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Global Market Report - 10 September

Lex Hall  |  10 Sep 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to open higher following gains on Wall Street as investors returned to the market to seize on cheap tech stocks.

The Australian SPI 200 futures contract was up 75 points, or 1.28 per cent, to 5,935 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

Wall Street’s main indexes ended higher on Wednesday to snap a three-session losing skid as investors jumped back in to take advantage of the pullback in technology-related stocks, a day after the Nasdaq confirmed correction territory.

The Dow Jones Industrial Average rose 439.58 points, or 1.6 per cent, to close at 27,940.47, the S&P 500 gained 67.12 points, or 2.01 per cent, to 3,398.96 and the Nasdaq Composite added 293.87 points, or 2.71 per cent, to 11,141.56.

The S&P/ASX200 benchmark index closed lower by 129.2 points, or 2.15 per cent, at 5,878.6 on Wednesday. It's the lowest closing position of the index since June 29, when it finished at 5,815.0. The All Ordinaries index finished down by 131.3 points, or 2.12 per cent, to 6,058.9.

Gold was up 0.9 per cent at $US1,948.84 an ounce; Brent oil was up 2.4 per cent to $US40.75 a barrel; Iron ore was down 2.0 per cent to $US126.54 a tonne

Meanwhile, the Australian dollar was buying 72.81 US cents at 8.30am, up from 72.12 US cents at Wednesday’s close.

Asia

China stocks dropped the most in six weeks on Wednesday following Wall Street’s tech rout, with heightened Sino-US tensions and falling oil prices also curbing risk appetite.

Some stock investors rotated into bonds amid signs of tighter regulatory scrutiny and climbing yields.

The blue-chip CSI300 index fell 2.3 per cent to 4,584.59 points, posting its biggest one-day percentage drop since 24 July. The Shanghai Composite Index lost 1.9 per cent to 3,254.63 points.

Hong Kong stocks ended lower on Wednesday, dragged down by tech shares following a tech rout on Wall Street.

At the close of trade, the Hang Seng index was down 155.41 points or 0.63 per cent at 24,468.93. The Hang Seng China Enterprises index fell 1.04 per cent to 9,728.52.

Europe

European shares bounced back on Wednesday, on the eve of the European Central Bank’s policy meeting, as AstraZeneca reversed declines after a report that it may resume its covid-19 vaccine trial next week.

AstraZeneca had to pause global trials of its experimental vaccine after an unexplained illness in a participant. But its shares rebounded from small declines earlier in the session to inch 0.5 per cent higher after the Financial Times report.

The pan-European STOXX 600 index rose 1.6 per cent, with telecoms, insurers and technology stocks leading sectoral advances.

Travel and leisure stocks were the laggards with a 0.9 per cent fall.

The British airline easyJet fell 2.1 per cent, a day after reducing its flying schedule as frequent changes in government travel restrictions hit demand.

Fellow airlines Ryanair and IAG and cruise operator Carnival fell between 3.5 per cent and 6 per cent.

The plane manufacturer Airbus fell 2 per cent after deliveries slipped in August, slowing its recovery from a meltdown in demand induced by the coronavirus.

The STOXX 600 index has been stuck in a tight range since June, but investors are looking to Thursday’s ECB policy meeting as a possible catalyst.

Analysts are not expecting any changes in rate policy, focusing instead on the central bank’s inflation outlook and commentary on the euro’s recent strength.

Investors were following developments around Britain’s plan for life outside the European Union’s single market from 1 January as the UK published legislation that it acknowledged would break a binding agreement with the EU, casting a dark shadow over the latest round of talks on a free trade agreement.

Expectations for third-quarter STOXX 600 earnings have worsened, according to the latest data from Refinitiv.

Profits are now expected to fall 39.2 per cent for the 600 companies listed on the pan-European index, against an expectation of 37.9 per cent a week ago.

North America

Tesla shares rebounded 10.92 per cent after suffering their biggest one-day percentage drop in the prior session, while Apple, Microsoft Corp and Amazon.com—the top three US public companies by market capitalisation—each rose by at least 3 per cent.

Other stay-at-home winners such as Facebook Inc and Google-parent Alphabet Inc also climbed, a day after the tech-heavy Nasdaq ended 10 per cent below its Sept. 2 record closing high, commonly known as a correction. The S&P tech sector notched its biggest one-day percentage gain since 29 April.

Analysts also said the Nasdaq’s ability to hold its 50-day moving average, a technical support level, was key in reversing the market’s direction.

The percentage gains marked the best one-day performance for the S&P since June 5, the Nasdaq since April 29 and the Dow since 14 July.

US stocks have become susceptible to volatility as market leadership has narrowed during the year to a handful of heavyweight tech-related stocks as traders bid up their shares in a rally that triggered a Nasdaq-led rebound for Wall Street from its pandemic lows in March.

The recent pullback has also been driven by worries that sellers of call options would unwind massive amounts of stocks they bought as hedges during the rally.

Media reports last week said SoftBank Group Corp has made big bets on equity derivatives tied to tech firms.

In a sign of growing unease about the positioning in tech stocks, skew, a measure of demand for protective put options in relation to call options, has risen sharply.

Market volatility is expected to further increase in the run-up to the US presidential election, with September and October also historically turbulent months of the year.

In a reversal from the prior three sessions, growth stocks jumped 2.59 per cent to outperform the 1.13 per cent climb in value stocks.

Market participants were watching for signs of a widening in market breadth, supported by improving economic data.

AstraZeneca could resume trials for its experimental coronavirus vaccine next week, the Financial Times reported, after the British drugmaker paused global trials of its experimental covid-19 vaccine. Still, its US-listed shares fell 1.96 per cent.

Tiffany & Co tumbled 6.44 per cent after French luxury goods giant LVMH warned it was set to walk away from its planned $16 billion takeover of the US jeweller.

is content editor for Morningstar Australia

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