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Global Market Report - 17 February

Lex Hall  |  17 Feb 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to fall despite another record for the Dow as investors cheered the prospect of more stimulus.

The Australian SPI 200 futures contract was down 19 points, or 0.3 per cent, at 6,838 points at 8.30am Sydney time on Wednesday, suggesting a negative start to trading.

The Dow Jones Industrial Average notched a record closing high on Tuesday as cyclical sectors gained on the prospect of more fiscal aid to lift the US economy from a coronavirus-driven slump.

The Dow Jones Industrial Average rose 61.52 points, or 0.2 per cent, to 31,519.92, the S&P 500 lost 2.38 points, or 0.06 per cent, to 3,932.45 and the Nasdaq Composite dropped 47.98 points, or 0.34 per cent, to 14,047.50.

Locally, tech giants Google and Facebook will have to pay an agreed annual lump sum to publishers for their news content, rather than per click or snippet, as part of a handful of minor changes to the government’s mandatory media bargaining code, The Australian reports.

On Tuesday, Australia's share market closed above 6900 points for the first time since February last year, after BHP delighted investors with its interim dividend.

The S&P/ASX200 benchmark index closed higher by 48.4 points, or 0.7 per cent, to 6,917.3 on Tuesday.

The index is near the record close of 7,162.49, set in February last year, just before stocks tumbled due to the coronavirus pandemic.

The All Ordinaries closed better by 39.6 points, or 0.55 per cent, at 7,189.3.

Market giant BHP closed higher by 2.73 per cent to $47.00 after it declared an interim dividend of $US1.01 per share, up from 65 US cents in the previous corresponding period.

Spot gold was down 1.2 per cent to $US1,796.77/oz; Brent crude was up 0.1 per cent to $US63.27 a barrel.

Meanwhile, the Australian dollar was buying 77.62 US cents at 8.30am, down from 77.95 US cents at Monday's close.

Asia

Japanese stocks rose to a 30-year high on Tuesday as progress in the distribution of coronavirus vaccines boosted expectations that the global economy is poised for a strong recovery.

The Nikkei 225 Index ended up 1.28 per cent at 30,467.75, closing at its highest since August 1990.

Europe

European shares ended flat around a one-year peak on Tuesday as a boost from major mining and bank stocks was tempered by losses in most other sectors, with investors remaining uncertain over a euro zone economic recovery.

The pan-European STOXX 600 ended largely unchanged after jumping 1.3 per cent in the previous session to its highest level since February 2020.

A 2 per cent rise in shares of Glencore helped the European mining index climb to a near 10-year high, while higher iron ore and base metal prices supported the sector.

BHP Group, the world’s largest miner by market capitalization, rose 1.5 per cent after posting its best first-half profit in seven years and declaring a record interim dividend.

Commodity prices have benefited recently from expectations that increased stimulus measures and steady vaccinations will stoke global demand.

Energy stocks rose 0.5 per cent on stronger oil prices.

Bank stocks rose to a more-than 11-month high as investors bought into some sectors that have been severely hit by the pandemic. But they still remained well below pre-covid-19 levels.

Shares of Polish lender PKO Bank Polski topped the STOXX 600 on upbeat expectations over a long-running foreign currency mortgage issue.

Data showed euro zone economic output contracted by less than expected in the fourth quarter of 2020.

Other readings showed German investor morale was high over consumption picking up in the coming months, even as inflation expectations in the euro zone’s largest economy were seen cooling.

The STOXX 600 has struggled to reach pre-pandemic levels, lagging its peers across the Atlantic as a new round of lockdowns and disruptions to a vaccination drive hurt sentiment.

“The weakness in economic activity will continue to weigh on output in the current quarter as restrictions curtail mobility and businesses postpone reopening,” analysts at TS Lombard wrote in a note.

“Growth will bounce back strongly in H2 on the back of pent-up demand and an easing of restrictions, although the vigour in economic activity could be less than before.”

Analysts hiked their first-quarter profit growth forecast for European listed companies to 42.7 per cent from the 41 per cent that was expected last week, according to Refinitiv data, on growing expectations of an economic recovery this year.

But fourth-quarter earnings are now expected to have fallen 19.9 per cent versus the 18.2 per cent drop seen last week.

Global equities have remained in demand as US President Joe Biden negotiates a US$1.9 trillion ($2.6 trillion) stimulus package. In the euro zone, finance ministers agreed on Monday that supportive measures for the economy should stay in place as long as needed.

North America

The Dow Jones Industrial Average notched a record closing high on Tuesday as cyclical sectors gained on the prospect of more fiscal aid to lift the US economy from a coronavirus-driven slump.

The Nasdaq, however, dipped as technology stocks moved lower, while concerns over rising interest rates kept the benchmark S&P 500 little changed.

Sectors poised to benefit the most from a reopening economy, including energy and financials, had the biggest percentage gains. President Joe Biden has pitched a US$1.9 trillion pandemic relief bill and is pressing Congress to pass it in the coming weeks in order to get US$1,400 stimulus checks to Americans and bolster unemployment payments.

The S&P 500 banking index climbed as the yield on 10-year US Treasuries hit its highest since February 2020.

“We came into this week with a positive perspective on the Biden administration’s attempt to deliver a sizeable package,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. “Markets have greeted that with positive moves.”

Conversely, utilities and real estate were among the S&P 500 sectors with the biggest percentage losses. Utilities and real estate, because of their steady earnings and high dividend yields, are often considered bond proxies and tend to move in tandem with Treasuries. Shares of homebuilders, which are rate-sensitive, also fell.

Technology stocks slipped as well. That sector includes many stocks with high earnings multiples, which may also come under pressure with rising yields, according to some market analysts.

The S&P 500 backed off from session highs as yields rose on Tuesday, which reflected investor worries about the day’s surge in bond yields, said Robert Phipps, director at Per Stirling Capital Management in Austin, Texas. Equities would likely tolerate a gradual ascent in rates, but a sprint higher could create turbulence, in his view.

“Even though interest rates are still really low, the stock market is going to be very, very sensitive to changes,” he said.

The Dow Jones Industrial Average rose 61.52 points, or 0.2 per cent, to 31,519.92, the S&P 500 lost 2.38 points, or 0.06 per cent, to 3,932.45 and the Nasdaq Composite dropped 47.98 points, or 0.34 per cent, to 14,047.50.

A sharp drop in new coronavirus infections, progress in vaccinations and a stronger-than-expected fourth-quarter earnings season have reinforced hopes of a quick business recovery this year.

This week’s earnings reports from Hilton Worldwide Holdings Inc, Hyatt Hotels Corp, Marriott International Inc, Norwegian Cruise Lines and TripAdvisor Inc will be closely watched for signs of a pickup in global travel demand.

Shares of cryptocurrency and blockchain-related firms including Silvergate Capital Corp, Riot Blockchain and Marathon Patent Group surged as bitcoin briefly climbed past US$50,000.

Investors will also focus this week on the minutes from the Federal Reserve’s January meeting, where it reaffirmed its pledge to maintain a dovish policy stance.

With Reuters

is content editor for Morningstar Australia

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