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Global Market Report - 25 June

Lex Hall  |  25 Jun 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is likely to see early losses after worries over rising coronavirus cases in the US caused a sharp drop on Wall Street.

The Australian SPI 200 futures contract was down by 92.0 points, or 1.55 per cent, to 5,837.0 at 8am Sydney time on Thursday.

IG Markets analyst Kyle Rodda said the anticipated sell-off would produce a level of price movement not seen on the ASX200 this week.

In the US, the S&P 500 skidded 2.6 per cent after new coronavirus cases climbed to the highest level in two months.

The US has recorded the second-largest rise in infections since the health crisis began, with a flare-up of cases in states where restrictions meant to contain the disease were lifted early.

The governors of New York, New Jersey and Connecticut announced that visitors from states with high coronavirus infection rates must quarantine for 14 days on arrival.

In more bearish news, the International Monetary Fund said it expects global output to shrink by 4.9 per cent, compared with a 3.0 per cent contraction predicted in April.

The IMF forecasts Australia's economy will shrink by 4.5 per cent in 2020 and grow by four per cent in 2021.

Oil prices fell by more than 5.0 per cent on oversupply concerns, and gold reached its highest point since October 2012 with investors flocking to safe haven assets.

The share market on Wednesday closed slightly higher for a fourth straight day, with investors apparently afraid to push the ASX200 over the 6,000 level.

The Australian dollar was buying 68.61 US cents at 8am, down from 69.41 US cents at the close of trade on Tuesday.

Asia

China stocks ended higher on Wednesday to close the shortened three-session week on a firmer note, as investors cheered improving data from key economies and Beijing's latest reforms in its capital markets.

China's stock market will be closed on Thursday and Friday for the Dragon Boat Festival.

At the close, the Shanghai Composite index was up 0.3 per cent at 2,979.55, while the blue-chip CSI300 index added 0.42 per cent.

Hong Kong stocks fell on Wednesday, weighed down by energy companies, while signs of an increase in coronavirus cases added to the pressure.

At the close of trade, the Hang Seng index was down 125.76 points or 0.5 per cent, at 24,781.58. The Hang Seng China Enterprises index fell 0.57 per cent to 9,936.66.

Europe

European stocks slumped to a one week-low on Wednesday as a surge in coronavirus cases and news that U.S. was weighing tariffs on European products dashed investors hopes of a speedy economic recovery.

The pan-European STOXX 600 closed 2.8 per cent lower, recording its second worst fall this month. Economically sensitive cyclical sectors such as travel & leisure, automakers, oil & gas and banks led declines, falling between 3.7 per cent and 4.7 per cent.

Many US states saw record daily increases in COVID-19 infections amid easing of lockdowns, while a media report that European Union countries are prepared to bar entry to Americans raised worries of fresh restrictions.

Further adding to woes, the US may modify duties on a range of EU products and was weighing tariffs on other products from Britain, France, Spain and Germany that have an approximate value of $4.5 billion, according to the Office of the US Trade Representative.

Investors piled into risky assets on Tuesday after data showed improving business activity in France and Germany as well as on White House reassurances about the Phase One US-China trade deal.

But European Central Bank chief economist Philip Lane said that solid data may not be a good guide to how the euro zone recovers from the crisis and the International Monetary Fund predicted a deeper damage to global output.

Germany's DAX slumped 3.4 per cent even as the Ifo institute's survey showed the strongest rise ever recorded in the country's business morale in June.

The top decliner on the STOXX 600 was scandal-hit Wirecard, which plunged 28.3 per cent after a slew of negative reports.

Among the few bright spots, Austrian sensor maker AMS rose 6 per cent after JPMorgan upgraded the stock to “overweight” from “neutral”, while Dialog Semiconductor jumped 6.4 per cent after raising its quarterly revenue outlook.

Sweden’s Evolution Gaming Group AB fell about 6 per cent after it offered to buy NetEnt AB for 19.6 billion Swedish crowns ($3.09 billion). NetEnt’s shares jumped 33 per cent.

North America

Wall Street’s three major indexes on Wednesday suffered their biggest daily percentage drop in almost two weeks as a surge in US coronavirus cases intensified fears of another round of government lockdowns and worsening economic damage.

Nasdaq, which had registered its fifth record closing high on Tuesday, snapped an eight-day winning streak, which was its longest since December 2019.

The session marked the biggest percentage decline for all three indexes, including a 2.6 per cent drop for the S&P 500, since 11 June when the S&P fell 5.89 per cent.

The US has recorded the second-largest rise in infections since the health crisis began, with a flare-up of cases in states where restrictions meant to contain the disease were lifted early.

The governors of New York, New Jersey and Connecticut announced that visitors from states with high coronavirus infection rates must self-quarantine for 14 days on arrival.

The pandemic appeared to be causing wider and deeper damage to economic activity than first thought. The IMF said it now expects global output to shrink by 4.9 per cent, compared with a 3.0 per cent contraction predicted in April.

Advanced economies have been particularly hard hit, with US output now expected to shrink 8.0 per cent, more than two percentage points worse than the April forecast.

Shares of US airlines, resorts and cruise operators slumped as travel was hit hard by lockdowns. Royal Caribbean Cruises, Norwegian Cruise Line Holdings and Wynn Resorts all tumbled along with the NYSE Arca Airline index.

Cruise operator Carnival Corp fell 11 per cent as it also faced a Standard & Poor’s credit rating downgrade for its bonds to junk status.

The Dow Jones Industrial Average fell 710.16 points, or 2.72 per cent, to 25,445.94, the S&P 500 lost 80.96 points, or 2.59 per cent, to 3,050.33 and the Nasdaq Composite dropped 222.20 points, or 2.19 per cent, to 9,909.17.

The S&P 500 finished the session about 10 per cent under its 19 February, closing record high while the Dow Jones Industrials was about 14 per cent from its 12 February record close.

Wall Street’s fear gauge, the CBOE volatility index, closed 2.47 points higher at 33.84.

Before Wednesday’s sell-off, a slate of better-than-feared economic reports, easing lockdowns and massive stimulus measures had powered the Nasdaq to an all-time high and put the benchmark S&P 500 on track for its best quarterly performance since 1998.

The biggest decliner among the 11 major S&P sub-sectors was energy, down 5.5 per cent, as crude prices slumped on news of record storage and concerns about demand.

Utilities, down 0.9 per cent, showed the smallest percentage decline as it is seen as a defensive sector with predictable revenue.

Dell Technologies Inc shares jumped 8.3 per cent after a report said the company was considering spinning off its roughly $50 billion stake in cloud computing software maker VMware Inc. VMware rose 2.3 per cent.

is content editor for Morningstar Australia

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