday.

Oil has edged higher in volatile overnight trade, while iron ore is up and copper is down.
Gold prices soared to a new five-week peak on a subdued greenback.

There were across-the-board losses on Tuesday. The benchmark S&P/ASX200 index was down 58.1 points, or 1.01 per cent, at 5713.1 at the close, while the broader All Ordinaries fell 1 per cent.

Locally, TPG is set to hold its annual general meeting a day after being slapped with federal court proceedings for allegedly pocketing millions of dollars from a non-refundable $20 fee and seeking compensation for consumers.

Meanwhile, experts are waiting to see just how heavily the country's housing market is weighing on consumption when September quarter GDP figures are released at 11.30am by the Australian Bureau of Statistics.

US markets will be closed for the funeral of former president George HW Bush.

Out today: AiG performance of services for November; GDP third quarter.
Overseas data includes: China Caixin Services PMI November; Eurozone Markit Services PMI November; Eurozone retail sales October; Japan Nikkei Services PMI November; UK Markit/CIPS Services PMI November.

ASIA

Hong Kong stocks inched up on Tuesday, despite the waning optimism about a thaw in US-China trade tensions.

The Hang Seng index rose 0.3 per cent to 27,260.44, while the China Enterprises Index gained 0.2 per cent to 10,907.54 points. The market rallied strongly on Monday, after the announcement of the 90-day truce. Some investors doubt there will an end to the trade war, whereas others fret about the health of China's economy.

S&P Global Ratings cut Tata Motors's long-term rating deeper into junk, the second downgrade for the Indian carmaker in five months, citing headwinds for the company's Jaguar Land Rover subsidiary. Mumbai-based Tata Motor's leverage may deteriorate over the next 12 to 18 months due to the weaker-than-expected performance of Jaguar Land Rover, S&P said in a statement.

MSCI's Asia ex-Japan stock index fell 0.1 per cent; Japan's Nikkei index fell 2.4 per cent.

Shares in Sharp fell 5.7 per cent on the Tokyo Stock Exchange after the company retrenched nearly 3000 foreign subcontractors.

EUROPE

Germany's DAX Index fell 1.1 per cent, copping the most severe fallout from the doubts about the solidity of the US-China trade talks.

The Stoxx Europe 600 eased 0.8 per cent. The UK's FTSE 100 slumped 0.6 per cent. The stronger sterling dragged on its exporter-heavy constituents.

But the market outperformed its eurozone peers because of gains in its heavyweight oil and gold mining sectors and a flight to defensive stocks, popular at times of economic turmoil.

One standout loser was travel operator Thomas Cook whose share price was down by almost 17 per cent at one point because of growing concerns about its debts. The shares closed 3.9 per cent lower amid fears the stock would be dumped from the midcap index.

The MSCI Emerging Market Index eased 0.5 per cent.

NORTH AMERICA

Wall Street has tumbled more than 3 per cent, led lower by bank and industrial shares, as the US bond market sent unsettling signs about economic growth and investors worried anew about global trade.

A prominent US Federal Reserve official's comments about the path of interest rate hikes added to the uncertainty for investors, as did setbacks for Britain's plans to leave the European Union.

The S&P 500 posted its biggest single-day percentage drop in about two months, giving back some gains from Monday and a week earlier, when the benchmark index tallied its largest weekly percentage gain in nearly seven years.

The small-cap Russell 2000 fell 4.4 per cent, its biggest one-day plunge in more than seven years.

Investors were focused on US Treasury yields, where the benchmark 10-year yield fell to its lowest point since mid-September.

The spread between the 10-year yield over its two-year counterpart also shrank to the smallest in over a decade, a closely-watched signal because a so-called yield curve "inversion," when the two-year yields more than the 10-year bond, preceded all the recessions of the past 50 years.

Part of the curve did invert, with two-year and three-year yields holding above the five-year yield for a second day.

The New York Stock Exchange and Nasdaq will be closed on Wednesday, for a day of mourning for former President George HW Bush, who died on Friday at the age of 94.

Stocks had rallied on Monday following a truce between US President Donald Trump and Chinese President Xi Jinping on their trade dispute following weekend talks in Argentina, but investor optimism over a resolution faded on Tuesday.

Trump himself warned he would revert to tariffs if the two sides could not resolve their differences.

Financial shares, which are particularly sensitive to bond market swings, dropped 4.4 per cent.

The trade-sensitive industrial sector fell 4.4 per cent, with Boeing and Caterpillar declining 4.9 per cent and 6.9 per cent, respectively.

The Dow Jones Transport Average declined 4.4 per cent, its biggest one-day percentage drop since June 2016.

Defensive Utilities eked out a 0.2 per cent gain, the only one of the 11 major S&P 500 sectors in positive territory.

In comments on Tuesday, New York Fed President John Williams said the US central bank should expect to continue raising interest rates "over the next year or so" even while it pays close attention to possible risks highlighted by financial markets.

The comments came after those from Fed chair Jerome Powell last week, which lifted stocks as they were interpreted as suggesting a less aggressive path of rate hikes.

About 9 billion shares changed hands in US exchanges, above the 7.7 billion-share daily average over the last 20 sessions.

 

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