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Global Market Report - 23 June

Lex Hall  |  23 Jun 2020Text size  Decrease  Increase  |  
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Australia

Shares are set to gain at the start of trade on the Australian market, after US stocks closed higher on investors' hopes for more government stimulus amid the coronavirus pandemic.

The Australian SPI 200 futures contract was higher by 34.0 points, or 0.58 per cent, to 5,935.0 at 8am Sydney time on Tuesday.

Overnight on Wall Street, the Dow rose 0.59 per cent, the S&P 500 gained 0.65 per cent and the Nasdaq climbed 1.11 per cent.

Investors there were clinging to hopes for more stimulus after US House of Representatives Democrats last week unveiled a $US1.5 trillion infrastructure bill while reports also emerged of preparations by the Trump administration for an infrastructure stimulus plan.

The virus remains prevalent, however, with a dozen states in the US reporting record increases in new cases.

In Australia, traders will be watching for preliminary international trade figures from May to assess how the economy is faring during turbulent times.

There seems little prospect of international visitors to Australia anytime soon after Health Minister Greg Hunt this morning said the nation's borders will remain closed for a very significant amount of time.

The share market closed flat for the second consecutive day on Monday. The S&P/ASX200 benchmark index finished up just 1.9 points, or 0.03 per cent, at 5,944 points

The Australian dollar rose amid broad US dollar weakness against a basket of currencies and was buying 69.12 US cents at 8am, up from 68.58 US cents at the close of trade on Monday.

Asia

China’s main Shanghai Composite index closed down 0.08 per cent at 2,965.27 points, while the blue-chip CSI300 index ended up 0.08 per cent.

Hong Kong stocks ended lower on Monday as investors were wary after details of a new security law for the territory showed Beijing will have overarching powers on its enforcement.

At the close of trade, the Hang Seng index was down 132.55 points or 0.54 per cent at 24,511.34. The Hang Seng China Enterprises index fell 0.96 per cent to 9,879.02.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.07 per cent, while Japan’s Nikkei index closed down 0.18 per cent.

Europe

European shares closed at a near one-week low on Monday as signs of a resurgence in coronavirus cases in Germany and elsewhere unnerved investors who were hoping for a swift economic recovery from the crisis.

After switching between gains and losses earlier in the session, the pan-European STOXX 600 index ended 0.8 per cent lower, led by losses in the food & beverage, telecom and oil & gas sectors.

Scandal-hit German payments company Wirecard shed another 44 per cent as it said a quarter of its assets totalling 1.9 billion euros ($3.1 billion) that auditor EY had been unable to account for probably did not exist.

Its stock has shed more than 70 per cent of its value over the past week.

The World Health Organization reported a record increase in global coronavirus cases on Sunday, while Germany’s COVID-19 reproduction rate jumped to 2.88, a rate showing infections are rising above the level needed to contain the disease over the longer term.

After a stunning recovery from March lows, the STOXX 600 has struggled to make headway in June as investors weigh the possibility of a swift return to economic growth against rising virus cases and the chances of renewed restrictions.

All eyes will turn to Markit’s flash PMI numbers for Europe, slated to be released on Tuesday. The data is expected to show further improvement in business activity in June.

Lufthansa dropped 3.2 per cent as the German government held last-ditch talks with the airline group’s biggest shareholder, who is threatening to block a 9 billion euro ($14.6 billion) bailout unless its terms are adjusted.

Telecom stocks were hit as Deutsche Telekom dropped 4.3 per cent in ex-dividend trading.

However, automakers, retailers and miners gained between 0.2 per cent and 0.7 per cent, limiting losses.

Fiat Chrysler rose 1.4 per cent after news that the Italian government was close to unveiling the approval of guarantees for a 6.3 billion euro ($10.3 billion) financing.

French group Mediawan shot up 41.4 per cent as it announced the acquisition of Lagardere Studios valued at around 100 million euros ($163 million) as part of a broader expansion laid out by its founders.

North America

Wall Street’s three major indexes closed higher on Monday with the biggest gains in technology stocks as investors focused on the potential for more government stimulus measures even as they worried about an increase in coronavirus cases in the US and other countries.

Nasdaq registered its fourth record closing high this month with the biggest boosts from Microsoft, Apple and Amazon.com.

The World Health Organisation reported a record rise in global coronavirus cases on Sunday, driving demand for perceived safe havens including gold and longer-term US Treasuries.

While New York City on Monday celebrated the lifting of many coronavirus restrictions, a dozen states in the US South and Southwest reported record increases in new cases with 10 per cent to 20 per cent of people testing positive in some.

However, White House economic adviser Larry Kudlow told CNBC that there was no second wave of the pandemic and that it is unlikely there will be widespread shutdowns across the country.

Investors were also clinging to hopes for more government stimulus after US House of Representatives Democrats on Thursday unveiled a $1.5 trillion infrastructure bill in the same week that reports emerged of preparations by the Trump administration for an infrastructure stimulus plan.

US President Donald Trump said on Monday that he supported the idea of giving Americans a second round of financial aid because of the virus.

The Dow Jones Industrial Average rose 153.5 points, or 0.59 per cent, to 26,024.96, the S&P 500 gained 20.12 points, or 0.65 per cent, to 3,117.86 and the Nasdaq Composite added 110.35 points, or 1.11 per cent, to 10,056.48.

Of the S&P’s 11 major sectors, technology was leading the pack. However the next biggest gainer was the defensive utilities sector.

The market took a step back on Friday after Apple’s move to temporarily shut some US stores again underscored concerns of a delay in the recovery.

But Apple shares climbed on Monday and trading at record highs as the company announced new products at its annual conference for software developers.

Travel-related stocks were some of the weakest as those companies have been hit hard in the past by lockdowns.

The S&P 1500 airlines index dropped 1.3 per cent, while shares of cruise operators Norwegian Cruise Line and Royal Caribbean Cruises dropped 6 per cent.

US-based meat processor Tyson slipped 2.8 per cent as China’s customs authority suspended imports of poultry products from a plant owned by the company that had been hit by the coronavirus.

American Airlines Group Inc fell almost 7 per cent as it planned to secure $3.5 billion in new financing by selling shares and convertible senior notes to boost liquidity.

Virgin Galactic Holdings Inc soared just under 16 per cent as it signed up with NASA to develop a program to promote private missions to the International Space Station.

is content editor for Morningstar Australia

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