Global Market Report - September 21

China stocks continued their strong recovery after the Dow Jones and S&P 500 hit records overnight

Morningstar 24/09/2561

Global Market Report

Asia

With the S&P 500 and Dow Jones hitting record highs on Thursday, a chunky rebound on the Shanghai Composite on Friday caps a week in which global investors overcame their anxieties about trade disputes between the US and China. There has been no specific news to herald this change in sentiment and the rhetoric between the two warring sides seems as hostile as ever. China’s plans to reduce import taxes on global goods, which could come as soon as next month, are seen globally as a way of China reducing its dependence on US trade.

The 2.55% rise in the Shanghai index takes it just shy of 2,800 points, a rise of nearly 130 points in the week. This week’s gains should be seen in the context of the abrupt change in sentiment against emerging markets this year – Shanghai was close to 3,600 points early in 2018 and peaked at nearly 5,200 points in summer 2015 before the Chinese stock bubble burst spectacularly.

Japan’s Nikkei was higher on the day that inflation data for August came in better than expected.

Europe

The Salzburg Summit between EU leaders and the UK Prime Minister Theresa May has been received as a humiliating rejection of her earlier Chequers compromise deal – in which the UK would remain in the EU customs union for goods, but not for services. The pound dropped below 1.32 against the dollar but the fall could have been worse, given that the summit appears to increase the prospect of a no-deal Brexit.

The move in the pound, combined with the improved global mood, pushed the FTSE 100 through 7,400 points. Kingfisher (KGF), whose shares fell after recent results, was the index’s biggest riser.

Eurozone stock markets were positive across the board on Friday, but the main exchanges made daily percentage gains of less than 1%.

North America

Canada’s inflation number for August is expected to be one of the highlights of the economics calendar today. The Canadian Consumer Price Index is expected to soften year on year, but core inflation is expected to remain unchanged at 1.9%.

Next week the Federal Reserve is expected to tighten monetary policy once again with a quarter point rise in interest rates.

Companies reporting next week include cruise operator Carnival (CCL) and Nike (NKE), which has recently been in the news for its choice of NFL star Colin Kaepernick in an advertising campaign.

About Author

Morningstar