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Global Market Report - 20 July

Lex Hall  |  20 Jul 2020Text size  Decrease  Increase  |  
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Australia

Shares are likely to start flat on the Australian market after a mixed lead from Wall Street and amid cautious sentiment ahead of the federal government's impending budget update later this week.

The Australian SPI 200 futures contract was up by 2.0 points, or 0.03 per cent, to 6,004.0 points at 8am Sydney time on Monday.

US shares closed mixed on Friday as investors there weighed the prospect of more fiscal stimulus against fears of further business disruptions as covid-19 cases rise.

The Dow Jones Industrial Average fell 0.23 per cent to end at 26,672.36 points, while the S&P 500 gained 0.29 per cent to 3,224.75 and the Nasdaq Composite rose 0.28 per cent to 10,503.19.

In Australia, investors will remain cautious ahead of key macroeconomic events and worries about a resurgence in coronavirus cases in NSW and Victoria.

On Tuesday, the Reserve Bank will release minutes from it's July board meeting, followed by a speech by Governor Philip Lowe.

Federal treasurer Josh Frydenberg is due to release an economic and fiscal update on Thursday.

On Friday, the benchmark S&P/ASX200 index finished 22.7 points, or 0.38 per cent higher, at 6,033.60 points after a late recovery.

The All Ordinaries index closed 21.9 points, or 0.36 per cent higher, at 6,144.90.

The Australian dollar was trading at 69.91 US cents at 8am, barely changed from 69.86 US cents at Friday's close.

Asia

Shanghai shares managed to end higher on Friday, but still suffered their worst weekly drop in five months, as China’s better-than-expected GDP data fuelled worries over the pace of policy easing, while foreign investors cashed in after a bull run.

At close, the blue-chip CSI300 index was up 0.6 per cent to 4,544.70 points, while the Shanghai Composite Index had added 0.1 per cent for 3,214.13 points.

Hong Kong stocks ended higher on Friday but posted their worst weekly decline in nearly two months, weighed down by a sharp correction on the mainland, where better-than-expected GDP data fuelled worries over the pace of policy easing.

At the close of trade, the Hang Seng index was up 0.47 per cent at 25,089.17. The Hang Seng China Enterprises index rose 0.69 per cent to 10,203.57.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.63 per cent, while Japan’s Nikkei index closed down 0.32 per cent.

Europe

Euro zone shares were little changed on Friday as investors awaited the outcome of an European Union summit where leaders are expected to hammer out details of a 750-billion-euro ($1.4 billion) recovery fund.

The euro zone STOXX index was flat after rallying earlier this week to the highest since early June, mostly on hopes an EU-wide fund to support pandemic-struck economies could lift the bloc out of recession.

German Chancellor Angela Merkel warned “the differences are still very, very big,” as she arrived at the summit in Brussels.

Analysts believe markets could tolerate a few days or weeks of delay, with opposition from the Netherlands and the threat of a Hungarian veto weighing on chances of a deal on the EU’s 2021–27 budget—envisaged at slightly above 1 trillion euros—and the attached recovery fund.

Meanwhile, the US shattered its daily record for coronavirus infections on Thursday, raising fears of a slower recovery in the world’s largest economy.

The pan-European STOXX 600 index closed up 0.2 per cent as gains in automakers, commodity and technology stocks of more than 1 per cent outweighed losses in banks, energy, travel and leisure stocks.

For the week, the index was up 1.6 per cent for its third straight week of gains, as reports of progress in developing a covid-19 vaccine supported cyclical stocks.

AstraZeneca was the biggest boost on the pan-region index, hitting a two-month high. Russia’s wealth fund said it was set to unveil a deal with the British drugmaker to manufacture a covid-19 vaccine being developed along with Oxford University.

Sweden's main stock index scaled a near five-month high as telecoms equipment maker Ericsson surged 11.4 per cent after smashing core profit expectations. Its shares posted their best one-day percentage gain in more than two years.

Tobacco group Swedish Match jumped 10.4 per cent on better-than-expected quarterly profit.

Among auto stocks, Daimler rose 4.4 per cent after posting a smaller-than-expected operating loss in the second quarter, while truck maker Volvo rose after beating profit forecasts.

North America

The S&P 500 ended higher on Friday as investors weighed the prospect of more fiscal stimulus against fears of further business disruptions due to a record rise in covid-19 cases.

Netflix tumbled 6.5 per cent after the video streaming service forecast slower-than-expected subscriber growth during the third quarter, pulling the communication services sector down 0.4 per cent.

The S&P 500 utilities, real estate and healthcare indexes were the session’s strongest gainers.

However, a 1.5 per cent drop in Goldman Sachs helped keep the Dow in negative territory.

For the week, the S&P 500 and the Dow rose 1.2 per cent and 2.3 per cent, respectively, after optimism over an eventual coronavirus vaccine and hopes of a post-pandemic economic recovery helped investors look past a continuous surge in covid-19 cases. The US witnessed 77,000 new infections on Thursday.

The Nasdaq ended 1.1 per cent lower for the week as investors sold shares of high-flying companies including Microsoft Corp and Amazon.com Inc and moved into cyclical sectors.

Next week, second-quarter earnings season shifts into high gear with reports expected from corporate heavyweights including Microsoft, Tesla, Intel and Verizon Communications.

With this year largely written off as a disaster for US corporations because of the coronavirus, investors are looking for information from companies about the potential size and timing of an eventual recovery.

The Cboe Volatility Index, known as Wall Street’s “fear gauge,” ended at 25.68, its lowest closing level since 5 June.

The Dow Jones Industrial Average fell 0.23 per cent to end at 26,672.36 points, while the S&P 500 gained 0.29 per cent to 3,224.75.

The Nasdaq Composite climbed 0.28 per cent to 10,503.19.

Unprecedented stimulus measures and improving economic data have helped the S&P 500 rise to within about 5 per cent of its February record high.

Investors are also hoping for more fiscal support as a program that offers additional unemployment benefits is set to expire on 31 July. The US Congress will return to Washington on Monday to debate another coronavirus aid bill.

BlackRock, the world’s largest asset manager, rose 3.7 per cent after reporting a jump in quarterly profit as investors poured money into its fixed-income funds and cash management services.

is content editor for Morningstar Australia

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