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Global Market Report - 11 May

Lex Hall  |  11 May 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is set for a flat start to a week in which the easing of coronavirus restrictions could encourage investors.

The SPI 200 futures contract was up 3.0 points, or 0.06 per cent, to 5,405.0 at 8am Sydney time on Monday, indicating little direction for early trade.

Major US stock indices closed trading higher last week, as did Australia's S&P/ASX200 and All Ordinaries indices.

The Dow Jones Industrial Average rose 455.43 points, or 1.91 per cent, to 24,331.32, the S&P 500 gained 48.61 points, or 1.69 per cent, to 2,929.8 and the Nasdaq Composite added 141.66 points, or 1.58 per cent, to 9,121.32.

The US results were helped by data that showed 20.5 million US jobs were lost in April from the virus impact—a figure lower than economists feared.

AMP Capital chief economist Shane Oliver expected ASX traders' attention to be on the relaxing of coronavirus lockdown measures this week.

Australian state and territory governments are giving people more freedom to mingle, and more businesses are reopening.

Monthly employment figures will be published on Thursday.

Those numbers are expected to be bad but Oliver said they should already be factored into share market thinking.

One Australian dollar bought 65.23 US cents at 8am, the same as Friday's close.

Asia

China stocks closed higher on Friday as investors cheered Beijing opening up its financial markets further to foreign investors and talks between US and Chinese trade officials.

China finalised rules on Thursday that would scrap quotas under two major inbound investment schemes, giving qualified foreign institutions unlimited access to Chinese stocks and bonds.

At the close, the Shanghai Composite index was up 0.83 per cent at 2,895.34 and the blue-chip CSI300 index rose about 1 per cent. For the week, SSEC gained 1.2 per cent, while CSI300 was up 1.3 per cent.

Hong Kong stocks rose on Friday, in line with gains on the mainland, as investors cheered Beijing opening up its financial markets further to foreign investors and talks between US and Chinese trade officials.

China finalised rules on Thursday that would scrap quotas under two major inbound investment schemes, giving qualified foreign institutions unlimited access to Chinese stocks and bonds.

The Hang Seng index closed up 249.54 points or 1.04 per cent at 24,230.17. The Hang Seng China Enterprises index rose 1.07 per cent to 9,868.34. For the week, HSI and HSCE both shed 1.7 per cent.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 1.07 per cent, while Japan's Nikkei index closed up 2.56 per cent.

Europe

European shares closed higher on Friday, clocking weekly gains as signs of improving US-China relations provided a fresh dose of optimism for investors counting on the easing of lockdowns to spark a recovery in global growth.

The pan-European STOXX 600 closed up 0.9 per cent, with dialogue between US and Chinese officials over their phase-1 trade deal soothing investors about a renewed trade spat.

Automobile stocks, which rely heavily on China as a market and a production hub, led gains for the day, rising nearly 3 per cent.

Strong earnings also helped, with ING Groep, the largest Dutch bank, adding 3.6 per cent as it posted first-quarter pretax earnings that beat market expectations.

Siemens rose 4.8 per cent after the German industrial company announced cost-cutting plans to deal with the impact of the pandemic following an 18 per cent drop in industrial profit in the second quarter.

Bourses in Frankfurt and Paris rose 1.4 per cent and 1.1 per cent, respectively. London markets were closed for a public holiday.

The STOXX 600 added about 1.1 per cent for the week, as a series of better-than-expected earnings helped distract investors from a continued stream of weak economic readings due to the coronavirus.

Basic resources stocks were the best weekly performers among the European subindexes, as optimism over the gradual reopening of economies and robust Chinese trade data pushed up commodity prices.

On the other hand, bank stocks lagged most of their peers for the week, as growing discord between Germany and the European Central Bank cast doubts over certain ECB asset purchasing programmes.

Italy for instance, depends heavily on one of the programmes to keep borrowing costs down, and with the country set for its worst post-war recession, its lenders face a surge in bankruptcies.

The country's bank-heavy index lost 1.5 per cent for the week, as markets await decisions from rating agencies DBRS and Moody's on Italy's sovereign debt.

German military equipment and auto parts group Rheinmetall ended largely flat after it forecast significantly lower sales and profits this year due to the pandemic.

Norwegian insurer Storebrand shed 2.9 per cent after Kepler Cheuvreux downgraded the stock to “reduce”.

North America

Major US stock indexes jumped on Friday and logged solid gains for the week after data on historic job losses due to the coronavirus crisis showed they were slightly fewer than feared.

All 11 S&P 500 sectors were positive, led by the beaten-up energy group, which gained 4.3 per cent.

A 2.4 per cent gain in Apple shares also lifted the indexes after the iPhone maker said it will reopen a handful of US stores starting next week.

The US economy lost 20.5 million jobs in April, the Labor Department reported. Economists polled by Reuters had forecast payrolls diving by 22 million, but the decline still marked the steepest plunge since the Great Depression.

The Dow Jones Industrial Average rose 455.43 points, or 1.91 per cent, to 24,331.32, the S&P 500 gained 48.61 points, or 1.69 per cent, to 2,929.8 and the Nasdaq Composite added 141.66 points, or 1.58 per cent, to 9,121.32.

The Nasdaq posted its fifth straight daily gain, its longest such streak since December 2019.

The Cboe Volatility Index, known as Wall Street’s fear gauge, fell 3.46 points to 27.98, its first close below 30 since 26 February.

Financial markets on Thursday began pricing in a negative US interest rate environment for the first time, as investors grappled with the economic consequences of the new coronavirus outbreak.

Stocks have staged a sharp rebound since late March from the coronavirus-fuelled sell-off, helped by massive monetary and fiscal stimulus. The tech-heavy Nasdaq on Thursday erased its 2020 declines and turned positive for the year.

Investors are now watching efforts by a number of states to spark their economies by easing restrictions put in place to fight the outbreak.

Optimism for markets was also fed by news that US and Chinese trade representatives discussed their Phase 1 trade deal, with China saying they agreed to improve the atmosphere for its implementation.

In company news, Uber Technologies shares rose 6 per cent after the company said ride service bookings slowly recovered in recent weeks.

Noble Energy shares gained 13.5 per cent after the company said on Friday it would curtail oil production and further cut its capital spending to cope with a plunge in oil prices.

is content editor for Morningstar Australia

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