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Global Market Report - 24 December

Lex Hall  |  24 Dec 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to follow Wall Street higher as hopes of a recovery firm amid better job news and a pending stimulus deal.

The Australian SPI 200 futures contract was up 53 points, or 0.8 per cent, at 6618 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

Wall Street advanced on Wednesday as a pending stimulus deal and falling jobless claims prompted investors to bet on an economic recovery from the global health crisis.

The Dow Jones Industrial Average rose 259.81 points, or 0.87 per cent, to 30,275.32, the S&P 500 gained 22.89 points, or 0.62 per cent, to 3,710.15 and the Nasdaq Composite added 29.19 points, or 0.23 per cent, to 12,837.11.

Locally, a giant Beijing sovereign wealth fund has emerged as an investor in major Australian LNG infrastructure, with China Investment Corporation among backers of a deal to buy a stake in Shell’s Queensland gas infrastructure for $US2.5 billion ($3.3 billion), The Australian reports.

The S&P/ASX200 benchmark index closed higher by 43.5 points, or 0.66 per cent, to 6643.1 on Wednesday despite a mixed lead from Wall Street.

The index reached a session high of 6661.2.

The All Ordinaries closed up 47.1 points, or 0.69 per cent, to 6892.6.

Gold was up 0.7 per cent to $US1874.10/oz; Oil was up 2.4 per cent to $US51.27 a barrel: Iron ore was down 1.5 per cent to $US162.03 a tonne.

Meanwhile, the Australian dollar was buying 75.80 US cents at 8.30am, up from 75.49 US cents at Wednesday’s close.

Asia

China shares ended higher on Wednesday, buoyed by optimism that policymakers would likely avoid sudden credit policy tightening in 2021 to support an economic recovery from the pandemic-induced slump.

At the close, the Shanghai Composite index was up 0.76 per cent at 3,382.32, while the blue-chip CSI300 index was up 0.85 per cent. The smaller Shenzhen index ended up 0.74 per cent.

Hong Kong shares settled higher on Wednesday, led by gains in tech firms, as investors hoped that policymakers would avoid sudden credit policy tightening in 2021 to support an economic recovery from the pandemic-induced slump.

At the close of trade, the Hang Seng index was up 223.85 points, or 0.86 per cent, at 26,343.10. The Hang Seng China Enterprises index rose 0.95 per cent to 10,482.52.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 1.05 per cent, while Japan's Nikkei index closed up 0.33 per cent

Europe

European shares logged yet another day of strong gains on Wednesday, making up almost all of the losses at the start of the week, cheered by signs of an imminent Brexit trade deal.

Amid warnings that it could still go either way, talks between the European Union and Britain are in their “final stages” a source at the European Commission told Reuters, while other diplomatic sources said member states had started to prepare their procedure to implement any deal from 1 January.

The pan-European STOXX 600 index hit session highs on the news and closed up 1.1 per cent in holiday thinned trade.

“The fact that they are still talking has given another reason to buy into the market,” said David Madden, market analyst at CMC Markets UK.

The index extended a recovery rally after a 2.3 per cent slump on Monday when a mutant variant of the coronavirus was detected in the UK, sending markets into a tizzy.

London’s FTSE 100 reversed losses to pull into the black, but still lagged regional peers as the pound surged.

Further cheer came as France lifted its ban on UK travellers and freight after the variant, said to be significantly more transmissible than the original, had seen much of the world shut its borders to the island country, prompting warnings from supermarkets owners about food supply shortages.

Daimler was among the biggest boosts to the STOXX 600, up 3.3 per cent after business newspaper Handelsblatt reported that the German carmaker is preparing a stock market listing of its trucks division.

Germany’s DAX jumped 1.3 per cent in its last trading day of the week, capping weekly losses at 0.3 per cent.

The travel and leisure sector gained the most on the day, followed by banks, while oil and gas stocks tracked a rise in crude prices.

The STOXX 600 is on course to end a tumultuous 2020 down about 5 per cent, despite a stunning recovery from the coronavirus-fueled lows hit earlier in the year on ultra-easy monetary policy and vaccine optimism.

Banks and energy shares, closely linked to global growth expectations, are down around 25 per cent so far this year, with Brexit uncertainty adding to the fall in lenders.

Travel shares, among the worst hit at the onset of the pandemic, are set to end about 16 per cent lower - their worst year since 2008.

On the other hand, technology stocks, seen as winners of the work-from-home trend, are up 12 per cent.

North America

Wall Street advanced on Wednesday as a pending stimulus deal and falling jobless claims prompted investors to bet on an economic recovery from the global health crisis.

All three major indexes were higher, with the blue-chip Dow and small caps leading the gains.

Economically vulnerable cyclical stocks, which were battered by mandated shutdowns and stand to benefit most from economic recovery, were outperforming.

The rotation into cyclicals reflects a growing confidence in recovery from the pandemic recession, and began in fits and starts after promising late-stage vaccine data was released in early November.

“A lot of names that have lagged all year because they were handicapped by covid tend to do better as investors focus on reopening the economy,” said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. “As we get good news on vaccines, those names get a boost.”

The possibility of a year-end shutdown of the US government, not to mention the lack of new fiscal stimulus, raised its head after President Donald Trump threatened to veto a US$2.3 trillion ($3.03 trillion) funding package, which also includes a long-awaited US$892 billion pandemic relief deal.

A Brexit trade deal between Britain and the European Union appeared more likely after a senior European diplomat told Reuters that an agreement could be imminent.

A raft of mixed economic data showed a welcome decrease in jobless claims and an uptick in new orders for durable goods, but also a pullback in consumer spending, dropping personal income and fading sentiment as the holiday shopping season nears its end amid a resurgent pandemic.

But languid inflation data provided further assurance that the US Federal Reserve will maintain its accommodative monetary policy at least until 2024.

The Dow Jones Industrial Average rose 259.81 points, or 0.87 per cent, to 30,275.32, the S&P 500 gained 22.89 points, or 0.62 per cent, to 3,710.15 and the Nasdaq Composite added 29.19 points, or 0.23 per cent, to 12,837.11.

Of the 11 major sectors in the S&P 500, all but real estate tech were in the black.

Drugmaker Pfizer Inc rose 2.1 per cent following a deal with the US to supply 100 million additional doses of its covid-19 vaccine by July.

Merck & Co Inc agreed to supply the US government with up to 100,000 doses of its covid-19 treatment, sending its stock up 1.0 per cent.

Supernus Pharmaceuticals Inc surged 17.1 per cent after its experimental drug for attention deficit hyperactivity disorder met the main goal of a late-stage study in adults.

Shares of Nikola Corp fell 9.8 per cent after it called off a deal to develop electric garbage trucks with recycling and waste disposal firm Republic Services Inc.

American Airlines Group and United Airlines Holdings rose 2.7 per cent and 2.8 per cent, respectively, after revealing plans to bring back furloughed employees this month. The airline industry is hoping to receive about US$15 billion in payroll support as part of the pending fiscal relief package.

is content editor for Morningstar Australia

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