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Global Market Report - 19 May

Lex Hall  |  19 May 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is set for an early rise after US markets climbed on hopes of a coronavirus vaccine and economic recovery.

The SPI 200 futures contract was higher by 109 points, or 1.99 per cent, to 5,593.0 at 8am Sydney time on Tuesday, indicating a decent gain in early trade.

The S&P 500 climbed 3.2 per cent overnight as investors took note of US company Moderna's encouraging results from early tests of an experimental vaccine for COVID-19.

Investors also took heart from Federal Reserve chairman Jerome Powell's comments at the weekend.

He expressed optimism the US economy could begin to recover from the pandemic in the second half of the year.

In Australia on Tuesday, the Reserve Bank will publish the minutes of its monetary policy meeting earlier this month.

Building materials manufacturer James Hardie has reported full-year net operating profit to 31 March is up 6.0 per cent to $US241.5 million ($370 million).

Management has suspended any dividend payment.

The Australian dollar was buying 65.17 US cents at 8am, up from 64.32 US cents at the close of trade on Monday.

Asia

China shares ended higher on Monday as investors took hope from data showing home prices rose in April, but renewed trade tensions between Beijing and Washington and the threat of a second wave of coronavirus infections limited gains. 

At the close, the Shanghai Composite index was up 0.24 per cent at 2,875.42.

In Hong Kong, the Hang Seng index was up 137.30 points, or 0.58 per cent, at 23,934.77

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.02 per cent, while Japan’s Nikkei index closed up 0.48 per cent.

Europe

European shares enjoyed their best day in nearly eight weeks on Monday, with cyclical sectors soaring as an easing of lockdowns and an encouraging report on a potential COVID-19 vaccine boosted hopes of a swifter economic recovery.

Miners leapt 8 per cent, leading Europe’s sectoral gains, while automakers, oil and gas and travel and leisure indexes—typically reliant on the health of a global economy that has taken a battering due to the coronavirus crisis—gained between 6.5 per cent and 7.9 per cent.

Germany's auto-heavy DAX surged 5.7 per cent to its highest level in over two weeks, while France's main index rose 5.2 per cent.

The two countries called for the creation of a European Recovery Fund worth 500 billion euros ($837 billion) to help the region quickly exit the crisis.

The single biggest boost to the STOXX 600 was France’s Total, which surged 7.4 per cent after it agreed to buy assets from Energías de Portugal.

Other oil majors BP and Royal Dutch Shell rose nearly 8 per cent, as optimism over output cuts and signs of demand recovery lifted Brent crude LCOc1 to a one-month high. 

Giving additional impetus to the rally, US drugmaker Moderna said its experimental COVID-19 vaccine showed promising results in a small early-stage trial.

The pan-European STOXX 600 rose 4.1 per cent, in its biggest one-day percentage gain since 24 March.

Governments and central banks globally have unleashed unprecedented stimulus to prop up the economy, helping the STOXX 600 recover 27 per cent from its March lows as investors also hope for a gradual return to normal.

Shops, restaurants and hair salons prepared to reopen in Italy on Monday, while other centres of the outbreak such as New York and Spain gradually lifted restrictions.

French automakers Renault and Peugeot gained 8.7 per cent each after finance minister Bruno Le Maire told a local radio channel the government was hoping to announce a plan within 15 days to help the country’s automobile sector.

German conglomerate Thyssenkrupp jumped 12.5 per cent after a source told Reuters it was in talks with international peers about consolidating its loss-making steel business.

Ryanair shares surged 15.8 per cent after Europe’s largest low-cost carrier announced details of sharp cost cuts and promised a swift return to full capacity and expansion in the aftermath of the COVID-19 crisis.

Among decliners, Norwegian Air Shuttle ASA’s shares tumbled 22.3 per cent as the company said its issue of new equity was completed.

North America

US stocks jumped on Monday, and the S&P 500 closed at a 10-week high, on encouraging early-stage data for a potential coronavirus vaccine and on the promise of more stimulus to lift an economy beaten down by the pandemic.

Drugmaker Moderna Inc surged 19.96 per cent after the company said its experimental COVID-19 vaccine showed promising results in a small early-stage trial.

After rallying more than 32 per cent from a multi-year low hit in March, the S&P 500 had been trading in a tight range in May as investors weighed the hopes of an economic recovery against the fears of another wave of infection as states lifted virus-led restrictions.

Stocks that have been particularly battered by government lockdown measures implemented to stem the spread of the coronavirus surged on Monday.

Travel-related stocks were among the biggest gainers, with cruise line operators Carnival Corp, Royal Caribbean Cruises and Norwegian Cruise Line Holdings all outperforming the broader market with gains of at least 15 per cent.

Airline stocks also soared as Delta Air Lines said it would resume flying several major routes in June. The NYSE Arca index gained 14.14 per cent, with Delta up 13.91 per cent.

The Dow Jones Industrial Average rose 911.95 points, or 3.85 per cent, to 24,597.37, the S&P 500 gained 90.21 points, or 3.15 per cent, to 2,953.91 and the Nasdaq Composite added 220.27 points, or 2.44 per cent, to 9,234.83.

The benchmark S&P 500 notched its biggest one-day percentage gain since 8 April, with all 11 major S&P sectors higher.

Markets also took heart from comments by Federal Reserve Chair Jerome Powell over the weekend forecasting a gradual economic recovery and his affirmation that more monetary stimulus would be on the way if required. Powell is set to speak before the Senate Banking Committee on Tuesday to discuss how economic rescue efforts are working.

Cyclical plays were in favour with the energy and industrial sectors climbing as a gradual recovery in economic activity pointed to more demand for oil and manufactured products.

Still, stocks that are poised to benefit the most from a restart of the economy continue to lag those whose businesses have weathered the restrictions or even grown as a result of the lockdowns. The S&P 500 growth index has outperformed the S&P value index .IVX by about 4 percentage points this month.

General Motors Co and Ford Motor Co both surged, closing up 9.63 per cent and 8.37 per cent, respectively, as the two automakers started to reopen their North American factories in a push to restart work in an industry that accounts for about 6 per cent of US economic activity and employs nearly 1 million people in the US.

is content editor for Morningstar Australia

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