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Global Market Report - 15 October

Lex Hall  |  15 Oct 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to slip following losses on Wall Street overnight as the stalemate over covid stimulus drags on and mixed earnings results hurt sentiment.

The Australian SPI 200 futures contract was down 13 points, or 0.02 per cent, to 6,148 points at 8.30am Sydney time on Thursday, suggesting a negative start to trading.

Wall Street finished weaker on Wednesday, led lower by Amazon and Microsoft, as investors lost hope that a US fiscal stimulus would be approved before the presidential election in November.

The Dow Jones Industrial Average fell 0.58 per cent to end at 28,514 points, while the S&P 500 lost 0.66 per cent to 3,488.67. The Nasdaq Composite dropped 0.8 per cent to 11,768.73. 

Locally, The Australian Banking Association says almost half of deferred loans are now being repaid again as the nation recovers from the pandemic, according to The Australian.

The S&P/ASX200 benchmark finished down by 16.5 points, or 0.27 per cent, to 6,179.2 on Wednesday. The index finished below the 6,200 level, which it breached on Tuesday for the first time since March. The All Ordinaries index was worse by 12.8 points, or 0.2 per cent, to 6,387.4.

Gold was up 0.6 per cent to $US1,901.92 an ounce; Brent oil was up 2.1 per cent to $US43.34 a barrel; Iron ore was down 1.1 per cent to $US119.52 a tonne. 

Meanwhile, the Australian dollar was buying 71.63 US cents at 8.30am, down from 71.88 US cents at Wednesday’s close.

Asia

China shares ended lower on Wednesday, with property firms among the biggest laggards, on mounting pressure for raising cash under the government's new debt-ratio caps, while profit-taking in agricultural stocks after recent sharp gains also weighed.

At the close, the Shanghai Composite index was down 0.56 per cent at 3,340.78. 

The blue-chip CSI300 index was down 0.66 per cent, with its real estate index down 1.21 per cent and the healthcare sub-index down 0.61 per cent.

Hong Kong shares recovered lost ground to close higher on Wednesday, as tech stocks climbed after Chinese President Xi Jinping's Shenzhen speech emphasised on property rights and protection for entrepreneurs, lifting risk appetite.

At the close of trade, the Hang Seng index was up 17.41 points or 0.07 per cent at 24,667.09. The Hang Seng China Enterprises index rose 0.43 per cent to 9,920.77.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.1 per cent, while Japan's Nikkei index closed up 0.11 per cent.

Europe

European shares ended slightly lower on Wednesday, extending a decline from the previous day as surging coronavirus cases stoked fears of more sweeping lockdowns, with uncertainty over a Brexit trade deal also dampening the mood.

The pan-European STOXX 600 index fell 0.1 per cent, with food and beverage, healthcare and retail stocks leading declines.

Hopes of more stimulus to help businesses ride out the covid-19 pandemic helped European shares track gains in global equities in the past few weeks, but prospects of more lockdowns and signs of a delay in a vaccine have since dented sentiment.

Italian Prime Minister Giuseppe Conte on Tuesday imposed new restrictions on gatherings, restaurants, sports and school activities.

“There is still hope that targeted restrictions might be able to contain the spread of the virus,” said Commerzbank analyst Thu Lan Nguyen.

“If infection trends were to continue, this hope will start to dwindle though (and) it would look to the market as if the US was handling the pandemic better after all.”

London's FTSE 100 fell 0.6 per cent, its third straight day of declines on growing domestic political wrangling over new business restrictions.

A stronger pound also weighed on the export-heavy index as sources said the European Union and Britain were set to prolong Brexit talks past a mid-October deadline imposed by British Prime Minister Boris Johnson.

The EU summit on 15–16 October is set to conclude that progress so far is “still not sufficient” to seal a deal, and will also step up preparations for an abrupt split without provisions to avoid trade tariffs or quotas.

Meanwhile, data on Wednesday showed euro zone industrial production slowed sharply in August as expected, mainly due to a plunge in the output of capital goods even though it was cushioned to some extent by higher production of durable consumer goods.

In company news, Italy's Atlantia  jumped 9.2 per cent to the top of the STOXX 600 after entering exclusive talks until 18 October with state lender Cassa Despositi e Prestiti over the sale of the group's motorway assets.

European food-ordering firm Just Eat Takeaway.com rose 6.5 per cent as it said it had received 46 per cent more orders in the third quarter, thanks to a surge in online orders.

Overall, third-quarter earnings at STOXX 600 firms are expected to have declined by 36.7 per cent year-on-year, smaller than a 50.8 per cent plunge in the second quarter, according to data from Refinitiv.

North America

Downbeat comments from Treasury Secretary Steven Mnuchin that a deal would not likely be made before the vote added to fragile sentiment following a mixed bag of quarterly earnings reports from major Wall Street lenders.

“At this point getting something done before the election and executing on that would be difficult, just given where we are and the level of detail, but we’re going to try to continue to work through these issues,” Mnuchin said at a conference sponsored by the Milken Institute.

US stocks had rallied in recent sessions on optimism that the government would provide a fresh stimulus to reduce damage caused by the coronavirus pandemic.

“Optimism took hold like a rocket last week and now it’s coming back down to earth a little bit,” said Mike Zigmont, head of trading and research at Harvest Volatility Management in New York. “I think a stimulus as a large macro event is already baked into stock prices. It’s just a question of when the details emerge and when the stimulus goes into effect.”

Amazon dropped 2.3 per cent and Microsoft lost 0.9 per cent, both weighing more than any other stocks on the S&P 500.

Bank of America fell 5.3 per cent and Wells Fargo tumbled 6 per cent after disappointing quarterly results.

That left the S&P 500 banks index 2.4 per cent lower.

Third-quarter earnings season is getting under way, with signs of overall improvement in expectations of how badly US companies have been hurt by the pandemic. Analysts expect earnings to fall 19 per cent from a year earlier, according to Refinitiv IBES data, versus a 25 per cent drop forecast on 1 July.

Markets have also begun to digest the prospect of a Democratic victory, strategists and fund managers said.

While many investors view Democratic candidate Joe Biden as more likely to raise taxes, they are increasingly pointing to potential benefits of a Biden presidency, such as greater infrastructure spending and less global trade uncertainty.

UnitedHealth Group Inc dropped 2.9 per cent, despite raising its profit forecast, as the US insurer said it was difficult to predict the fallout of the pandemic on earnings.

is content editor for Morningstar Australia

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