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Global Market Report - 22 May

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

The Australian share market is likely to edge lower in early trade after Wall Street closed down following fresh tensions between the US and China.

The local SPI 200 futures contract was lower by 7 points, or 0.13 per cent, to 5,537.0 at 8am Sydney time on Friday, indicating little direction in early trade.

Earlier, US indices finished poorly after President Donald Trump said the United States would react strongly if China imposed national security laws for Hong Kong, and US Secretary of State Mike Pompeo criticised Beijing's handling of the coronavirus outbreak.

A Chinese official said the country will not flinch from any escalation in tensions.

As a result, the Dow Jones Industrial Average fell 0.41 per cent to end at 24,474.12 points, while the S&P 500 lost 0.78 per cent to 2,948.51. The Nasdaq Composite dropped 0.97 per cent, to 9,284.88.

Australia's relations with China have also been strained after it lobbied for an international investigation into the origins of the coronavirus pandemic.

Australia's biggest export—iron ore—could face the heat next after Chinese officials change the way iron ore imports are inspected at their ports.

Traders will also have an eye on China's National People's Congress, with the government to unveil a raft of economic stimulus policies, which could boost stocks around the world.

In Australian equities, Sydney Airport will hold its annual general meeting.

Airport revenue has been decimated by flight restrictions imposed to stop the spread of the virus.

The Australian share market on Thursday ended a four-day streak of closing higher.

The S&P/ASX200 benchmark index finished down 22.6 points, or 0.41 per cent, at 5,550.4 points, while the All Ordinaries index closed down 19.2 points, or 0.34 per cent, at 5,660.9.

The Australian dollar was buying 65.60 US cents at 8am, down from 65.71 US cents at the close of trade on Thursday.

Asia

China stocks ended lower on Thursday, hurt by tech players, on news that US regulators are open to making changes to close a possible loophole in a new rule aimed at curbing global chip sales to Chinese firm Huawei Technologies.

At close, the Shanghai Composite index was down 0.55 per cent at 2,867.92.

In Hong Kong, the Hang Seng index was down 119.92 points or 0.49 per cent, at 24,280.03. The Hang Seng China Enterprises index fell 0.48 per cent to 9,850.07.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.19 per cent, while Japan’s Nikkei index closed down 0.21 per cent.

Europe

European shares fell on Thursday, as signs of worsening US-China relations added to concerns over the pace of recovery from the coronavirus-led economic downturn.

The pan-European STOXX 600 ended 0.8 per cent lower in a volatile session, with trade-sensitive German and French indexes falling more than 1 per cent each.

Ties between China and the US have soured as Washington accused Beijing of mishandling the coronavirus outbreak, stalling a market recovery in recent weeks.

US Secretary of State Mike Pompeo took fresh aim at China on Wednesday, calling the US$2 billion ($3.05 billion) it has pledged to fight the pandemic “paltry”. A Beijing official said China will not flinch in the face of rising tensions.

Meanwhile, a survey released earlier showed the pandemic’s devastating effect on the euro zone economy abated a little in May as lockdowns were eased, but was still a long way from marking growth.

After hitting rock bottom in April, IHS Markit’s Flash Composite Purchasing Managers’ index recovered to 30.5 from April’s 13.6, but was still far below the 50 mark separating growth from contraction.

Stock markets globally have made headway this week, with optimism over easing of lockdowns and talks of more stimulus for the battered euro zone pushing the STOXX 600 to its strongest close in three weeks on Wednesday.

However, banks, oil & gas and technology companies were the biggest drags on the index on Thursday as risk appetite took a hit.

Amsterdam-based telecoms and cable group Altice Europe NV slumped 13.8 per cent after posting a worse-than-expected first-quarter core profit.

Premier Inn owner Whitbread tumbled 13.4 per cent after it said it would seek £1.01 billion ($1.8 billion) in fresh cash from shareholders to help weather the COVID-19 crisis.

Airline stocks found relief as Lufthansa rose 2.7 per cent amid talks with the German government over a rescue deal worth up to €9 billion ($16.5 billion), including the state taking a 20 per cent stake.

British low-cost airline easyJet gained 4.4 per cent after saying it would restart a small number of flights on 15 June.

North America

Wall Street ended lower on Thursday, a day after hitting two-month highs, on a fresh wave of China-US tensions that raised doubts about the trade deal reached early this year between the world’s two largest economies.

President Donald Trump said the US would react strongly if China imposes national security laws for Hong Kong in response to last year’s often violent pro-democracy protests.

The S&P 500 has surged over 30 per cent from its March low, but it remains down about 13 per cent from its 19 February record high. Almost half of S&P 500 stocks are down 20 per cent or more since 19 February, underscoring how uneven the recovery has been.

The Nasdaq is about 5 per cent below its February record high, fuelled in recent weeks by gains in Microsoft, Amazon.com and other technology heavyweights that many investors expect to emerge from the crisis stronger than smaller rivals.

Amazon fell 2.05 per cent on Thursday after touching a record intraday high earlier in the day.

The Dow Jones Industrial Average fell 0.41 per cent to end at 24,474.12 points, while the S&P 500 lost 0.78 per cent to 2,948.51. The Nasdaq Composite dropped 0.97 per cent, to 9,284.88.

The majority of the 11 S&P sector indexes declined, with energy, utilities, materials consumer staples, and technology each down 1 per cent or more.

Best Buy Co fell 4.4 per cent after the electronics retailer reported a 5.3 per cent drop in quarterly same-store sales due to the virus. L Brands surged 18 per cent despite posting worse-than-expected quarterly results but said it will scale down its struggling Victoria’s Secret unit.

Discount chain owner TJX jumped nearly 7 per cent to a more than two-month high after it flagged strong sales at its stores that have reopened after lockdowns.

is content editor for Morningstar Australia

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