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Global Market Report - 14 September

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

Australian shares are set for a modest rise after Wall Street posted another week of losses, including further declines in tech stocks.

The Australian SPI 200 futures contract was up 4 points, or 0.1 per cent, to 5,852 points at 8.30am Sydney time on Monday, suggesting a slightly positive start to trading.

The Nasdaq slid and the S&P 500 closed little changed on Friday as early gains in technology and growth names faded, with each of the three major Wall Street averages posting their second straight weekly decline.

The Dow Jones Industrial Average closed up 131.06 points, or 0.48 per cent, to 27,665.64. The S&P 500 gained 1.78 points, or 0.05 per cent, to 3,340.97 and the Nasdaq Composite dropped 66.05 points, or 0.6 per cent, to 10,853.55.

The S&P/ASX200 benchmark index finished lower by 49.1 points, or 0.83 per cent, to 5859.4 points on Friday. The index was down 1.12 per cent for the week. The All Ordinaries index lost 51.1 points, or 0.84 per cent, to 6038.9.

Gold was down 0.3 per cent to $US,1940.55 an ounce; Brent oil was down 0.6 per cent to $US39.83 a barrel; Iron ore was up 1.8 per cent to $US128.37 a tonne.

The federal reserve will meet later this week and investors will be watching for guidance on its long-term low interest rate strategy.

Locally, the ABS will release labour force data on Thursday.

Meanwhile, the Australian dollar was buying 72.77 US cents at 8.30am, down from 72.82 US cents at Friday’s close.

Asia

China’s main Shanghai Composite index closed up 0.79 per cent at 3,260.35 points, while the blue-chip CSI300 index ended 0.99 per cent higher.

Hong Kong shares bounced on Friday, as investors snapped up tech stocks hit by this week’s sell-off, though the benchmark index ended lower for the week as economic worries and Sino-US tensions continued to weigh on sentiment.

At the close of trade, the Hang Seng index was up 189.77 points or 0.78 per cent at 24,503.31. The Hang Seng China Enterprises index rose 0.71 per cent to 9,752.5.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.04 per cent, while Japan’s Nikkei index closed up 0.74 per cent.

Europe

European shares ended a choppy trading session higher on Friday, as investors weighed signs of a pick up in M&A activity against the economic threat from growing prospects of a no-deal Brexit.

The pan-European STOXX 600 index rose 0.1 per cent and ended the week about 1.8 per cent higher. The index has been in a holding pattern since June as economic growth lost momentum due to a stronger euro, increasing the cost of European exports.

Meanwhile, the EU is ramping up preparations for a tumultuous end to the four-year Brexit saga as top officials prepared to brief its 27 members on British Prime Minister Boris Johnson’s plan to break the divorce treaty.

“The Brexit talks could turn into another major headache for investors,” said Milan Cutkovic, market analyst at AxiCorp.

“UK Prime Minister Boris Johnson still intends to rewrite the UK’s Brexit treaty, even as the EU is threatening to take legal actions and the chances of securing a trade deal are decreasing.”

Most of the major sector indexes were lower, a day after the ECB held interest rates steady and said it was closely watching the euro.

Oil and gas stocks were among the biggest decliners as crude prices fell, while defensive plays including healthcare, telecoms and real estate edged higher.

M&A activity took centre stage, with Altice Europe's shares soaring 24.4 per cent to a three-month high and on top of the STOXX 600 after it agreed to be bought by its founder Patrick Drahi.

Swiss frozen baked goods maker Aryzta jumped 12.5 per cent after it said it was in advanced talks with private equity firm Elliott Advisors over a takeover deal.

The pan-European Euronext exchange edged 1.7 per cent higher as it confirmed with Italian state lender Cassa Depositi e Prestiti (CDP) that they were in talks to buy the Milan stock exchange Borsa Italiana.

France's CAC 40 index saw some changes to its components. Accor dropped 4.3 per cent on its exclusion from the index, while Alstom jumped 1.6 per cent on being included.

North America

After hitting a record high of $61.86, shares of Oracle Corp turned lower along with the rest of the technology sector, which closed down 0.75 per cent. The cloud services company's earnings beat estimates as it signalled a recovery in client spending due to higher demand led by the work-at-home trend.

The tech sector posted its fifth decline in six days and biggest weekly percentage decline since March as investors sold companies such as Apple that have spearheaded the dramatic rally from coronavirus-driven lows in March. Apple shares slid 1.31 per cent.

The path of least resistance for stocks is volatile and probably a bit lower from here, said Art Hogan, chief market strategist at National Securities in New York.

“Just because we shaved 10 or 11 percent off the Nasdaq in three days doesn’t mean that is the end of the nervousness and that is kind of where we are right now,” Hogan said.

Growth stocks, which include many tech names along with others that have benefited from government-imposed lockdowns such as Amazon.com, fell 0.26 per cent while value names edged up 0.54 per cent. Amazon fell 1.86 per cent.

About once a month the market experiences several days or a bit more of investors dropping growth for value, said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

“While growth isn’t cheap, it is growth and a lot of these companies are doing well during the pandemic so I wouldn’t be surprised to see money coming back to them,” Ghriskey said.

For the week, the Dow fell 1.66 per cent, the S&P lost 2.51 per cent and the Nasdaq dropped 4.06 per cent.

Industrials and financial stocks, up 1.39 per cent and 0.76 per cent respectively on Friday, provided the biggest boost to the benchmark index. Material was the only S&P sector to end higher on the week.

Gains in Home Depot and Caterpillar, up 1.33 per cent and 2.65 per cent respectively, led the Dow industrials to close up.

Many investors view the recent slump as a healthy consolidation after a stunning five-month rally in the S&P 500 that was powered by a narrow group of heavyweight tech companies and massive amounts of fiscal and monetary stimulus.

Meanwhile, the latest data showed US consumer prices increased solidly in August, but the labour market’s slack is likely to keep a lid on inflation as the economy recovers from the covid-19 recession.

Another beneficiary of coronavirus lockdowns, exercise bike maker Peloton Interactive, gave up early gains and closed down 4.23 per cent, even as it reported forecast-beating quarterly revenue due to a surge in subscribers and increased demand for its fitness products during the pandemic.

is content editor for Morningstar Australia

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