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Global Market Report - 12 October

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

Australian shares are set to dip despite continued gains on Wall Street on Friday amid further optimism over covid stimulus.

The Australian SPI 200 futures contract was down 5 points, or 0.1 per cent, to 6,091 points at 8.30am Sydney time on Monday, suggesting a negative start to trading.

US stocks rose on Friday and the S&P 500 and Nasdaq registered their biggest weekly percentage gains since July as optimism over more federal fiscal aid grew.

The Dow Jones Industrial Average rose 161.39 points, or 0.57 per cent, to 28,586.9, the S&P 500 gained 30.31 points, or 0.88 per cent, to 3,477.14 and the Nasdaq Composite added 158.96 points, or 1.39 per cent, to 11,579.94.

Locally, the board of AMP wants to provide a shareholder update on the potential sale of all or parts of the 171-year-old wealth group before the year’s end, as several investors ramp up pressure for a break-up of the company, The Australian reports.

The S&P/ASX200 benchmark index closed up 0.2 points, or 0 per cent, to 6,102.2 on Friday. The index gained 5.36 per cent this week, its best since a 6.31 per cent rise on April 10. The All Ordinaries index finished higher by 6.7 points, or 0.11 per cent, to 6,312.5.

Gold was up 1.9 per cent at $US1,930.40 an ounce; Brent oil was down 1.1 per cent to $US42.85 a barrel; Iron ore was up 1.8 per cent to $US125.72 a tonne.

Meanwhile, the Australian dollar was buying 72.13 US cents at 8.30am, up from 71.82 US cents at Friday’s close.

Asia

China shares ended higher on Friday as mainland markets resumed trade following a week-long break, with investors being encouraged by official data that showed signs of economic recovery and a rebound in tourism during the holiday week.

Tourism sites were visited by 637 million domestic tourists over the eight-day National Day holiday that started 1 October, 79 per cent of last year’s total, China’s Ministry of Culture and Tourism said in a statement on Thursday.

At the close, the Shanghai Composite index was up 1.68 per cent at 3,272.08, while the blue-chip CSI300 index closed 2.04 per cent firmer.

Hong Kong’s main Hang Seng index finished lower on Friday, weighed down by financial shares, but it closed nearly 3 per cent up for the week on rising investor hopes for more US stimulus and the prospect of Democratic victories in US elections in November.

At the close of trade, the Hang Seng index was down 74.22 points or 0.31 per cent at 24,119.13, but gained 2.81 per cent for the week.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.76 per cent, while Japan’s Nikkei index closed down 0.12 per cent.

Europe

European stocks posted a second consecutive week of gains on Friday as bumper forecasts from Denmark’s Pandora and Novo Nordisk set a brighter tone for the earnings season, while investors kept an eye out for signs of fresh US stimulus.

The STOXX 600 index ended up 0.6 per cent to close the week with a gain of 2.1 per cent.

Global equities advanced this week as growing expectations the Democratic party will win US elections next month revived hopes for more economic stimulus there.

In Europe, a string of mergers and acquisitions as well as a rebound in beaten-down sectors like travel & leisure, banks and oil & gas lifted regional markets.

Shares of aircraft engine maker Rolls Royce have almost doubled in value since Monday, while British Airways owner-IAG jumped 13.2 per cent.

Jewellery maker Pandora rose 17.2 per cent to the top of STOXX 600 on Friday after hiking its profit guidance on stronger sales and a big boost to its online business.

Drugmaker Novo Nordisk gained 3.3 per cent after raising its 2020 sales and operating outlook.

German online fashion company Zalando rose 3.2 per cent and Global Fashion Group surged 24.0 per cent after upgrading their earnings outlook.

Companies on the STOXX 600 are expected to post a profit decline of 38 per cent in the third quarter and 22.7 per cent in the current quarter, according to Refinitiv data, as businesses recoup from the coronavirus-driven hit.

“Even though we’ve had rising infection rates in developed markets for the best part of the month, there hasn’t been any negative impact on consensus earnings forecasts,” said Alastair George, head strategist at Edison Investment Research.

“As long as strict lockdowns can be avoided, equities are likely to continue to make progress on the back of very loose monetary policy and global stimulus packages as well.”

Europe surpassed 100,000 daily reported covid-19 cases for the first time on Thursday, after countries such as Russia and the United Kingdom saw no respite in the mounting number of infections every day in the past five days.

However, UK stocks got a boost as British finance minister Rishi Sunak announced his latest programme to try to stave off a surge in unemployment.

Euronext declined 4.4 per cent after hitting a record high last week. London Stock Exchange accepted a 4.325 billion euro ($7 billion) cash offer from the pan-European bourse operator for the Milan stock exchange.

German chemicals group BASF fell 3.8 per cent as it slashed its outlook after heavy writeoffs in third quarter.

North America

Talks were expected to continue on a covid-19 stimulus package, even though US House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin failed on Friday to reach agreement.

Mnuchin floated a new proposal Friday afternoon, but an aide for Pelosi said it lacked a broad plan to contain the pandemic.

Recent trading on Wall Street has been dictated by headlines on fiscal aid, with the three main indexes tumbling on Tuesday after US President Donald Trump called off negotiations. He has since indicated he was willing to resume discussions.

“The market’s reacting well to Trump’s sudden turnaround in terms of a support package,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “A lot of this has been politics, but a lot of people believe the economy really needs some economic support here, so that’s a good thing.”

The S&P 500 technology shares rose 1.5 per cent, and the sector gave the S&P 500 its biggest boost. The small-cap Russell 2000 index climbed 6.4 per cent for the week, posting its biggest percentage gain since early June.

For the week, the S&P 500 rose 3.8 per cent and the Nasdaq climbed 4.6 per cent, their biggest weekly percentage gains since July. The Dow added 3.3 per cent, its biggest weekly gain since August.

Strategists say investors have also begun to digest the possibility of Democratic candidate Joe Biden winning the 3 November presidential election after a fractious debate last month led to a jump in his lead over Trump in several national polls.

Xilinx Inc surged 14.1 per cent after a report said Advanced Micro Devices Inc was in talks to buy the chipmaker in a deal valued at more than US$30 billion ($41 billion). General Electric Co rose 2.9 per cent as a report said Goldman Sachs reinstated coverage on the US industrial conglomerate with a "buy" rating, saying the company will emerge stronger from the covid-19 pandemic.

The S&P 500 energy index fell 1.6 per cent following recent gains.

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