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Global Market Report - 18 June

Lex Hall  |  18 Jun 2020Text size  Decrease  Increase  |  
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Australia

Shares are expected to fall in early trade on the ASX after rising coronavirus cases in parts of the US and China caused falls on Wall Street.

The Australian SPI 200 futures contract was lower by 36 points, or 0.60 per cent, to 5,972.0 at 8am Sydney time on Thursday, indicating losses in share values early.

Worries over a resurgence in the pandemic's spread persisted as new coronavirus cases hit a record in Oklahoma just days before US President Donald Trump's expected campaign rally in that state.

The numbers of new cases are rising sharply in about six US states and authorities in Beijing have ramped up mobility restrictions in their efforts to contain a new COVID-19 outbreak.

The S&P 500 and the Dow reversed earlier gains to snap a three-day winning streak.

Tech shares led the Nasdaq to a modest gain.

In Australia on Thursday, employment estimates for May will be published by the Australian Bureau of Statistics and give more insight into the toll of coronavirus lockdowns.

After a record fall in employment in April of 594,300 jobs, economists expect a smaller decline in May of 76,900 jobs.

The federal government has begun negotiations with the UK for a free trade agreement following the latter's decision to leave the European Union.

The deal could be finalised before the end of the year.

Air New Zealand has told the share market it expects a $120 million underlying loss before tax for the 2020 financial year.

The airline is slowly resuming domestic flights after the New Zealand government eased virus restrictions.

The Australian dollar was buying 68.83 US cents at 8am, lower from 69.09 US cents at the close of trade on Wednesday.

Asia

China shares closed little changed on Wednesday, as investors remained cautious due to Beijing’s curbs on travel and movement in some areas to contain a resurgence in the new coronavirus cases in the capital city.

At the close, the Shanghai Composite index was up 0.14 per cent at 2,935.87.

The blue-chip CSI300 index was up 0.08 per cent, with its financial sector sub-index lower by 0.27 per cent, the consumer staples sector down 0.07 per cent, the real estate index down 0.51 per cent.

Hong Kong shares ended slightly higher on Wednesday, as investors remained cautious that a resurgence in new coronavirus cases in China and the United States could slow down global economic recovery.

At the close of trade, the Hang Seng index was up 137.32 points, or 0.56 per cent, at 24,481.41. The Hang Seng China Enterprises index rose 0.43 per cent to 9,909.63.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.39 per cent, while Japan’s Nikkei index closed down 0.56 per cent.

Europe

European shares rose for a second day on Wednesday as expectations of more US stimulus and hopes the global economy can bounce back from an appalling April offset fears of further lockdowns after a new COVID-19 outbreak in China.

The pan-European STOXX 600 index rose 0.7 per cent, adding to the previous session’s strong gains on reports the Trump administration was preparing a nearly US$1 trillion infrastructure proposal.

European equity markets have roared back since a coronavirus-fuelled crash in March, aided by massive global stimulus, with the STOXX 600 index now only 15.7 per cent below its February record high.

Focus will now turn to the European Council, which will meet at the end of the week to discuss a recovery proposal by the bloc’s executive to raise 750 billion euros ($1.2 billion) worth of debt to top up spending from joint coffers to be worth 1.1 trillion euros in 2021–27.

Meanwhile, Beijing cancelled scores of domestic flights as it attempted to contain the fresh coronavirus outbreak.

British renewable power generator and network operator SSE jumped 9.1 per cent to the top of STOXX 600 after it confirmed its full-year dividend and posted a better-than-expected annual pre-tax profit.

Boohoo gained 6.6 per cent after the online fashion group forecast annual results ahead of market expectations on increasing demand during lockdowns.

Dutch postal and parcel services provider PostNL jumped 18 per cent with its full-year normalised operating profit seen “strongly” above previous guidance.

Healthcare stocks remained in focus after trial results on Tuesday showed that a cheap and widely used steroid called dexamethasone became the first drug shown to be able to save the lives of COVID-19 patients.

North America

The S&P 500 closed lower on Wednesday as news of spiking pandemic data and the prospect of a new round of economic lockdowns dampened investor optimism over signs of economic recovery.

The S&P 500 and the Dow reversed earlier gains to snap a three-day winning streak. Tech shares led the Nasdaq to a modest gain.

Worries over a resurgence in the pandemic’s spread persisted, as new coronavirus cases hit a record in Oklahoma just days before President Donald Trump’s expected campaign rally in Tulsa.

The numbers of new cases are rising sharply in about six US states, according to a Reuters analysis, and authorities in Beijing have ramped up mobility restrictions in their efforts to contain a new COVID-19 outbreak.

Indeed, the indexes were up earlier in the session on news that an inexpensive, common steroid called dexamethasone can help save critically ill COVID-19 patients, according to a clinical trial in Britain, a development that prompted the World Health Organisation to update its treatment guidelines.

US Federal Reserve chair Jerome Powell wrapped up two days of congressional testimony, during which he pledged the central bank will use its “full range of tools” to help that recovery along. But Powell added, “It would be a concern if Congress were to pull back on the support that it’s providing, too quickly.”

On the economic front, while housing starts increased at a slower-than-expected pace in May, building permits saw a more robust rebound and applications for loans to purchase homes surged last week to a near 11½-year high last week, according to separate reports from the US Commerce Department and the Mortgage Bankers Association.

The Dow Jones Industrial Average fell 170.37 points, or 0.65 per cent, to 26,119.61, the S&P 500 lost 11.25 points, or 0.36 per cent, to 3,113.49 and the Nasdaq Composite added 14.67 points, or 0.15 per cent, to 9,910.53.

Of the 11 major sectors in the S&P 500, eight ended the session in the red, with energy and financials suffering the largest percentage losses.

Oracle Corp dropped 5.6 per cent after reporting weaker-than-expected quarterly revenues as lockdowns led its clients to delay purchases.

Cruise operator Norwegian Cruise Line Holdings extended the suspension of its voyages through September, sending its stock down 8.4 per cent.

Peers Carnival Corp and Royal Caribbean Cruises dropped 6.5 per cent and 7.2 per cent, respectively.

Bankrupt car rental firm Hertz Global Holdings announced it would suspend its plan to sell $500 million in new shares after the US Securities and Exchange Commission raised objections to the sale.

is content editor for Morningstar Australia

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