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Global Market Report - 16 October

Lex Hall  |  16 Oct 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to fall as the ongoing stimulus stalemate in the US extended losses on Wall Street.

The Australian SPI 200 futures contract was down 10 points, or 0.2 per cent, to 6,189 points at 8.30am Sydney time on Friday, suggesting a negative start to trading.

The S&P 500 ended lower on Thursday after a rise in weekly jobless claims compounded worries about a stalling economic recovery and fading hopes for more fiscal aid before the election.

The Dow Jones Industrial Average fell 0.07 per cent to end at 28,494.2 points, while the S&P 500 lost 0.15 per cent to 3,483.34. The Nasdaq Composite dropped 0.47 per cent to 11,713.87.

Locally, Virgin Australia’s days as a full-service airline are set to end with the departure of chief executive Paul Scurrah, exposing Australians to a new style of carrier pioneered in the U.S., The Australian reports.

Shares have closed higher and above 6,200 points for the first time since March as the Australian market defied a negative US lead. The S&P/ASX200 benchmark closed higher by 31.1 points, or 0.5 per cent, to 6,210.3 on Thursday. The All Ordinaries index finished up by 26.8 points, or 0.42 per cent, to 6,414.2.

Gold was up 0.2 per cent at $US1,905.61 an ounce; Brent oil was down 0.4 per cent to $US43.14 a barrel; Iron ore was down 0.7 per cent to $US118.70 a tonne.

Meanwhile, the Australian dollar was buying 70.91 US cents at 8.30am, down from 71.33 US cents at Thursday’s close.

Asia

China shares ended lower on Thursday, erasing earlier gains after data showing falling factory gate prices and weak consumer inflation in September underscored persistent challenges facing the economy as it recovers from the covid-19 pandemic. 

At the close, the Shanghai Composite index was down 0.26 per cent at 3,332.18. The blue-chip CSI300 index fell 0.17 per cent.

Hong Kong shares slumped on Thursday as investor sentiment took a blow from escalating Sino-U.S. tensions, a surge in global covid-19 cases and the impasse over a U.S. stimulus package to boost the world’s largest economy.

At the close of trade, the Hang Seng index was down 508.55 points or 2.06 per cent at 24,158.54. The Hang Seng China Enterprises index fell 1.6 per cent to 9,762.28.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.2 per cent, while Japan’s Nikkei index closed down 0.51 per cent, with sentiment hurt by a surge in global covid-19 cases, elusive U.S. stimulus and Sino-US tensions.

Europe

European shares sank on Thursday as a resurgence in covid-19 cases across the continent and fading hopes for more US fiscal stimulus before the presidential election dented demand for equities globally.

The pan-European STOXX 600 index fell 2.1 per cent in its worst day in more than three weeks, with autos, insurance and energy stocks tumbling more than 2 per cent.

Bank shares tracked a decline in bond yields, shrugging off signs of a pickup in M&A activity after a report said Italy's Banco BPM and France's Credit Agricole had signed a confidentiality agreement in a first step toward formal talks over a possible merger.

“Investors are unnerved by what’s going on with covid-19 and how that is negatively impacting jobs and the ability for many businesses to succeed,” said Russ Mould, investment director at AJ Bell.

“It’s becoming more apparent that the pandemic could still be raging well into 2021 and so economic prospects have become even more clouded.”

European stock markets bounced from the coronavirus lows hit in March on a raft of global stimulus, but sentiment has recently taken a hit from the surge in infections as well as signs of a slowing economic rebound.

France has imposed curfews and other European nations are closing schools and cancelling surgeries in an attempt to contain the resurgence ahead of the winter season.

Bourses in France, Italy, Spain and Germany fell between 1.4 per cent and 2.8 per cent.

The UK’s FTSE 100 was down 1.7 per cent as the government imposed tighter restrictions in London, while investors looked for signs of progress towards a Brexit trade deal at the two-day European Union summit that began on Thursday. 

EU leaders said agreeing a “fair” new partnership with Britain was “worth every effort” but that the bloc would not compromise at any cost and was ready for an abrupt split in trade worth a trillion euros every year.

“It’s not in anyone’s interest if the UK leaves the EU without a deal and markets are so far leaning towards an 11th-hour Brexit agreement,” said Hussein Sayed, a market strategist at FXTM.

In company news, Swiss drugmaker Roche shed 3.5 per cent even as it posted record revenue in its diagnostics division that offset declining drug sales and kept it on track to meet its full-year 2020 targets.

Ryanair fell 4.3 per cent as it said it would cut its planned winter capacity by a third due to the wave of travel restrictions imposed by European governments.

North America

The number of Americans filing new claims for jobless benefits rose to a two-month high last week, stoking fears the covid-19 pandemic was inflicting lasting damage to the labour market.

A separate report showed manufacturing activity in New York State fell more than expected in October.

“Going into the fall it will be difficult for unemployment to make a lot of positive headway because of the lack of stimulus,” said Christopher C. Grisanti, chief equity strategist, MAI Capital Management in Cleveland.

U.S. President Donald Trump said he is willing to raise his offer of $1.8 trillion for a covid-19 relief deal with Democrats in Congress, but the idea was shot down by his fellow Republican, Senate Majority Leader Mitch McConnell.

The CBOE volatility index, investors’ fear gauge, hit a one-week high and Wall Street’s indexes dipped for the third straight day. The S&P 500 is down about 3 per cent from its 2 September record high close.

With less than 20 days until the 3 November election, Trump and Democratic challenger Joe Biden are set to hold duelling prime-time town halls on Thursday instead of their second presidential debate, which was cancelled after Trump declined to take part in a virtual matchup.

“More of what moves the market will be the crystallizing of who is going to win the presidency, and how close the Senate races are,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta.

A Biden presidency, coupled with a Democratic Senate, would likely mean a larger fiscal stimulus plan than what a Republican Senate would agree to. However, Biden is also widely seen on Wall Street as likely to raise taxes.

Supporting the Dow Jones Industrial Average, Walgreens Boots Alliance Inc surged 4.8 per cent as the drugstore chain forecast single-digit profit growth in 2021 after reporting a better-than-expected fourth-quarter profit.

Focus is also on the quarterly results for corporate America, with expectations for third-quarter earnings improving to a 19 per cent drop from a 25 per cent tumble forecast on 1 July according to Refinitiv IBES data.

Morgan Stanley rose 1.3 per cent after it beat third-quarter profit estimates, winding up mixed results from major US lenders. Recent bank earnings reports saw those focused on trading clocking big gains, while retail banks took a hit from the covid-19 pandemic.

The S&P 500 financials index climbed 0.8 per cent, while the healthcare index was the worst sector performer, down 0.7 per cent.

The S&P 1500 airlines index dipped 1.5 per cent after United Airlines reported a 78 per cent drop in quarterly revenue.

Shares of Vertex Pharmaceuticals Inc lost a fifth of their value after the drug developer discontinued its trial of a protein deficiency disorder treatment.

is content editor for Morningstar Australia

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