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Global Market Report - 12 May

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

The Australian share market is poised to open slightly lower after mixed results across US markets overnight.

The SPI 200 futures contract was down 19 points, or 0.35 per cent, to 5,459.0 at 8am Sydney time on Tuesday, indicating a marginal loss in early trade.

Wall Street was split as continued gains for technology and health care stocks helped cover more prevalent losses elsewhere. Almost 70 per cent of stocks fell on the S&P 500.

The index ended the day at a virtual standstill, up just 0.39 points at 2,930.19.

In Australia on Tuesday, Treasurer Josh Frydenberg is expected to give an update on the economy.

This will include an estimate of the federal budget balance, which will be greatly revised due to the economic impact of the coronavirus pandemic.

On the share market, building products manufacturer CSR will provide its full-year results.

The S&P/ASX200 benchmark index finished Monday up 70.1 points, or 1.3 per cent, at 5,461.2 points, while the All Ordinaries index gained 71.1 points or 1.3 per cent, to 5,559.1.

A stronger US dollar weighed on its Australian counterpart overnight.

One Australian dollar buys 64.90 US cents at 8am, down from 65.40 US cents at the close of trade on Monday.

Gold is trading at $US1,695.77 an ounce.

Asia

China stocks shed early gains to end a tick lower on Monday, amid renewed concerns over the coronavirus outbreak as Wuhan reported its first cluster of infections since the lockdown was lifted a month ago.

At the close, the Shanghai Composite index was down 0.02 per cent at 2,894.80.

The blue-chip CSI300 index was down 0.09 per cent, with its financial sector sub-index climbing 0.06 per cent, the consumer staples sector dropped 0.79 per cent, the real estate index down 0.01 per cent and the healthcare sub-index down 1.59 per cent.

Hong Kong shares tracked Wall Street higher on Monday, on course for their best session since 7 April, as more countries looked to restart their economies.

The Hang Seng Index was up 1.97 per cent at 24,706.50.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.79 per cent, while Japan’s Nikkei index closed up 1.05 per cent.

Europe

European stocks closed lower on Monday, with banks, miners and travel stocks bearing the brunt of investor worries of a second wave of coronavirus cases as many countries emerge from lockdowns.

The pan-European STOXX 600 shed 0.4 per cent after gaining nearly 1 per cent at the open, when a post-holiday catch-up for UK shares supported markets.

As the session wore on, cyclical sectors—more exposed to the health of the global economy—took a hit as investors focused on news that Germany and South Korea reported an acceleration in new coronavirus infections after steps to ease their restrictions.

That dented optimism as France tiptoed out of one of Europe’s strictest lockdowns, while British Prime Minister Boris Johnson set out a cautious plan to get Britain back to work.

Europe’s mining index led losses as shares in the world’s largest steelmaker, ArcelorMittal, slumped 16.2 per cent after Moody’s downgraded its rating to Ba1 as the credit rating agency expects economic conditions to materially worsen in 2020 due to the pandemic.

Returning from a holiday-extended weekend, Britain’s FTSE 100 closed flat and mid-cap shares rose 0.1 per cent, catching up with a global rally on Friday on easing US-China tensions.

However, shares in Britain’s low-cost carrier easyJet fell 6 per cent and British Airways-owner IAG dropped 3 per cent as the British government said it would introduce a 14-day quarantine period for most people arriving from abroad.

French stocks took a hit as Airbus SE dropped 2.8 per cent after Australia’s Qantas Airways said it did not expect to take delivery of any new planes in the near term as it grapples with a plunge in demand due to the pandemic.

Aircraft engines maker Safran dropped 3.2 per cent.

Despite a feeble start to the month, European shares have recovered more than 26 per cent since mid-March lows as investors pinned their hopes on a swift economic recovery after countries started to ease lockdowns and policymakers’ support to ailing economies.

That helped markets look past a staggering 20.5 million US job losses in April, while Germany’s Ifo institute said that many industries were cutting jobs, noting that 39 per cent of automotive companies, 50 per cent of hotels, 58 per cent of restaurants and 43 per cent of travel agencies had shed staff in April.

Among gainers, German payments company Wirecard jumped 8.3 per cent after announcing a reshuffle of its management board amid allegations including accounting irregularities and disclosure violations, which it denied.

Frankfurt-listed real estate firm LEG Immobilien gained 3.8 per cent after it confirmed its earnings forecast for 2020 after reporting first-quarter results.

Italian lenders bucked the gloom in Europe’s banking sector with a 0.6 per cent rise, on relief that Moody’s spared the country of a rating downgrade on Friday.

North America

The S&P 500 closed barely higher, eking out a nominal gain on Monday as investors weighed new spikes in coronavirus infections with expectations that an economy crippled by mandated shutdowns will soon be re-opened for business.

Technology and healthcare shares provided the biggest lift to all three major US stock indexes and led the tech-heavy Nasdaq to its sixth consecutive advance.

The blue-chip Dow lost ground.

The S&P 500 and Dow Jones Industrial Average remain within 20 per cent of all-time highs reached in February, and the Nasdaq is within 10 per cent of its closing record.

Indeed, despite bleak recent economic data, including Friday’s 20.2 million drop in US payrolls, Wall Street has gained in recent weeks as investors look beyond pandemic to recovery.

But a surge of new coronavirus infections in Germany and South Korea suggested early efforts to lift restrictions could be premature, even as businesses around the world, shuttered by social distancing restrictions, begin re-opening their doors.

The Dow Jones Industrial Average fell 109.33 points, or 0.45 per cent, to 24,221.99, the S&P 500 gained 0.39 points, or 0.01 per cent, to 2,930.19 and the Nasdaq Composite added 71.02 points, or 0.78 per cent, to 9,192.34.

Of the 11 major sectors in the S&P 500, four closed in the black, with healthcare enjoying the largest percentage gain.

First-quarter earnings season is nearing the final stretch, with 440 of the companies in the S&P 500 having reported. Of those, 67.5 per cent have beaten Wall Street estimates, according to Refinitiv data.

In aggregate, S&P 500 earnings are seen to have dropped by 12.1 per cent in the first quarter, compared with a year ago.

Drug distributor Cardinal Health Inc jumped 6.7 per cent as the pandemic boosted third-quarter sales.

Chesapeake Energy Corp slid 12.2 per cent after it said bankruptcy is among the options under consideration as the shale driller copes with plummeting oil and gas prices.

Marriott missed first-quarter profit margins by a wide margin as bookings plunged. The hotel operator’s shares lost 5.6 per cent.

Shares of Under Armour plunged 9.7 per cent after the athletic wear company forecast a 50 per cent to 60 per cent drop in the second quarter as many of its stores remain shuttered.

Packaged food company General Mills said it expects to surpass its fiscal 2020 sales expectations as consumers stock their pantries amid lockdowns, sending its stock up 1.8 per cent.

is content editor for Morningstar Australia

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