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Global Market Report - 12 February

Lex Hall  |  12 Feb 2020Text size  Decrease  Increase  |  
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Australia

A flat open is tipped for Australian shares even though major US and European markets surged to fresh records overnight amid renewed coronavirus hopes.

The SPI200 futures contract was higher at 7000 points at 8am Sydney time on Wednesday despite another strong performance from US stocks overnight.

The Dow industrials, S&P 500 and Nasdaq all set new records and European stocks jumped higher after China's senior medical adviser suggested the deadly coronavirus may be over by April.

The World Health Organisation, or WHO, has characterised the coronavirus as a "very grave" international threat. The virus has killed more than 1000 people.

However the assurance from the Chinese medical adviser has eased investors' minds. Oil prices lifted on the outlook.

Meanwhile, in local profit reporting Commonwealth Bank has beaten market expectations with a $4.48 billion first-half cash profit amid pressure from record low interest rates and rising costs.

The Aussie dollar is buying 67.14 US cents from 67.16 US cents at Tuesday's close.

Asia

China shares closed higher for a sixth straight session on Tuesday as a fall in new cases of the coronavirus in China lifted investor sentiment.

The Shanghai Composite index closed 0.4 per cent higher at 2,901.67. The blue-chip CSI300 index gained 0.9 per cent.

CSI300’s financial sector sub-index rose 0.8 per cent, the consumer staples sector was up 1.7 per cent, the real estate index climbed 1.2 per cent and the healthcare sub-index edged up 0.4 per cent.

Hong Kong shares rose on Tuesday as the pace of new coronavirus infections in mainland China slowed, providing some respite to investors in the city and across the region.

The Hang Seng Index climbed 1.3% to 27,583.88 points, their highest since 24 January. H-shares rose 1.5 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by almost 1 per cent.

Europe

German shares hit a record high on Tuesday, leading European stocks to a record too amid hopes the coronavirus outbreak may plateau soon and that the impact on the global economy might not be significant as feared.

Deutsche Telekom jumped nearly 4 per cent, driving the rally in Frankfurt's DAX, after the telecom giant's T-Mobile and wireless carrier Sprint got US approval for a merger initially valued at $26 billion.

Shares in Nordic network equipment makers Nokia and Ericsson also rallied on news of the US approval, helping Europe’s technology index end at its highest in more than 18 years.

The DAX closed up 1 per cent at 13,627.84 with gains across the board. The pan-European STOXX 600 index, which had its highest opening on Tuesday, powered 0.9 per cent higher during the day to set a new closing best.

Globally, sentiment was lifted by the slowing number of new coronavirus cases in China. A top Chinese health adviser’s suggestion that the epidemic may plateau in the next few weeks and be over by April further fuelled risk appetite, even as the death toll climbed above 1000.

Markets have seen several volatile weeks following the news of the virus outbreak as investors worried about the extent of economic disruption.

Travel company TUI led gains on the STOXX 600, rising 13 per cent, after it raised the lower end of its annual earnings outlook, citing strong holiday demand.

Overall, the travel and leisure sector rose 1.9 per cent. Worries over travel disruptions caused by the virus had led to a heavy sell-off in the sector over the past few weeks.

Other China-exposed firms such as chipmaker ASML and Hong Kong-focused bank HSBC were among the companies giving the STOXX 600 index the biggest boost.

Basic resources stocks rose 1.7 per cent on an uptick in iron ore and base metal prices while energy stocks tracked a rebound in oil prices from 13-month lows.

But capping gains were shares of NMC Health, which fell 16 per cent after buyout firm KKR said it did not intend to make an offer for the troubled healthcare company. NMC had shot up 24 per cent on Monday after it revealed KKR’s approach.

North America

S&P 500 and the Nasdaq inched to their second consecutive record closing highs on Tuesday as Chinese officials said the deadly coronavirus epidemic could be contained by April.

But the Dow closed flat, and the S&P 500 and the Nasdaq pared their gains after the Federal Trade Commission issued orders to large tech companies to provide information on mergers that were too small to report to antitrust regulators.

Microsoft Corp was the biggest drag on all three major US stock indexes following FTC’s demand for data from company. Data was also requested from Alphabet Inc Amazon.com, Apple Inc and Facebook Inc.

Market participants watched closely as US Federal Reserve Chair Jerome Powell began his semiannual economic update before congress.

Powell’s remarks reiterated his view that the economy, in its 11th year of expansion, remains “resilient,” but that the central bank was closely monitoring potential risks, including the coronavirus.

The Dow Jones Industrial Average was flat, the S&P 500 gained 5.66 points, or 0.17 per cent, to 3,357.75 and the Nasdaq Composite added 10.55 points, or 0.11 per cent, to 9638.94.

Of the 11 major sectors in the S&P 500, all but communications services, consumer staples and technology closed in positive territory, with real estate showing the largest percentage gain.

T-Mobile shares jumped 11.8 per cent after a federal judge approved its purchase of Sprint, clearing the path for a deal originally valued at $26 billion.

Sprint surged 77.5 per cent, while larger rival Verizon Communications Inc slid 2.6 per cent.

Cell tower operators, including SBA Communications Corp, American Tower Corp and Crown Castle International Corp, gained between 4 per cent and 7 per cent on expectations that the deal could increase tower demand.

Under Armour Inc tumbled 16.7 per cent after the sportswear company forecast a surprise drop in 2020 profit.

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