Global Market Report - June 8, 2018

World investors switched into anxious mode today as G7 leaders meet in Canada to lock horns over trade

Morningstar 12/06/2561

Asia

Wall Street’s mixed performance on Thursday set up Asia markets for a fall on the final trading day of what has been a positive week. Hong Kong’s Hang Seng and Japan’s Nikkei have been stronger this week but suffered a sharp reversal on Friday.

The G7 meeting in Canada brings trade worries to the fore again, not least because European leaders and Trump have exchanged barbs ahead of the conference – France’s President Macron said pointedly that US Presidents are not forever but trade relationships need to be managed on a long-term basis.

Hong Kong and China markets were the worst performing on Friday, reflecting their sensitivity to trade disputes and any potential tech-related downturn.

Nevertheless, China’s May trade data was positive in the context of the country’s move away from being an export-dominated economy. Imports rose by nearly 16% in May in local currency and exports just 3%. China’s trade surplus is now just under $25 billion.

The Hang Seng’s 500+ points fall today brings the index back below 31,000, bringing it back to roughly where it started on Monday – the Hong Kong market has been in a 2,000 point band between 30,000 and 32,000 points since February and any attempt to break through the latter level has faltered.

Japan was lower but losses were moderated by a drop in the yen against the dollar.

Europe

The UK’s FTSE 100 put its technical problems behind it, and the index was sold off in line with the global trend. BT (BT.) was one of the biggest risers as its chief executive Gavin Patterson said he will step down this year. Patterson is credited with pushing the once monopolistic phone line company into live sports rights. But the recent underperformance of shares and profits has set up a confrontation with shareholders – which now can be avoided. The company’s shares are rated as five-star by BT Morningstar analysts, meaning that they are significantly undervalued.

Recently merged fund company Standard Life Aberdeen (SLA) was one of the biggest fallers on Friday morning as Lloyds Banking Group (LLOY) offloaded its entire 3% stake in the fund manager.

Germany’s Dax, which tends to rally when global markets are upbeat and underperform when investors are gloomy, was one of the biggest fallers in the eurozone today, but Spain’s IBEX wasn’t too far behind.

North America

The Nasdaq has crept to new record highs this week but dropped on Thursday night. US stock market futures are suggesting that the Dow Jones, S&P 500 and Nasdaq are set to open lower today after a reasonably positive week for world equities. Dow futures are predicting a fall of over 130 points at the open.

Canada’s employment data for May will be in focus and the country is expected to have added 22,000 jobs during the month, compared to a drop of over 1,000 posts in April.

Next week the Federal Reserve meets and given the strength of the labour market and other economic data, the Fed is expected to raise interest rates by a quarter point.

 

 

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