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Global Market Report - 22 June

Lex Hall  |  22 Jun 2020Text size  Decrease  Increase  |  
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Australia

Shares are set for a subdued start on the ASX as a spike in COVID-19 cases in the US and Victoria spook investors.

The Australian SPI 200 futures contract was lower by 78.0 points, or 1.31 per cent, to 5,854.0 at 8am Sydney time on Monday.

The local indices have a weak lead from Wall Street after the S&P 500 finished lower on Friday due to the virus and Apple temporarily shutting some stores again because of a spike in the number of coronavirus cases.

New cases of COVID-19 set records across at least six US states, and mandated mask use is becoming more common as economies continue re-opening.

The concerns outweighed anticipated economic stimulus and the continued economic recovery from many businesses re-opening.

In Australia, Victorian Premier Daniel Andrews has reimposed restrictions after 25 new coronavirus cases were recorded on Saturday and a further 19 on Sunday.

Most of the new cases in Victoria came from large family gatherings.

The federal government's Deputy Chief Medical Officer Nick Coatsworth said he had every confidence the outbreak would be brought under control.

Meanwhile Reserve Bank Governor Philip Lowe on Monday is due to speak at a leadership forum on the global economy and COVID-19 at the Australian National University in Canberra.

The Australian dollar was buying 68.19 US cents at 8am, down from 68.59 US cents at the close of trade on Friday.

Asia

China stocks rose on Friday to finish the week higher, led by gains on the start-up board, as investors cheered Beijing’s pledge for reforms and liquidity support to bolster the world’s second-largest economy.

The Shanghai Composite index closed up 0.96 per cent at 2,967.63, while the blue-chip CSI300 index ended 1.34 per cent higher.

Hong Kong stocks firmed on Friday to conclude the week higher. The Hang Seng index was up 178.95 points or 0.73 per cent at 24,643.89. The Hang Seng China Enterprises index rose 0.59 per cent to 9,974.59.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.53 per cent, while Japan’s Nikkei index closed up 0.55 per cent.

Europe

European shares closed higher on Friday, with defensive plays leading gains as investors remained hopeful that a massive stimulus package will soon be passed even though EU leaders made little progress in negotiations.

A proposed rescue package worth 1.85 trillion euros ($3 trillion) was discussed at a summit by video-conference, and the leaders agreed to meet in person in mid-July to haggle and get a long-term budget across the line.

The pan-European STOXX 600 index, which like other global markets has struggled in the face of new bouts of coronavirus infections in China and a number of other economies, rose 0.6 per cent.

The STOXX 600 index ended the week higher, recovering about 36 per cent from its March lows on massive stimulus and less-than-dire economic data. Traders are now betting on urgent action to haul coronavirus-hit European economies from the deepest recession since World War Two.

However, COVID-19 cases continued to rise as around 400 workers at a slaughterhouse in northern Germany tested positive on Thursday, while the numbers rose in several US states and Beijing.

Defensive utilities and health care stocks were among the top gainers on Friday, while oil & gas stocks bounced on higher crude prices.

Wirecard lost another 35.3 per cent, after plunging about 60 per cent on Thursday, as its chief executive quit amid the German payments firm’s search for $2.1 billion of missing cash which hit a dead end in the Philippines and it scrambled to secure a financial lifeline from its banks.

Lufthansa rose 3 per cent after its biggest shareholder, German billionaire Heinz Hermann Thiele, reached out to Berlin politicians for talks, newspaper Handelsblatt reported, the latest step in a standoff over the airline’s 9 billion euro ($14.7 billion) bailout.

Shares in Softewareone slipped 6.7 per cent after the company announced changes in shareholder structure and in the board of directors.

Stock markets in Finland and Sweden were closed for trading on Friday.

North America

The S&P 500 ended lower on Friday after an up-and-down session as investors weighed spiking cases of COVID-19 and Apple Inc’s announcement of fresh store closures against anticipated stimulus and continued economic recovery.

The S&P 500 ultimately settled in the red, along with the blue-chip Dow, while the tech-heavy Nasdaq closed nominally higher.

Apple Inc announced it is temporarily shutting some stores again in Florida, Arizona, South Carolina and North Carolina, which have seen a spike in coronavirus cases in recent days.

New cases of COVID-19 set records across at least six US states, and mandated mask use is becoming more common as economies continue reopening. China, where the pandemic originated but had been contained, also reported an uptick in new cases of the disease.

Still, for the week, the S&P 500, the Dow and the Nasdaq posted solid percentage gains.

The S&P 500 and the Dow are now at 8.5 per cent and 12.5 per cent shy of their respective all-time highs reached in February. The tech-heavy Nasdaq stands at 1.3 per cent below its last closing high reached on June 10, after breaching that level earlier in the session.

Trading volume is typically light on summer Fridays as investors head into the weekend.

But Friday marked “quadruple witching,” in which futures and options expiries occur, and that typically translates into elevated volume and liquidity. The S&P is synchronising its delayed rebalancing to take advantage of that liquidity.

In a video conference, US Federal Reserve Chair Jerome Powell warned the economic recovery from the pandemic is set to be challenging and there will be no quick fix.

The Dow Jones Industrial Average fell 208.64 points, or 0.8 per cent, to 25,871.46, the S&P 500 lost 17.53 points, or 0.56 per cent, to 3,097.81 and the Nasdaq Composite added 3.07 points, or 0.03 per cent, to 9,946.12.

Of the 11 sectors in the S&P 500, 10 lost ground, with healthcare the sole gainer.

Airlines, hit particularly hard by the economic lockdowns, were down sharply, with the S&P 1500 Airline index falling 4.2 per cent.

AMC Entertainment Holdings Inc, the world’s largest movie theatre operator, dipped 2.0 per cent after its announcement that it would reopen theatres at about 450 locations in the US next month was tempered by renewed shutdown fears.

is content editor for Morningstar Australia

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