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Global Market Report - 24 July

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

Australian shares are set to drop after more signs the coronavirus crisis is worsening in the US, which prompted markets there to close lower.

The Australian SPI 200 futures contract was lower by 52.0 points, or 0.86 per cent, to 6,010.0 points at 8am Sydney time on Friday.

In the US, investors baulked at data that showed jobless claims reached 1.416 million last week.

The increase of 109,000 claims broke a stretch of 15 consecutive weeks of improvements.

Congress kept working to pass more economic stimulus. Senate Republicans said they could present their version of the bill to Democrats as early as this week.

Total US coronavirus cases have topped 4 million, and there were nearly 2600 new cases every hour on average, according to a Reuters tally.

Technology stocks had the sharpest drops after a better-than-expected profit report from Microsoft failed to satisfy investors.

The Dow Jones Industrial Average fell 353.51 points, or 1.31 per cent, to 26,652.33, the S&P 500 lost 40.36 points, or 1.23 per cent, to 3,235.66 and the Nasdaq Composite dropped 244.71 points, or 2.29 per cent, to 10,461.42.

Other stock indexes around the world were mixed. Uncertainty across markets helped gold touch its highest price in nearly nine years.

In Australia today, Treasurer Josh Frydenberg will further detail the economic task ahead of Australia during the pandemic in a speech to the National Press Club. This follows his budget update on Thursday.

Federal, state and territory leaders will have a regular national cabinet meeting to discuss the virus crisis and measures to cope. The prime minister is expected to front the media afterwards to outline the talks.

The Australian dollar was trading at 70.96 US cents at 8am, lower from 71.52 US cents at Thursday's close.

The US dollar dropped to a more than four-month low overnight as investors continued to sell the buck on expectations the US economy will underperform its peers due to the surge in coronavirus cases.

The Aussie dollar has been helped by demand for commodities including iron ore and copper.

Asia

Chinese shares fell on Thursday, snapping a four-day win streak, after an abrupt US order for closure of the Chinese consulate in Houston stoked geopolitical tensions and offered exits for investors who profited from the market’s recent rally.

The Shanghai Composite Index fell 0.2 per cent to 3,325.11 and the blue-chip CSI300 index was pretty much flat. Both benchmarks flitted in and out of positive territory during the session.

Hong Kong shares ended higher on Thursday as investors returned their focus to the city’s rallying tech stocks, shaking off fears of escalating US-China tensions.

At the close of trade, the Hang Seng index was up 0.8 per cent at 25,263.00. The Hang Seng China Enterprises index also rose 0.8 per cent.

The sub-index of the Hang Seng tracking the IT sector rose 2.4 per cent, the financial sector ended 0.5 per cent higher and the property sector fell 0.1 per cent.

Europe

European shares ended flat on Thursday, after a jump in US weekly jobless claims and falling euro zone consumer confidence put a dampener on economic recovery hopes, erasing earlier gains made on strong regional earnings reports.

The pan-European STOXX 600 index gave up gains of as much as 0.8 per cent after data showed US jobless claims rose for the first time in nearly four months, suggesting the labour market was stalling amid a surge in covid-19 cases.

In Europe, consumer confidence deteriorated in July despite expectations of an improvement.

There were similar doubts about US consumer spending as the additional amount received by the unemployed under an emergency stimulus program is set to taper over the weekend.

The travel and leisure sector—worst hit by pandemic containment measures—fell 1.1 per cent. It has lost more than 36 per cent this year with a recovery from March lows plateauing.

Losses in the main index were capped by a 2.1 per cent surge in automakers after Germany’s Daimler forecast a rise in operating profit at its Mercedes-Benz cars and vans division in 2020 as sales rebound.

Unilever climbed 7.9 per cent as its second-quarter sales fell far less than feared. Shares in Nestle and Danone rose about 1.5 per cent each.

Publicis Groupe, the world’s third-biggest advertising company, surged 8 per cent after it beat market expectations for quarterly underlying sales.

Companies listed on the STOXX 600 are expected to report a 58.6 per cent drop in second-quarter earnings, but many investors believe there is a big margin for error, given analysts in many cases had no precise outlook to factor into their estimates.

The STOXX 600 is on track to end with weekly gains as hopes of a covid-19 vaccine and optimism around an EU recovery fund pushed the benchmark index to early March highs.

But investors will keep a wary eye on US-China trade relations as they await Beijing’s official response to the forced closure of its consulate in Houston amid accusations of spying.

North America

Wall Street dropped sharply on Thursday as investors fled market-leading tech shares due to mixed earnings reports and growing signs of a worsening coronavirus pandemic, which could exacerbate a deep economic recession.

The sell-off steepened after a tech watchdog group reported that Apple faces consumer protection investigations in multiple states.

The bellwether S&P 500 slid more than 1 per cent, snapping a four-day winning streak with its biggest daily percentage drop since June 26. All three major US stock averages lost ground, with falling momentum stocks Apple, Microsoft Corp and Amazon.com weighing heaviest.

Apple ended the session down 4.6 per cent.

The Russell 2000 and the S&P Smallcap 600, both small cap indexes, outperformed the broader market.

US jobless claims unexpectedly ticked higher to 1.416 million last week, the Labor Department said.

The number excludes recipients of Pandemic Unemployment Assistance, set to expire on 31 July.

Congress kept working to pass new stimulus measures before that deadline continued, with Senate Republicans announcing they could present their version of the bill to Democrats as early as this week.

Total US coronavirus cases topped 4 million on Thursday, with nearly 2,600 new cases every hour, on average, according to a Reuters tally.

The Dow Jones Industrial Average fell 353.51 points, or 1.31 per cent, to 26,652.33, the S&P 500 lost 40.36 points, or 1.23 per cent, to 3,235.66 and the Nasdaq Composite dropped 244.71 points, or 2.29 per cent, to 10,461.42.

Of the 11 major sectors in the S&P 500, eight closed in the red, with tech shares notching the largest percentage drop. Second-quarter reporting season is in full-stride, with 113 S&P 500 constituents having reported. Refinitiv data shows that 77 per cent of those have beaten expectations that were extraordinarily low.

Microsoft Corp dropped 4.3 per cent after reporting its cloud computing business Azure reported its first-ever quarterly growth under 50 per cent.

Tesla Inc reported a profit for the fourth straight quarter, setting the company up for inclusion in the S&P 500. But the stock slid 5.0 per cent as analysts questioned whether the electric automaker’s stock price matched its performance.

American Airlines Group jumped 3.7 per cent after announcing it would rethink the number of flights to add in August and September. Also, it reported an adjusted loss per share of $7.82.

Airlines, battered by mandated lockdowns, reversed early losses to cross well into the black. The S&P 1500 Airlines index gained 1.3 per cent.

Twitter rose 4.1 per cent after reporting its highest-ever annual growth of daily users.

is content editor for Morningstar Australia

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