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Global Market Report - 14 February

Lex Hall  |  14 Feb 2020Text size  Decrease  Increase  |  
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Australia

Australian shares look set for a quiet end to the week after world health officials eased fears of a sharp rise in coronavirus cases.

The SPI200 futures contract was flat at 0 points, or 0.00 per cent, at 7029 at 8am Sydney time on Friday.

Global markets dipped on Thursday after a sharp rise in the number of Covid-19 coronavirus cases at the epicentre of the outbreak in China.

But fears were eased after the World Health Organisation said the surge was due to new reporting and officials were not seeing dramatic increases in the spread outside China.

The Australian market ended marginally higher after a record-setting day while European and Asian stocks fell.

US markets were little changed, ending slightly higher to provide a positive lead for the local market on Friday.

The Dow Jones Industrial Average fell 127.75 points, or 0.43 per cent, to 29,423.67, the S&P 500 lost 0.16 per cent and the Nasdaq Composite dropped 0.14 per cent.

Baby Bunting is due to release its results on Friday.

The dollar was trading at 67.20 US cents at 8am on Friday, up from 67.16 US cents as the market closed on Thursday.

Asia

China stocks closed lower on Thursday, after having gained for seven straight sessions, as Hubei province reported a sharp jump in new cases and deaths due to the coronavirus outbreak.

The Shanghai Composite index ended 0.7 per cent lower at 2,906.07. The blue-chip CSI300 index was down 0.6 per cent.

CSI300’s financial sector sub-index was lower by 0.7 per cent, the consumer staples sector fell 0.6 per cent and the healthcare sub-index lost 1 per cent.

Hong Kong stocks fell from a three-week high on Thursday as worries over the coronavirus outbreak heightened after the number of new confirmed cases and deaths soared in China’s Hubei province.

At the close of trade, the Hang Seng index was down 0.3 per cent at 27,730, off its highest level since 24 January hit earlier in the session.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.2 per cent, while Japan’s Nikkei index closed down 0.1 per cent.

Europe

European shares fell marginally for the first time in three sessions on Thursday as a surge in new coronavirus cases in China wiped out any optimism about a slowing spread rate in China, but Linde’s record high on upbeat growth outlook helped offset losses.

London's blue chip index significantly underperformed, down 1.1 per cent as a rallying pound hit its internationally exposed companies, while utility Centrica plunged 15 per cent on reporting a 35 per cent drop in 2019 profit.

The sterling surged 0.7 per cent amid strong expectations that the appointment of a new British finance minister will pave the way for a more expansionary budget next month.

After trading lower in the session the pan-European STOXX 600 index finished flat as the World Health Organisation said cases of coronavirus infections are not rising dramatically outside China, calming some jitters.

The index notched new highs in the last two sessions on optimism over what appeared to be a decline in new cases of infection, as well as a slow restart in factory activity after an extended break in China.

But a dramatic jump in new cases after China deployed a new diagnostic method, and a record rise in the death toll, dashed those hopes and swiftly subdued risk appetite. HSBC lowered its first-quarter forecast for mainland China’s economic growth on Thursday.

While the new charts of infection rates look much more worrying, the number of recoveries is also on the rise, providing some hope that the situation is still moving in the right direction, said Chris Beauchamp, chief market analyst at IG.

Auto stocks slid 0.8 per cent after data showed auto sales in China likely fell 18 per cent in January, their 19th straight month of decline, with the virus outbreak further hurting demand.

Nestle, the biggest firm on the STOXX 600 by market capitalization, dropped 2.2 per cent after it pushed back its 2020 growth target to over the next two years.

Among bright spots were German shares of industrial gases group Linde which rose 3.2 per cent after it said it aims for further profit gain in 2020. Its rise helped Germany’s China-sensitive DAX wipe most of the session’s losses.

Zurich Insurance and Dutch peer NN Group, electrical parts maker Rexel and Commerzbank all rallied to the top of the STOXX 600 after handily topping earnings expectations.

European real estate, utility and healthcare sectors benefited from some defensive buying.

Italian shares managed to weather the rout as Telecom Italia surged after on expectations for M&A moves on its network, while payment firm Nexi jumped on multiple price target hikes after strong earnings.

North America

Wall Street lost ground on Thursday, backing away from record highs as investors digested new coronavirus developments and mixed corporate earnings.

Technology shares led all three major US stock averages lower, with the blue-chip Dow suffering the largest percentage loss.

Hopes that the coronavirus epidemic could be on the wane were soured by a spike in fatalities, with an additional 242 bringing China’s coronavirus death toll to 1367. Additionally, thousands more were diagnosed due to a new testing methodology.

Still, there were glimmers of optimism as the director of the World Health Organisation told a news briefing that “we are not seeing dramatic increases in cases outside China.”

Still, the late session sell-off was relatively muted.

Indeed, in his economic report to Congress earlier this week, US Federal Reserve Chair Jerome Powell said the central bank was assessing the risk of the coronavirus and other potential threats, indicating any change to its accommodative policy was unlikely this year.

The Dow Jones Industrial Average fell 128.11 points, or 0.43 per cent, to 29,423.31, the S&P 500 lost 5.51 points, or 0.16 per cent, to 3373.94 and the Nasdaq Composite dropped 13.99 points, or 0.14 per cent, to 9,711.97.

Of the 11 major sectors in the S&P 500, seven closed in the red, led by industrials.

Defensive utilities and consumer staples sectors enjoyed the largest percentage gains.

The fourth-quarter reporting season is nearing its final approach, with 378 companies in the S&P 500 having posted results. Of those, 71.2 per cent have surprised consensus estimates to the upside, according to Refinitiv data.

Analysts now see aggregate fourth-quarter earnings increasing at a 2.5 per cent annual rate, a stark reversal from the 0.3 per cent decline seen at the beginning of the year.

Cisco Systems Inc dropped 5.2 per cent after providing lackluster forward revenue and profit guidance on its quarterly earnings call.

Tesla rose 4.8 per cent following its announcement that it intends to raise $2 billion in a stock offering.

Alibaba Group warned that the coronavirus sweeping China would hurt its revenue. The e-commerce company’s shares fell 1.8 per cent.

American International Group Inc slipped 6.2 per cent despite reporting better-than-expected quarterly profit on stronger underwriting in its general insurance unit.

Shares of Kraft Heinz Co plunged 7.6 per cent after the packaged food company missed quarterly sales expectations and took a $666 million charge.

NetApp Inc dropped 9.3 per cent following the data storage equipment maker’s current-quarter profit forecast miss.

is content editor for Morningstar Australia

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