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Global Market Report - 13 October

Lex Hall  |  13 Oct 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following gains on Wall Street, driven by Amazon and Apple, and optimism over covid stimulus.

The Australian SPI 200 futures contract was up 48 points, or 0.8 per cent, to 6,0161 points at 8.30am Sydney time on Tuesday, suggesting a positive start to trading.

Wall Street ended sharply higher on Monday, fuelled by expectations of a coronavirus relief package and by a rally in Amazon, Apple and other technology stocks ahead of quarterly earnings season.

The Dow Jones Industrial Average rose 0.88 per cent to end at 28,837.52 points, while the S&P 500 gained 1.64 per cent to 3,534.22. The Nasdaq Composite climbed 2.56 per cent to 11,876.26. 

Locally, the second largest shareholder in Link Group says a $5.20-per-share indicative offer made by a private equity consortium of Carlyle Group and Pacific Equity Partners is too cheap, the AFR reports.

The S&P/ASX200 benchmark index closed higher by 29.7 points, or 0.49 per cent, to 6,131.9 on Monday. The index climbed substantially in the last hour of trade.The All Ordinaries index finished better by 30.5 points, or 0.48 per cent, to 6,343.

Gold was down 0.4 per cent to $US1,921.92; oil was down 2.9 per cent to $US39.41 a barrel; Iron ore was down 1.2 per cent to $US124.23 a tonne.

Meanwhile, the Australian dollar was buying 72.13 US cents at 8.30am, down from 72.32 US cents at Monday’s close.

Asia

China stocks extended their rally on Monday to post their biggest daily percentage gain in three months, as investors cheered Beijing's latest policy support for equity markets.

The blue-chip CSI300 index rose 3 per cent to 4,823.16, its best day since July 6, while the Shanghai Composite Index gained 2.6 per cent to 3,358.47 points, its best session since July 20.

The tech-heavy start-up ChiNext added 3.9 per cent and the STAR50 index rose 1.7 per cent.

Hong Kong stocks on Monday tracked gains on the mainland, with the Hang Seng China Enterprises index posting its best day in three months, as investors cheered Beijing's latest policy support for its capital markets.

At the close of trade, the Hang Seng index was up 530.55 points or 2.2 per cent at 24,649.68. The Hang Seng China Enterprises index rose 2.71 per cent to 9,878.74, posting its best daily gain since July 6.

Japanese stocks fell on Monday as concerns about upcoming corporate earnings reports prompted some investors to take profits, with industrial and consumer discretionary sectors leading the decline.

The Nikkei index ended down 0.26 per cent at 23,558.69, while the broader TOPIX fell 0.24 per cent to 1,643.35.

Europe

European shares hit a five-week high on Monday as optimism about a stable economic recovery in China and hopes of more US fiscal stimulus helped offset concerns around surging COVID-19 cases across the continent.

The pan-European STOXX 600 marked a third straight day of gains to end 0.7 per cent higher, led by utilities, technology and autos stocks.

The Trump administration on Sunday called on the US Congress to pass a stripped-down coronavirus relief bill after talks stalled on a more comprehensive stimulus deal.

“Investors have not lost faith that further stimulus measures will follow and that an effective COVID-19 vaccine will soon be placed on the market,” said Milan Cutkovic, market analyst at Axi.

But a jump in domestic coronavirus cases has raised the spectre of fresh lockdowns and cast a shadow over a nascent economic rebound.

With Italy preparing for nationwide curbs, the European Central Bank’s chief economist, Philip Lane, said the euro zone economy was entering a tougher phase. UK Prime Minister Boris Johnson also imposed a tiered system of further restrictions on parts of England, including closing some pubs.

British pub and restaurant owners Marston's and Restaurant Group fell 5.3 per cent and 9.3 per cent, respectively, while the blue-chip FTSE 100 lost 0.3 per cent.

“Investors are walking on thin ice,” Cutkovic said. “Further lockdowns would jeopardise the already fragile economic recovery and have lasting effects on consumer confidence.”

Data on inflation, industrial production and business conditions is due later in the week. All eyes will also be on a European Union summit on 15–16 October, particularly with a UK-imposed deadline for a post-Brexit trade deal.

The Italian bourse ended 0.6 per cent higher, shrugging off a slide in bank stocks as Italian government bond yields fell near record lows on expectations of a new round of stimulus from the European Central Bank.

As the third-quarter corporate earnings season gets under way, analysts expect earnings at STOXX 600 firms to have declined 38 per cent year-on-year in the quarter following a 50.8 per cent slump in the prior quarter, according to Refinitiv data.

The European telecoms index surged to a three-week high, powered by a 6.8 per cent jump for Dutch telecommunications company KPN following a report that Sweden-based private equity firm EQT was considering a takeover.

North America

Apple Inc jumped 6.4 per cent, adding US$128 billion to its stock market value, ahead of an event on Tuesday, when it is expected to unveil its newest iPhones.

Amazon rallied 4.8 per cent ahead of its annual Prime Day shopping event on 13–14 October. Microsoft jumped 2.6 per cent, helping lift the S&P 500 information technology index 2.7 per cent.

The S&P 500 was about 1 per cent below its record closing high from 2 September, nearly recovering from most of a 9 per cent pullback last month.

“Apple is crushing it. There’s some euphoria around the name,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York. “The market leaders are once again the tech names, supported by the fact that the economy continues to expand.”

Optimistic sentiment dominated after the Trump administration on Sunday called on Congress to pass a stripped-down coronavirus relief bill as negotiations on a broader package ran into resistance.

“It looks like the administration wants a deal done before the election,” said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. “Now it’s up to the Republican Senate to figure out how big the number is going to be.”

Many investors view Democratic candidate Joe Biden as more likely to raise taxes, and for months have seen a second term for Trump, who favors deregulation, as better for the overall stock market.

However, with growing expectations of a Democratic win in next month’s presidential election, investors are increasingly pointing to potential benefits of a Biden presidency, such as greater infrastructure spending and less global trade uncertainty.

Betting odds aggregated by RealClearPolitics suggest bettors see a 67 per cent chance Biden will win and a 33 per cent chance for Trump, the greatest gap so far between the two candidates.

With the 15 October presidential debate officially cancelled, Trump plans to travel to key battleground states this week as his doctor declared he was no longer a transmission risk for the novel coronavirus.

Results from big US banks will be in focus this week, with JPMorgan & Co and Citigroup set to report on Tuesday.

Overall, analysts expect third-quarter earnings for S&P 500 companies to fall 21 per cent from a year earlier, smaller than a 31 per cent slump in the second quarter.

“Earnings are expected to be negative, but I think most people would say, ‘Yes, but we set the bar so low that we will probably beat Q3 numbers the way we beat Q2 numbers’,” said Sam Stovall, chief investment strategist at CFRA in New York.

The S&P 500 energy index fell 0.15 per cent as oil prices dropped on easing supply worries.

Twitter Inc jumped 5.1 per cent after Deutsche Bank upgraded the social media company’s shares to “buy” on expectations of continued growth in 2021.

is content editor for Morningstar Australia

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