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Global Market Report - 11 September

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

Australian shares are set to fall as losses among heavyweight tech stocks pushed Wall Street lower.

The Australian SPI 200 futures contract was down 78 points, or 1.3 per cent, to 5,831 points at 8.30am Sydney time on Friday, suggesting a negative start to trading.

US stocks closed lower after a choppy trading session on Thursday as heavyweight tech-related stocks resumed their decline following a sharp rebound the previous session, while elevated jobless claims reminded investors of a still-difficult recovery ahead.

The Dow Jones Industrial Average fell 405.89 points, or 1.45 per cent, to 27,534.58, the S&P 500 lost 59.77 points, or 1.76 per cent, to 3,339.19 and the Nasdaq Composite dropped 221.97 points, or 1.99 per cent, to 10,919.59.

The S&P/ASX200 benchmark index closed up 29.9 points, or 0.51 per cent, to 5,908.5 points on Thursday. The ASX200 rose to a session high of 5,955.7 in the first 20 minutes of trading before easing for most of the remainder. The All Ordinaries index finished higher by 31.1 points, or 0.51 per cent, to 6,090.0.

Gold was down 0.2 per cent to $US1,942.74 an ounce; Brent oil was down 2.3 per cent to $US39.86 a barrel; Iron ore was down 0.4 per cent to $US126.09 a tonne. 

Meanwhile, the Australian dollar was buying 72.56 US cents at 8.30am, down from 72.82 US cents at Thursday’s close.

Asia

China shares shed early gains to end lower on Thursday, as more than 300 start-ups slumped earlier in the session after regulators moved to curb speculation on the tech-heavy ChiNext board.

The Shanghai Composite index was down 0.61 per cent at 3,234.82, while the blue-chip CSI300 index fell 0.06 per cent. 

Hong Kong shares retreated in the afternoon session to finish lower on Thursday, tracking broad weakness in the mainland market dragged down by a slump in China’s start-up stocks. 

At the close of trade, the Hang Seng index was down 155.39 points or 0.64 per cent at 24,313.54. The Hang Seng China Enterprises index fell 0.46 per cent to 9,683.75.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.72 per cent, while Japan’s Nikkei index closed up 0.88 per cent.

Europe

Major European bourses closed lower on Thursday after the European Central Bank kept its policy rates unchanged and said its existing stimulus measures were sufficient and likely to be used in full.

The pan-European STOXX 600 index dropped 0.6 per cent, as ECB President Christine Lagarde said the central bank is carefully watching the implications of a strong euro. With the economic recovery losing momentum there is an expectation that the bank will at some point provide more stimulus.

“The balanced tone struck by the ECB at today’s meeting was less dovish than many investors may have been expecting,” said Jai Malhi, global market strategist at J.P. Morgan Asset Management.

“The lack of policy change at the ECB is much more to do with the reduced effectiveness of the remaining options at its disposal rather than the central bank being comfortable with the current state of the economy.”

Markets closely followed the latest back and forth between the UK and the European Union involving Britain’s exit from the bloc.

The EU told Britain it should urgently scrap a plan to break their divorce treaty but Prime Minister Boris Johnson’s government refused and instead pressed ahead with a draft law that could sink four years of Brexit talks.

Rate-sensitive European banks fell 0.5 per cent, while travel and leisure stocks bounced 0.7 per cent following steep declines in the previous session.

Among stocks, LVMH shares rose 0.1 per cent, as the French luxury goods group said it would counter-sue Tiffany, accusing it of mismanagement through the coronavirus crisis after the US jeweller accused the French group of trying to bow out of a US$16 billion ($22 billion) acquisition deal.

Buyout firm EQT rose 2 per cent on readying a sale of German energy services firm Getec as it seeks to benefit from high valuations for energy infrastructure assets, people familiar with the matter said.

Volkswagen’s trucks arm Traton dropped 1 per cent after it upped its takeover offer for US peer Navistar to US$43.00 per Navistar share, up from US$35 per share.

Games Workshop jumped 11.7 per cent to the top of the STOXX 600 after saying trading in the three months to end August topped its expectations.

Italy’s Nexi gained 6.8 per cent after a report that the payments firms and SIA are close to clearing a major hurdle to a potential merger.

North America

Names that have rallied since March lows, such as Apple Inc, Microsoft Corp and Amazon.com, all fell at least 2.8 per cent.

Tesla Inc rose 1.4 per cent, initially helping to limit the Nasdaq’s losses before the tech-heavy index’s slide widened.

The NYSE FANG+TM Index, which includes the core FAANG stocks, fell 1.8 per cent, and all 11 sectors of the S&P 500 traded lower.

Wall Street’s main indexes bounced back sharply on Wednesday from their biggest three-day rout since March, as investors returned to tech-focused stocks that are deemed insulated from the current economic downturn.

The number of Americans filing new claims for unemployment benefits remained high last week, Labor Department data showed, as layoffs and furloughs persisted across industries.

In addition, the US Senate on Thursday killed a Republican bill that would have provided around US$300 billion in new coronavirus aid, as Democrats seeking far more funding prevented it from advancing.

Senate Majority Leader Mitch McConnell said in an interview with Fox News the electoral outcome for control of the Senate could go either way.

The S&P tech index was one of the weaker performers on Thursday afternoon, stumbling 2.28 per cent. Despite the recent pullback, the tech index is up about 24 per cent in 2020, far outperforming the benchmark S&P 500’s rise of 3.3 per cent in the same period.

A few notably large, bullish tech-related options positions in Facebook Inc, Adobe Inc and Netflix Inc were partially unwound on Thursday, in line with more cautious sentiment toward tech names, according to Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group.

Many market participants view the sell-off as a bout of turbulence rather than the start of a deeper slide.

The CBOE volatility index climbed on Thursday. The index hit a near three-month high at the start of a historically tumultuous September. Investors have also remained cautious as data paints a mixed picture of US economic health.

A separate report showed US producer prices rose slightly more than expected in August as the cost of services increased solidly.

Energy stocks dropped 3.67 per cent as oil prices extended losses after US data showed a surprise build in crude stockpiles last week and on forecasts for lower global oil demand.

is content editor for Morningstar Australia

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