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Global Market Report - 25 March

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

Australian shares are poised to bounce sharply amid a global rally on hopes of a US economic stimulus deal.

The SPI200 futures contract was up 278 points, or 5.9 per cent, at 4992 points at 8am Sydney time on Wednesday, suggesting a huge surge as the market opens.

Analysts say it is shaping up to be another positive day for local investors but are cautious about how long any bounce will last.

"The moves do look like another bear market rally, though given how oversold valuation metrics and market technicals had suggested global stocks had become, there's a sense that perhaps equity markets have more than just a day's recovery in them," IG Markets analyst Kyle Rodda says in a note.

Overnight the US, European and Chinese stock markets also surged on hopes a $US2 trillion stimulus deal would soon be clinched.

The local bourse rallied on Tuesday from a near eight-year low with the US Federal Reserve taking drastic action to shore up markets and new coronavirus cases seeming to plateau in Italy.

The Dow Jones Industrial Average soared 11.37 per cent to end at 20,704.91 points, while the S&P 500 jumped 9.38 per cent to 2447.33. The Nasdaq Composite rallied 8.12 per cent to 7417.86.

The Australian dollar was buying 59.72 US cents at 8am on Wednesday up from 59.39 US as the market closed on Tuesday.

Asia

China stocks tracked broader Asia higher on Tuesday after the US Federal Reserve rolled out a slew of support measures to ease a global cash crunch, although gains were capped due to a sharp rise in new coronavirus cases in China.

At the close, the Shanghai Composite index was up 2.3 per cent at 2,722.44.

The blue-chip CSI300 index was up 2.7 per cent, with its financial sector sub-index higher by 2.7 per cent, while the consumer staples sector rose 3.5 per cent, the real estate index gained 2.7 per cent and the healthcare sub-index added 3.3 per cent.

Hong Kong stocks rallied on Tuesday, following a broader Asia higher after the US Federal Reserve rolled out a slew of support measures to ease a global cash crunch.

At the close of trade, the Hang Seng index was up 967.36 points or 4.46 per cent at 22,663.49. The Hang Seng China Enterprises index rose 4.94 per cent to 9,184.44.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 5.08 per cent, while Japan’s Nikkei index closed up 7.13 per cent.

Europe

European shares surged on Tuesday, recovering a week’s worth of losses as the prospect of some stability from recent stimulus measures saw buying into markets wallowing around seven-year lows.

The pan-European STOXX 600 index jumped 8.4 per cent in its strongest session since late-2008. The index was still roughly 30 per cent down from a record peak hit in February, after fears over the economic shock from the coronavirus spurred panicked selling across the board in recent weeks.

Nearly all of the index’s constituents were trading positive, with a jump in equities across the Atlantic also bolstering sentiment. Low valuations were seen prompting some degree of bargain hunting.

With several major governments and central banks announcing measures to boost liquidity and offset the coronavirus outbreak’s impact, investors hoped for some stability in markets amid skyrocketing volatility.

Europe’s so-called fear gauge fell to 52.53, its lowest in nearly two weeks, after having spiked to 12-year highs earlier in the month.

The European basic resources and oil and gas sub-sectors were the best performers for the day, adding more than 15 per cent each. Both sectors recovered from multi-year lows.

Base metal and oil prices also surged on the day.

Traders hardly reacted to worse-than-expected figures showing euro zone business activity crumbled in March as shops, restaurants and offices pulled down their shutters.

Italian stocks surged nearly 9 per cent, marking their best day in nearly a decade as latest numbers showing a slowdown in new cases of COVID-19 raised hopes that the most aggressive phase of the outbreak may be passing.

German stocks jumped nearly 11 per cent, while British bluechips added 9 per cent. Both bourses saw their best sessions since 2008.

Among individual movers, British travel and leisure stocks Cineworld and Carnival topped the STOXX 600, bouncing back from severe drops in valuation.

Takeaway.com, Europe’s largest online food ordering service, closed 9.3 per cent higher after it said late Monday that it would grant a delay in payments for Dutch restaurants on its platform that have been hit by the coronavirus.

North America

The Dow soared on Tuesday to its biggest one-day percentage gain since 1933, after US lawmakers said they were close to a deal for an economic rescue package in response to the coronavirus outbreak, injecting optimism following the biggest selloff since the financial crisis.

All three main US stock indexes rebounded strongly from Monday’s brutal selloff as the coronavirus outbreak forced entire nations to shut down.

Senior Democrats and Republicans said they were close to a deal on a $2 trillion stimulus bill, aimed at providing financial aid to Americans out of work and help for distressed industries.

The expected legislation adds to aggressive action announced by the Federal Reserve in recent days, including purchase of corporate bonds and announcing that the US central bank will make direct loans to companies.

King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco, said expectations on the stimulus bill were driving optimism on Wall Street, but said his firm was still waiting to buy back into the market.

“With all of this stimulus, we just need a catalyst to spark the fire,” Lip said. “That spark will be a peaking of the cases, and when it starts to come down, I think that’s when everything gets lit up.”

Investors were also pleased after President Donald Trump said on Monday he was considering how to restart parts of business life when a 15-day shutdown ends next week, even as the highly contagious virus spreads rapidly and poorly equipped hospitals struggle with a wave of deadly cases.

A separate proposal in the US House of Representatives to grant airlines and contractors a $40 billion bailout lifted the S&P 1500 airlines index by 15 per cent.

The severity of the spread of COVID-19 and expectations of aggressive stimulus measures have whipsawed financial markets and ended Wall Street’s 11-year bull run.

Boeing Co powered the Dow’s gains, jumping nearly 21 per cent after chief executive Dave Calhoun said the planemaker expected the 737 MAX jet to return to service by mid-year. Its shares have lost nearly two-thirds of their value so far in 2020.

Data on Monday showed US business activity hit a record low in March, bolstering expert views that the economy was already in a recession.

Traders were still weighing the uncertainty of the path of the coronavirus outbreak.

The Dow Jones Industrial Average soared 11.37 per cent to end at 20,704.91 points, while the S&P 500 jumped 9.38 per cent to 2,447.33. The Nasdaq Composite rallied 8.12 per cent to 7,417.86.

The S&P energy index jumped 16.3 per cent. The big banks index jumped about 13 per cent, tracking an increase in US government bond yields.

Just 11 S&P 500 stocks ended lower.

 

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