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Global Market Report - 18 March

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

Local investors could see the Australian market open flat for a change despite a huge surge on Wall Street on US President Donald Trump's big economic stimulus plans.

The SPI200 futures contract was down just seven points, or 0.13 per cent, at 5275 points at 8am Sydney time on Wednesday, suggesting Australia's volatile market might open flat.

The futures market has not been a reliable indicator during the past few turbulent weeks of mostly panic selling.

The highly volatile local market had its best day ever on Tuesday, gaining 5.8 per cent, after its worst day ever on Monday, falling 9.7 per cent.

Massive government stimulus plans helped lift sentiment in European and US equity markets overnight, which could spur more buying on the ASX.

On Wall Street, the Dow Jones Industrial Average rose 1048.49 points, or 5.19 per cent, to 21,237.01, the S&P 500 gained 5.99 per cent and the Nasdaq Composite added 6.23 per cent.

Local investors are also waiting to hear about Australian measures to ease economic pain from the coronavirus.

Prime Minister Scott Morrison led a meeting of national cabinet on Tuesday evening, with a number of announcements set for mid-morning on Wednesday.

Australia's ailing airlines will be handed a $715 million federal government lifeline to help the sector through the coronavirus pandemic.

Regional carrier Rex has been urging government action, warning it could go under unless given help during the tumultuous period.

Its shares entered a trading halt on Tuesday pending an announcement to the market.

Ardent Leisure is also in a trading halt pending an announcement.

Also on Wednesday data will be released giving a preliminary estimate for Australian retail turnover for February.

The Reserve Bank of Australia is expected to take further measures to protect the economy on Thursday.

The Aussie dollar meanwhile was buying 59.98 US cents at 8am on Wednesday from 60.86 US cents as the market closed on Tuesday. 

Asia

China stocks fell to six-week lows on Tuesday, in line with global markets as investor sentiment remained fragile after coordinated efforts by central banks failed to ease worries over the coronavirus impact.

The Shanghai Composite index closed 0.3 per cent lower at 2,779.64, falling for the fifth trading day and hitting its lowest level since Feb. 4, when investors wiped $700 billions off the Chinese stock market on fears of an epidemic.

The blue-chip CSI300 index lost 0.5 per cent, paring some losses after touching its lowest level since August 2019 earlier in the session. It also fell for the fifth day.

Hong Kong stocks snapped four sessions of falls on Tuesday, with technology and financial sectors leading the recovery, as investors picked up battered shares while signs of limited strength in global markets also supported sentiment.

At the close of trade, the Hang Seng index rose 0.9 per cent to 23,263.73. The Hang Seng China Enterprises index inched down 0.1 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.2 per cent, while Japan’s Nikkei index closed up 0.1 per cent.

Europe

European shares retreated after an initial bounce on Tuesday as damage being heaped on companies and economies across the globe from the coronavirus grew and kept financial markets on edge.

Sharp restrictions on large gatherings, shutdowns of major cities and disruptions to business supply chains are taking a toll on corporate Europe. The world’s biggest catering firm Compass Group and automaker Volkswagen Group were the latest to warn of a hit from the pandemic.

Compass tumbled 22.2 per cent and Volkswagen dropped 3 per cent.

The pan-European STOXX 600 index was down 1.1 per cent after rising as much as 3.7 per cent in early trading, following a dramatic sell-off on Monday that dragged it to levels last seen in 2012.

All of the 19 European sub-indexes were trading in red, with travel and leisure stocks plummeting 10 per cent as drastic containment measures forced airlines to make unprecedented cuts to flights, costs and staffing.

British Airways parent IAG, EasyJet, Ryanair and Air France-KLM were again among the biggest decliners on the STOXX 600, bringing the wider travel sub-index’s total declines in the first quarter to over 50 per cent.

A coordinated effort by global central banks to flush more cash into the system only added to the alarm around a looming global recession.

Airbus tumbled 6.7 per cent after saying it would stop production and assembly activities at its plants in France and Spain for the next four days in order to comply with the government’s containment measures.

The wider French bourse fell 1 per cent, but was off 2013 lows hit on Monday as President Emmanuel Macron sought to reassure businesses by offering more fiscal aid.

Frankfurt shares, which have declined in seven of the past eight sessions, also shed 0.9 per cent ahead of a reading of German economic sentiment for March, which is expected to plunge to -26.4 from +8.7 a month earlier, according to Refinitiv Eikon data.

North America

Wall Street rebounded on Tuesday, following its steepest declines since the 1987 crash, as the Federal Reserve took more steps to boost liquidity in a market sapped by business and travel disruptions in the wake of the coronavirus pandemic.

The benchmark S&P 500 was up 5 per cent after the central bank relaunched a financial crisis-era purchase of short-term corporate debt.

The move to buy back Commercial Paper follows several emergency measures taken by the US central bank on Sunday, including slashing interest rates to near zero, which sent the main indexes tumbling 12 per cent on Monday.

That was the benchmark S&P 500's third-biggest daily percentage drop on record, beaten only by the 1987 rout and the Great Depression crash in 1929 as investors fretted over a looming recession.

The Trump administration is pursuing a massive $850 billion stimulus package to buttress an economy reeling from the health crisis that has brought major cities in the United States to a standstill.

The head of the US securities regulator on Monday said that US markets should stay open despite intense volatility, quashing speculation that the government might shut down the country’s exchanges.

The Dow Jones Industrial Average rose 1048.49 points, or 5.19 per cent, to 21,237.01, the S&P 500 gained 5.99 per cent and the Nasdaq Composite added 6.23 per cent.

All the 11 S&P sectors were trading in the black, led by the defensive utilities, real estate and consumer staples rising between 6 per cent and 9.8 per cent.

Healthcare stocks were another bright spot as Pfizer Inc gained 5.2 per cent after signing a deal with Germany’s BioNTech to co-develop a potential coronavirus vaccine.

Regeneron Pharmaceuticals jumped 12.3 per cent after the company said it had identified antibodies to potentially treat covid-19.

Boeing Co’s shares tumbled as much as 22 per cent to a more-than-six-year low on Tuesday following a rating downgrade that reflected its worsening cash flow due to the extended grounding of its 737 MAX jet and the blow from the coronavirus pandemic.

 

is content editor for Morningstar Australia

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