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Global Market Report - 18 May

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

Shares are tipped to be slightly higher in early trade on the Australian market as part of what one expert said is the ASX's skittish recovery from coronavirus lows.

The SPI 200 futures contract was higher by 32 points, or 0.59 per cent, to 5,436.0 at 8am Sydney time on Monday, indicating a small gain in early trade.

This follows a thin positive lead from Wall Street where the three major US indexes closed higher on Friday despite weaker-than-expected US economic data, amid optimism that easing coronavirus restrictions would boost activity this month.

CommSec chief economist Craig James says Australian equities have likely bottomed out and are undergoing a skittish recovery—as long as the nation continues to keep coronavirus cases low.

He noted the ASX200 had risen over six of the past seven weeks.

More Australians have returned to work, and cafes, restaurants and pubs have reopened— albeit at reduced capacity—as part of eased coronavirus restrictions.

However, government leaders have warned the number of infections will climb as people mingle in greater numbers.

This week, local investors will closely watch remarks by Reserve Bank Governor Philip Lowe in the minutes of the central bank's monetary policy meeting.

US Federal Reserve Chair Jerome Powell's testimony to the US Senate banking committee on Wednesday (AEST) will be of interest, too.

The Australian Bureau of Statistics will issue data on the coronavirus pandemic's impact on households later on Monday.

The Australian dollar was buying 64.13 US cents at 8am, down from 64.62 US cents at the close of trade on Friday.

Asia

Chinese blue-chip stocks slipped on Friday to end their worst week since March as economic growth worries linger on lacklustre consumption and US-China trade friction.

At the close, the Shanghai Composite index was down 0.1 per cent at 2,868.46. The index fell 0.9 per cent week on week, its first week in negative territory in May.

The blue-chip CSI300 index fell 0.3 per cent on Friday. It fell 1.3 per cent from the previous week, its biggest weekly drop since mid-March.

In Hong Kong, the Hang Seng index was down 0.1 per cent at 23,797.47.

Around the region, MSCI’s Asia ex-Japan stock index gained 0.2 per cent while Japan’s Nikkei index closed up 0.6 per cent.

Europe

European stocks closed higher on Friday, but marked their worst weekly losses since mid-March as rising US-China tensions added to concerns that a global economic downturn may be here longer than feared.

The pan-European STOXX 600 index ended 0.5 per cent higher, with miners rising 2.8 per cent after data showed China’s industrial production climbed by a faster-than-expected 3.9 per cent in April.

European shares lost some ground by afternoon trading as Washington acted to block shipments of semiconductors to Huawei Technologies from global chipmakers, in an action ramping up trade tensions with China again.

Global stock markets have largely stalled this month after a solid rebound in April on fears of a possible resurgence in COVID-19 cases as countries ease restrictions and a worrying outlook from US officials on economic recovery.

The STOXX 600 recorded a 3.8 per cent weekly loss, while most regional indexes also saw their biggest weekly drop in two months when coronavirus-induced selling peaked.

“The market is torn between stimulus, new infections and economic data,” Keith Temperton at Tavira Securities said. “The data is bad, but the stimulus is outweighing it for now. But I don’t imagine it’s going to last.”

Europe’s semiconductor stocks took a hit in response to the latest trade comments, with Germany’s Dialog Semiconductor and Siltronic falling 3.3 per cent and 1 per cent, respectively.

Keeping Paris shares almost flat, chipmaker STMicroelectronics fell 3 per cent.

An early reading of Germany’s first-quarter GDP showed that Europe’s largest economy contracted by 2.2 per cent in the first quarter, its steepest slump since the 2009 financial crisis, with worse expected by mid-year.

But euro zone finance ministers were holding a meeting by teleconference to discuss fiscal measures designed to mitigate the economic fallout. German Finance Minister Olaf Scholz plans a supplementary budget, which could involve taking on 100 billion euros ($108.25 billion) in extra debt, Der Spiegel magazine reported.

Supporting market gains on Friday, German food-processing equipment maker GEA Group jumped 10 per cent after reporting better-than-expected first quarter results and confirmed its 2020 forecast.

Britain’s biggest telecoms group BT Group Plc gained 5.4 per cent after a report that it was in talks to sell a stake in its wholly owned network subsidiary, Openreach. But the company said the report was “inaccurate” after markets closed.

Swiss drugmaker Roche edged up 1.8 per cent after saying it would start selling a new digital diagnostics product that may simplify and accelerate screening of COVID-19 patients.

Luxury group Richemont fell 2 per cent after reporting a 67 per cent fall in annual profit and said the impact of the coronavirus could last up to three years.

German payments company Wirecard tumbled 7.6 per cent to hit a two-year low, with traders pointing to a tweet about a business partner based in Dubai liquidating as a reason for the fall. Wirecard later confirmed that Al Alam Solution Provider was closing.

North America

Wall Street’s three major indexes closed higher after swinging between gains and losses on Friday as investors weighed worries about Sino-US trade relations and weaker-than-expected US economic data against growing optimism that easing coronavirus restrictions would boost activity this month.

Economic data painted a grim picture on Friday as US retail sales and manufacturing output showed record declines in April due to virus-related stay-at-home orders.

The data came after US President Donald Trump ratcheted up trade tensions with China by moving to block semiconductor shipments to China’s Huawei Technologies from global chipmakers. The trade worries sent the Philadelphia Semiconductor index .SOX down more than 2 per cent.

China was swift to respond with a report saying it was ready to put US companies on an “unreliable entity list,” according to the Global Times.

The combination of trade tensions and weak data had sent S&P 500 down around 1.3 per cent earlier in the session but for much of the afternoon session it oscillated between positive and negative territory.

The Dow Jones Industrial Average rose 60.08 points, or 0.25 per cent, to 23,685.42, the S&P 500  gained 11.2 points, or 0.39 per cent, to 2,863.7 and the Nasdaq Composite  added 70.84 points, or 0.79 per cent, to 9,014.56.

However, for the week S&P 500 fell 2.3 per cent, for its biggest weekly drop since the week of March 20. The Dow dropped 2.7 per cent for the week while the Nasdaq declined 1.2 per cent, marking their biggest weekly drops since the week ended 3 April.

Six of the 11 major S&P sectors closed higher, led by a 1.3 per cent gain in communications services. Utilities was the weakest with a 1.4 per cent drop followed by a 0.7 per cent drop in financial stocks.

The small-cap Russell 2000 outperformed, with a 1.6 per cent gain. One of its stocks, Sorrento Therapeutics, closed 158 per cent higher after its experimental antibody candidate showed potential in blocking COVID-19 infections in early studies.

is content editor for Morningstar Australia

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