Global Market Report - 2 October
Australian shares are poised for a flat open, but could edge higher after a freshly signed trade deal between the US, Canada, and Mexico eased trade fears.
Australia
Australian shares are poised for a flat open, but could edge higher after a freshly signed trade deal between the US, Canada, and Mexico eased trade fears.
The SPI200 futures contract was up 7 points, or 0.11 per cent, to 6167.0 at 8.30am Sydney time on Tuesday, pointing to a subdued open for the benchmark ASX, which was weighed down by the under-fire financial sector on Monday.
The Aussie was buying 72.21 US cents, from 72.13 US cents at Monday's close.
On Wall Street, the Dow and S&P 500 rose overnight after Canada and Mexico accepted more restrictive commerce in the new US-Mexico-Canada Agreement, which will make it harder for global automakers to build cars cheaply in Mexico.
The Dow Jones Industrial Average rose 192.9 points, or 0.73 percent, to 26,651.21, the S&P 500 gained 10.61 points, or 0.36 per cent, to 2924.59 and the Nasdaq Composite dropped 9.05 points, or 0.11 per cent, to 8037.30.
The banks weighed heavily on the local market on Monday, with the ASX closing lower as findings from the banking royal commission's interim report reverberated.
Banking shares had bounced on Friday amid the less-than-expected fallout after the interim report's release, but those gains were reversed on Monday.
Labor is repeating calls for an extended inquiry into banking misconduct despite the royal commissioner insisting he doesn't need more time. The federal opposition will hear from victims through a series of roundtable talks in cities and towns across Australia, kicking off in Melbourne on Tuesday.
Meanwhile, investors are waiting to see if the Reserve Bank will keep interest rates steady at the record low of 1.5 per cent, as expected, when the board meets on Tuesday afternoon.
Asia
Japan's Nikkei share average rose to a 27-year high on Monday, as an extended weakening in yen helped improved export earnings prospects for Japanese corporations, with a last-gasp deal to salvage NAFTA also lifting sentiment.
The Nikkei ended the day up 0.5 per cent at 24,245.76 after going as high as 24,306.54, its strongest since November 1991.
The Nikkei has risen roughly 7 per cent since the beginning of September, boosted by the yen's depreciation and buying by foreign investors - with the latest data showing their weekly purchases of Japanese equities at the highest since 2014.
Europe
European shares rose on Monday as the new US-Mexico-Canada trade pact lifted some of the gloom over global trade, while Italian stocks extended Friday's slide as top EU officials weighed in on the government's budget plans.
There was no shortage of corporate news to drive the markets either, with Ryanair taking a 12.5 per cent dive after a profit warning, Fresenius boosted by a ruling in its favour, and Linde rising on a regulator's green light for its merger with Praxair.
The euro zone's top stock index rose 0.4 per cent while Germany's trade-sensitive DAX climbed 0.8 per cent.
North America
The Dow Jones index and the S&P 500 have begun the fourth quarter on a positive note, after a last-minute deal to salvage NAFTA as a trilateral pact helped ease trade worries, although major indexes finished off their session highs.
Industrial stocks, and more specifically auto and rail-related shares rose. Ford Motor Co gained 0.8 per cent, while General Motors Co advanced 1.6 per cent. Among railroads, Kansas City Southern rose 2.9 per cent.
The industrial sector, sensitive to trade developments in recent months, was up 0.9 per cent, its best day in five weeks.
The biggest boost to the industrials, however, was General Electric Co, which rose 7.1 per cent and was set for its best day in three-and-a-half years after replacing CEO John Flannery with board member Larry Culp, who, investors hope can transform the company's portfolio more quickly.
October is traditionally one of the tougher months for the S&P, although LPL Financial's senior market strategist Ryan Detrick points out the S&P 500 has averaged a 3.3 per cent return during October in midterm election years.
Aside from industrials, the materials and energy sectors also rose more than 1 per cent. Energy stocks got a boost as crude oil prices hit their highest level since 2014 on a combination of the new trade agreement and US sanctions on Iran.
Small-cap stocks were under pressure, with the Russell 2000 off 1.39 per cent. Smaller names had been seen as more immune to trade pressures and the index is now off nearly 4 per cent from its August 31 high.
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Lex Hall is content editor, Morningstar Australia
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