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Global Market Report - 16 September

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

Australian shares are set to rise as the tech rally continues on Wall Street and investors hope the Fed keeps rates lower for longer.

The Australian SPI 200 futures contract was up 44 points, or 0.75 per cent, to 5,941 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

US stocks rose on Tuesday as investors hoped the Federal Reserve would stick with its supportive policy stance as the central bank’s two-day meeting got under way.

The Dow Jones Industrial Average rose 2.27 points, or 0.01 per cent, to 27,995.6, the S&P 500 gained 17.66 points, or 0.52 per cent, to 3,401.2 and the Nasdaq Composite added 133.67 points, or 1.21 per cent, to 11,190.32.

The S&P/ASX200 benchmark index closed lower by 4.7 points, or 0.08 per cent, to 5,894.8 points on Tuesday. The index reached a session high of 5,919.2 in the first hour of trade, but then flattened. The All Ordinaries index finished higher by 0.8 points, or 0.01 per cent, to 6,079.3.

Gold was flat at $US1,956; Brent crude was up 2.7 per cent to $US40.68 a barrel; iron ore was down 1.3 per cent to $US128.52 a tonne

Meanwhile, the Australian dollar was buying 72.99 US cents at 8.30am, up from 72.29 US cents at Tuesday’s close.

Asia

China and Hong Kong stocks rose on Tuesday, as upbeat Chinese economic data and coronavirus vaccine hopes fuelled investor optimism.

The CSI300 index rose 0.6 per cent to 4,677.75 at the end of the morning session, while the Shanghai Composite Index gained 0.3 per cent to 3,288.07.

In Hong Kong, the Hang Seng index added 0.5 per cent, to 24,759.52 points, while the Hong Kong China Enterprises Index gained 0.4 per cent to 9,848.78.

Japanese shares closed lower on Tuesday as a stronger yen pressured exporters and investors to book profits after a three-day rally in the run up to the ruling party election, where Abe ally Yoshihide Suga was picked as the new leader.

The benchmark Nikkei share average ended down 0.44 per cent at 23,454.89, having hit a fresh seven-month high in the previous session. There were 45 advancers on the index against 175 decliners.

Europe

Europe’s STOXX 600 closed at a near three-week high on Tuesday as robust industrial output data from China boosted mining and luxury stocks, while Sweden’s H&M surged after reporting a profit rebound.

Shares in the world's second-biggest fashion retailer H & M Hennes & Mauritz jumped 10.8 per cent, recording their biggest daily rise in almost six months after the company beat quarterly profit forecasts as it recovered more quickly than expected from a coronavirus-induced slump.

The retail index rose 2.3 per cent, leading sectoral gains in Europe.

Miners rose 1.7 per cent after data showed industrial output in China, the world's top metal consumer, accelerated the most in eight months in August, while retail sales grew for the first time this year.

China-reliant luxury stocks like LVMH, Kering and Hermes also gained, boosting the STOXX 600.

The ZEW economic research institute said investor sentiment in Germany rose unexpectedly in September, signalling confidence in a recovery from the coronavirus crisis.

“The hard data—retail sales, industrial production, exports—suggest activity is largely rebounding as we expect, in a tick-shape manner,” said Florian Hense, an economist at Berenberg.

“After initially rebounding strongly, the trajectory of the recovery has flattened, but continues firmly during Q3.”

All eyes are on the conclusion of the US Federal Reserve’s monetary policy meeting on Wednesday, the first since Chairman Jerome Powell unveiled a shift toward greater tolerance of inflation, effectively pledging to keep interest rates low for longer.

The Bank of England is also set to meet on Thursday.

The UK's FTSE 100 jumped 1.3 per cent, outperforming its European peers after a handful of positive corporate updates, better-than-expected jobs data and as Prime Minister Boris Johnson faced opposition within his party to proposed legislation that would breach the Brexit treaty.

Britain's Hiscox surged 17.0 per cent to the top of STOXX 600 as London judges ruled that some insurers were wrong to reject claims from small firms battered by the covid-19 pandemic, but the costs were less than expected, according to the company.

The broader pan-European STOXX 600 index rose 0.7 per cent to close at its highest since 27 August, while euro zone stocks gained 0.4 per cent.

The bloc's banks slid 1.5 per cent to become the worst-performing sector. ECB board member Fabio Panetta became the latest to highlight risks from a strong currency, saying the results of its stimulus measures are "not fully satisfactory yet".

Fiat Chrysler jumped 9.0 per cent and Peugeot maker PSA rose 2.2 per cent after the carmakers restructured the terms of their planned merger to conserve cash.

North America

The market was off its session highs as Apple’s shares erased most of their gains from early in the day. The stock ended flat after briefly turning lower in the wake of its product event, which included the rollout of a new virtual fitness service and a bundle of all its subscriptions, Apple One.

Apple’s stock, which was up as much as about 3 per cent early in the session and rose 3 per cent on Monday, often dips after running up prior to that event.

The Nasdaq outperformed the other two major indexes, while the S&P 500 technology index gained 1 per cent, extending its recovery from a brutal sell-off earlier this month that had halted a Wall Street rally.

Investors were optimistic as the Fed began its first policy meeting since Chair Jerome Powell announced a more accommodative stance on inflation.

“While the economy is slowing, the upcoming macro news should be friendly, which should indicate the Fed will have no change in terms of policy,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Data on Tuesday showed US factory output increased strongly in August. Separately, US import prices increased more than expected for the same month, supporting the view that inflation pressures were building up.

The S&P 500 financial index fell 1.4 per cent, with Citigroup dropping 6.9 per cent following a report that federal regulators were preparing to reprimand the US lender for failing to improve its risk-management systems.

JPMorgan Chase & Co slipped 3.1 per cent as it lowered its full-year net interest income forecast.

is content editor for Morningstar Australia

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