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Global Market Report - 20 May

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

The Australian share market is set to lose some of the big gains made on Tuesday after US doubts about a possible coronavirus vaccine.

The SPI 200 futures contract was lower by 83 points, 1.49 per cent, to 5,491.0 at 8am Sydney time on Wednesday, indicating a loss in early trade.

The contract's low numbers come after US investors overnight focused on a report questioning biotech Moderna's coronavirus vaccine early stage trial results.

The US company's early results prompted rampant buying on markets the day earlier.

However, the report questioned the validity of the results and Moderna's share price finished more than 10 per cent lower.

That concern produced a widespread slide that left the Dow Jones Industrial Average down 390.51 points, or 1.59 per cent, to 24,206.86, the S&P 500 lower by 30.97 points, or 1.05 per cent, at 2,922.94 and the Nasdaq Composite down 49.72 points, or 0.54 per cent, to 9,185.10.

On the home front on Wednesday, the ABS will release retail sales data for April.

ANZ Bank economists expect sales will be down by 5.0 per cent following the panic buying in March that overwhelmed many store operators.

Investors will also keep an eye on the escalating trade tensions between Australia and China.

There are reports Chinese officials are considering stricter checks for Australian seafood, oats and fruit after imposing tariffs on barley and banning some beef imports.

Australian commentators have said the measures are a reaction to Australia's call for an investigation into the origins of the coronavirus.

Chinese officials deny the claim.

The Australian dollar was buying 65.31 US cents at 8am, down from 65.46 US cents at the close of trade on Tuesday.

Asia

China shares closed firmer on Tuesday, as data from an early-stage trial for a COVID-19 vaccine lifted hopes of a faster recovery from the pandemic-driven economic slump. 

At the close, the Shanghai Composite index was up 0.81 per cent at 2,898.58.

The blue-chip CSI300 index was up 0.85 per cent, with its financial sector sub-index climbing 0.58 per cent, the consumer staples sector up 0.09 per cent, the real estate index down 0.52 per cent and the healthcare sub-index up 0.71 per cent.

In Hong Kong, the Hang Seng index was up 453.36 points, or 1.89 per cent, at 24,388.13.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.89 per cent, while Japan’s Nikkei index closed up 1.49 per cent.

Europe

European shares lost some ground on Tuesday after a rally in the previous session, as falls for euro zone banks and telecoms stocks countered optimism from a stimulus plan for the European Union.

After rising as much as 0.5 per cent at the open, the pan-European STOXX 600 gradually shed gains to close 0.6 per cent lower.

Euro zone stocks also fell 0.7 per cent, despite an early boost from France and Germany’s calls on Monday for the creation of a 500 billion ($834 billion) euros recovery fund to offer grants to EU regions and sectors hit hardest by the pandemic.

Investors locked in gains after hopes of a potential COVID-19 treatment had driven the STOXX 600 to the biggest single-day gains since March 24 in the previous session.

Optimism over countries easing coronavirus-induced lockdowns and trillions of dollars in fiscal and monetary stimulus has helped the STOXX 600 rebound more than 26 per cent from lows plumbed earlier this year.

Telecom stocks led sectoral declines, as shares in Telecom Italia fell 8.6 per cent after Italy’s biggest phone group gave no guidance on its 2020 core profit target as it reported a drop in first-quarter earnings.

Banking-heavy Spanish and Italian bourses led regional declines with a 2.5 per cent and 2.1 per cent fall respectively, with some analysts pointing to the lifting of a short-selling ban across six EU states hitting shares of euro zone lenders.

Shares in Banco de Sabadell tumbled 11.9 per cent and Bankia dropped 11 per cent, while Italian lender Banco BPM fell 7.3 per cent.

However, wealth manager Julius Baer rose 5 per cent as it saw a spike in trading volumes boost its first-quarter margins, even though a strong Swiss franc ate into assets under management.

Automakers struggled after data showed European passenger car sales saw a record drop in April, the first full month with restrictions imposed to contain the pandemic across the continent.

UK stocks were also hit as shares in tobacco group Imperial Brands tumbled 6.5 per cent after its plans to cut its dividend by a third, and a profit warning due to the coronavirus crisis.

Norwegian fish farmer SalMar jumped 9.3 per cent after it reported first quarter operating EBIT above estimates and maintained its 2020 harvest expectations.

Shares in peers Grieg Seafood and Mowi rose 5 per cent and 2.9 per cent, respectively.

North America

The S&P 500 closed lower on Tuesday, as investors focused on a report questioning Moderna’s recent coronavirus vaccine early-stage trial results, wiping out modest gains on the benchmark index in the last hour of trading.

Major averages fell to session lows in the wake of a report from STAT News that questioned the validity of the results of Moderna’s vaccine trial, which the company had announced Monday. Moderna shares plunged after the report, and closed down 10.41 per cent.

Stocks had initially edged higher as investors attempted to glean information from a mixed bag of results from major retailers.

Home improvement chain Home Depot fell 2.96 per cent after it missed quarterly profit estimates due to higher costs, while department store operator Kohl’s Corp tumbled 7.65 per cent after reporting a bigger-than-expected loss.

Walmart, on the other hand, exceeded expectations for quarterly revenue and earnings as online sales soared as consumers stockpiled essentials in response to coronavirus lockdowns. Still, its shares finished 2.12 per cent down after rising as much as 3.4 per cent earlier.

Advance Auto Parts climbed 3.59 per cent after the company said same-store sales improved significantly at the start of the second quarter.

Trillions of dollars in fiscal and monetary stimulus have helped the S&P 500 rebound nearly 35 per cent from its March 23 intraday low. While the benchmark index is now less than 13 per cent below its 19 February closing record, gains have largely slowed in May on uncertainty over truly halting the spread of the coronavirus and allowing business to resume and rising US-China tensions.

The benchmark index surged more than 3 per cent on Monday, boosted by Moderna’s promising early-stage data for a COVID-19 vaccine and Federal Reserve Chair Jerome Powell’s pledge over the weekend to support the economy as needed until the crisis has passed.

Powell, in testimony to the Senate Banking Committee on Tuesday, said the central bank was continuing to consider ways to accommodate additional borrowers, and Congress should consider anything to keep people out of insolvency.

The Dow Jones Industrial Average fell 390.51 points, or 1.59 per cent, to 24,206.86, the S&P 500 lost 30.97 points, or 1.05 per cent, to 2,922.94 and the Nasdaq Composite dropped 49.72 points, or 0.54 per cent, to 9,185.10.

is content editor for Morningstar Australia

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