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Global Market Report - 12 February

Lex Hall  |  12 Feb 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to weaken despite modest gains on Wall Street as Joe Biden's China warning dimmed sentiment.

The Australian SPI 200 futures contract was down 2 points, or 0.03 per cent, at 6,777 points at 8.30am Sydney time on Friday, suggesting a negative start to trading.

The Nasdaq eked out a modest gain on Thursday with investors betting on more fiscal stimulus, but US President Joe Biden said China was poised to “eat our lunch,” a warning that tempered investor enthusiasm for a market near record highs.

The Dow Jones Industrial Average rose 2.54 points, or 0.01 per cent, to 31,440.34, the S&P 500 gained 8.03 points, or 0.21 per cent, to 3,917.91 and the Nasdaq Composite added 57.55 points, or 0.41 per cent, to 14,030.09.

Locally, an extra $44.5 billion could be dumped on Australia’s $1 trillion debt pile if record low interest rates rise earlier than predicted, with Finance Minister Simon Birmingham warning of major structural adjustments across the national economy as we rebuild from the covid-19 recession, The Australian reports.

Australia's share market has closed little changed after earnings reports aplenty, but none moved the market.

The S&P/ASX200 benchmark index closed lower by 6.8 points, or 0.1 per cent, to 6,850.1 on Thursday.

The All Ordinaries closed down by 11.7 points, or 0.16 per cent, at 7,122.1.

Spot gold was up 0.9 per cent to $US1,826.53/oz; Brent crude -0.4 per cent to $US61.20 a barrel; Iron ore flat at $US166.88 a tonne.

Meanwhile, the Australian dollar was buying 77.49 US cents at 8.30am, up from 77.36 US cents at Thursday's close.

Asia

Hong Kong stocks ended a half-day trading session on Thursday at their highest level since June 2018, as investors squared their positions ahead of the Lunar New Year holidays.

The Hang Seng index gained 0.45 per cent at 30,173.57 while the China Enterprises Index climbed 0.59 per cent to 11,880.49 points.

Chinese markets closed for Lunar New Year break. 

In Japan, the Nikkei index ended 0.85 per cent higher at 28,698.26.

Europe

European shares edged higher on Thursday, still on track to end the week flat, as investors kept close watch on a barrage of earnings reports from companies for clues on the pace of business recovery.

The pan-European STOXX 600 index was 0.3 per cent higher in early trading, after having gained nearly 3.5 per cent so far in February.

“Investors are assessing whether to take some profits after decent gains or continue riding February’s uptrend,” said Hussein Sayed, chief market strategist at FXTM.

The STOXX 600 is about 5 per cent below its peak of February 2020 after a rally of about 50 per cent since it crashed in March, aided by historic monetary and fiscal stimulus.

“However, markets do not move in straight lines and a 5 per cent to 10 per cent correction could happen any time soon ... taking some profits may be something to consider in the short term,” FXTM’s Sayed said.

AstraZeneca rose 1.7 per cent, among the top boosts to the STOXX 600, after the covid-19 vaccine developer beat quarterly product sales estimates and forecast 2021 revenue growth.

European healthcare stocks were up 0.5 per cent, while technology shares added 1.0 per cent and were among the top sectoral gainers.

The banks sector dropped 0.5 per cent as Germany’s Commerzbank tumbled 5.3 per cent after the lender said its loss deepened in the fourth quarter.

France’s second-biggest listed bank Credit Agricole jumped 5 per cent after posting better-than-expected fourth-quarter results.

Danone rose 2.9 per cent after investment company Artisan Partners demanded corporate governance and strategic changes, including separation of the French food group’s chairman and chief executive officer roles.

Schneider Electric rose 1.8 per cent as the French company said encouraging trends in data centres and connected living should help boost its core profit margin and sales this year.

Clariant dropped 2.6 per cent after the Swiss specialty chemicals maker said full-year 2020 sales slipped 5 per cent in local currencies, as demand was hurt by the covid-19 pandemic.

Swedish defence company Saab fell 6 per cent after posting fourth-quarter profits below market forecasts.

Investors also kept a close watch on signs of progress around the proposed $1.9 trillion US stimulus bill, while awaiting a reading on Americans filing applications for weekly unemployment benefits later in the day. 

North America

The Nasdaq eked out a modest gain on Thursday with investors betting on more fiscal stimulus, but US President Joe Biden said China was poised to “eat our lunch,” a warning that tempered investor enthusiasm for a market near record highs.

Gains in Nvidia Corp and Intel Corp helped make technology the only sector on the S&P 500 and Nasdaq to rise, with all others declining.

Biden told a group of US senators in a meeting to discuss the need to upgrade US infrastructure that the United States must raise its game in the face of the challenge from China.

The warning about China and Democrat plans to include raising the minimum wage to $15 in a $1.9 trillion stimulus package showed headwinds for investors could be on the rise, said Ed Moya, senior market analyst at OANDA in New York.

“Markets are starting to get a little bit nervous over the relations between the West and China,” Moya said.

Biden’s first call late Wednesday with China’s President Xi Jinping “resurfaced all of the difficulties that we’re going to face this year in addition to the pandemic,” he said.

The Democrats also are not in agreement on where they stand on the minimum wage, he said. “This is dragging out stimulus talks.”

Mastercard also rose after the credit-card company said it was planning to offer support for some cryptocurrencies on its network this year, joining a string of big-ticket firms that have pledged similar support.

Bank of New York Mellon advanced after saying it had formed a new unit to help clients hold, transfer and issue digital assets, sending Bitcoin to an all-time high of $48,481.

The number of Americans filing new applications for unemployment benefits were 793,000 last week, compared to 812,000 in the prior week, but they are well below the record 6.867 million reported last March when the pandemic hit the US.

Wall Street’s main indexes have hit record highs recently on prospects of the $1.9 trillion relief bill that aims to jump start the US economy, while a largely better-than-expected earnings season also has bolstered sentiment.

Analysts now expect fourth-quarter earnings for S&P 500 firms to grow 3 per cent, versus a 10.3 per cent decline forecast at the beginning of January, per Refinitiv data. Stocks are trading with high multiples, raising fears the market is overvalued.

“The market is certainly fairly valued. I don’t see the overall market as horribly overvalued,” said David Trainer, chief executive of New Constructs, a research firm in Nashville, Tennessee “There are pockets of stocks, we call them micro bubbles, that are extremely overvalued.”

The Dow Jones Industrial Average rose 2.54 points, or 0.01 per cent, to 31,440.34, the S&P 500 gained 8.03 points, or 0.21 per cent, to 3,917.91 and the Nasdaq Composite added 57.55 points, or 0.41 per cent, to 14,030.09.

The tech sector and semiconductors hit record highs, while economy-linked energy and industrials took a back seat after being in the spotlight this year.

US-listed shares of cannabis companies including Tilray and Aphria reversed premarket gains to drop 42 per cent and 20 per cent after the sector caught the attention of Reddit-inspired retail investors this week.

Walt Disney Co was nearly flat ahead of its results after market close.

Pinterest Inc rallied after a report said Microsoft Corp approached the image-sharing company in recent months about a potential buyout. The negotiations were, however, currently not active, according to the report.

With Reuters

is content editor for Morningstar Australia

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