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Global Market Report - 24 June

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

Investors are likely to see slight gains early on the Australian share market after improving economic data helped Wall Street edge higher.

The Australian SPI 200 futures contract was higher by nine points, or 0.15 per cent, to 5,934.0 at 8am Sydney time on Wednesday.

In the US, Wall Street's three major indices closed higher after data showed the pace of contraction in the US manufacturing and services sectors slowed in June as businesses reopened after lockdowns that started in mid-March.

New home sales in the US jumped 16.6 per cent in May, blowing past estimates of a 2.9 per cent rise.

The mood may have been dampened a little by a New York Times report that European Union countries were prepared to block Americans from entering because the US has failed to control the coronavirus pandemic.

In Australia, internet provider TPG will hold an extraordinary general meeting and ask shareholders to vote in favour of its proposed merger with Vodafone.

A merger would create a substantially stronger competitor to Telstra and Optus.

The benchmark S&P/ASX200 index finished Tuesday up 9.9 points, or 0.17 per cent, to 5,954.4, while the broader All Ordinaries closed up 11.3 points, or 0.19 per cent, to 6,069.3.

The Australian dollar was buying 69.28 US cents at 8am, up from 69.09 US cents at the close of trade on Tuesday.

Asia

Chinese shares ended higher on Tuesday, as investors were reassured by US President Donald Trump’s assertion that the trade deal between China and the US remains in place.

At the close, the Shanghai Composite index was up 0.18 per cent at 2,970.62.

In Hong Kong, the Hang Seng index was up 396.00 points or 1.62 per cent at 24,907.34. The Hang Seng China Enterprises index rose 1.16 per cent to 9,993.48.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.75 per cent, while Japan’s Nikkei index closed 0.5 per cent higher.

Europe

European shares closed at their highest in almost two weeks on Tuesday, powered by cyclical stocks, following signs that business activity in the continent was rebounding faster than expected from a coronavirus-driven slump.

The pan-European STOXX 600 index ended 1.3 per cent higher, with economically sensitive sectors such as banks, automakers, miners and insurers gaining between 1.9 per cent and 3.3 per cent.

Euro zone stocks rose 1.6 per cent after IHS Markit’s Purchasing Managers’ Index showed a historic coronavirus-induced downturn in the bloc had eased again in June as businesses reopened after weeks of lockdown.

The index recovered more than expected to 47.5 from May’s 31.9, after touching a record low of 13.6 in April.

Germany's DAX jumped 2.1 per cent, France's CAC 40 rose 1.4 per cent and the UK's FTSE 100 rose 1.2 per cent after better-than-expected readings from Europe's largest economies.

Investors also took relief as White House trade adviser Peter Navarro walked back from his earlier remarks that the Phase One trade deal with China was “over” and US President Donald Trump confirmed in a tweet the trade deal was fully intact.

BlackRock’s Investment Institute said it was “warming up” to European assets following what it called the eurozone’s “impressive” efforts to tackle the coronavirus, and is considering an upgrade to European equities.

Trillions of dollars in stimulus from central banks and governments have helped the STOXX 600 recover nearly 37 per cent from March lows, although the pace of recovery has slowed in June amid worries over a fresh rise in coronavirus cases.

Helping Germany’s DAX outperform, Bayer AG gained 5.8 per cent after reports that the company is set to reach a settlement this week with US plaintiffs that claim its glyphosate-based weedkillers cause cancer.

German metals trader Kloeckner & Co jumped 17.5 per cent after it provided a positive earnings outlook for the second quarter.

Payments company Wirecard, mired in an accounting scandal, bounced 18.8 per cent after shedding more than 140 per cent in the past three sessions.

UK-listed drugmaker Hikma Pharmaceuticals fell 5.6 per cent after a major shareholder sold most of its nearly 1 billion pound ($1.8 billion) stake.

North America

Wall Street’s three major indexes closed higher on Tuesday as improving economic data and the prospect of more stimulus bolstered hopes of a swift recovery, while a jump in technology shares powered the Nasdaq to another record high.

While all the indexes pared gains late in the session to close below their peaks for the day, the Nasdaq managed to register its fifth record high close this month. Apple Inc provided the biggest boost followed by Amazon.com and Microsoft.

Data showed that the pace of contraction in the US manufacturing and services sectors slowed in June as businesses reopened after lockdowns that started in mid-March.

Also, new home sales jumped 16.6 per cent in May, blowing past estimates of a 2.9 per cent rise.

The mood may have been dampened a little by a New York Times report that European Union countries were prepared to block Americans from entering because the US has failed to control the coronavirus pandemic.

Then US Treasury Secretary Steven Mnuchin said that the next stimulus bill will be focused on getting people back to work quickly and that he would consider a further delay of the tax filing deadline.

Earlier in the day White House economic adviser Lawrence Kudlow said tax rebates and direct mail checks are on the table in the next coronavirus relief bill.

The Dow Jones Industrial Average rose 131.14 points, or 0.5 per cent, to 26,156.1, the S&P 500 gained 13.43 points, or 0.43 per cent, to 3,131.29 and the Nasdaq Composite added 74.89 points, or 0.74 per cent, to 10,131.37.

Seven of the 11 major sub-indexes were higher with consumer discretionary and technology posting the steepest gains. Industrials ended the day unchanged.

The defensive utilities, real estate and consumer staples sectors slipped as investors felt more comfortable taking riskier bets.

It also helped that at least three brokerages raised their price targets for Apple’s stock, and UBS raised its iPhone shipment estimates a day after the iPhone maker said it would use its own chips for Mac computers.

Earlier global equity markets had shown some relief from US President Donald Trump’s assurance that the Phase One trade agreement with China was “fully intact” after adviser Peter Navarro sparked confusion by saying the deal was over.

While US-China tensions have been a cause for concern, monetary and fiscal support worth trillions of dollars has played a large part in powering gains in the benchmark S&P 500 which closed 7.5 per cent below its 19 February record high.

Nike Inc rose 2.4 per cent as brokerages raised their price targets ahead of quarterly results on Thursday.

Spirit AeroSystems Holdings fell 13.3 per cent after the company, which is Boeing Co’s top supplier, said it was seeking relief from lenders as its finances were stretched by the COVID-19 pandemic and a 737 MAX production halt.

is content editor for Morningstar Australia

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