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Global Market Report - 25 March

Lex Hall  |  25 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to follow Wall Street lower as tech stocks retreated despite Fed optimism over the recovery.

The Australian SPI 200 futures contract was down 10 points, or 0.2 per cent, at 6,730 points at 8.30am Sydney time on Thursday, suggesting a negative start to trading.

The S&P 500 closed lower on Wednesday as optimism about the economic recovery by Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen was unable to halt a decline in technology shares for a second straight day.

The Dow Jones Industrial Average fell 3.09 points, or 0.01 per cent, to 32,420.06. The S&P 500 lost 21.38 points, or 0.55 per cent, to 3,889.14 and the Nasdaq Composite dropped 265.81 points, or 2.01 per cent, to 12,961.89.

Locally, Macquarie analysts say AGL Energy may look to divest or split out its Loy Yang A coal plant in Victoria to reduce its carbon footprint and gain a rerating as a greener energy operator, The Australian reports.

Australia's share market bucked a downwards trend across Asia and closed higher on Wednesday.

The S&P/ASX200 benchmark index closed up by 33.4 points, or 0.5 per cent, to 6,778.8 on Wednesday.

The All Ordinaries closed higher by 27.3 points, or 0.39 per cent, to 7,013.9.

The health sector proved best, up 1.87 per cent.

Most Asian markets were down after a negative lead from markets in the US, where financial authorities discussed tax hikes to pay for economic stimulus.

Gold was up 0.4 per cent at $US1,734.29 an ounce; Brent oil was up 5.5 per cent to $US64.10 a barrel; Iron ore was down 0.3 per cent to $US161.39 a tonne.

Meanwhile, the Australian dollar was buying 75.85 US cents at 8.30am, down from 75.98 US cents at Wednesday’s close.

Asia

Chinese shares fell on Wednesday to their lowest close in three months as risk appetite soured on concerns of policy tightening and escalating tensions between China and major western economies.

At the close, the blue-chip CSI300 index was down 1.61 per cent at 4,928.69, the lowest close since 11 December, while the Shanghai Composite index fell 1.3 per cent to 3,367.06, the weakest close since 24 December.

Hong Kong stocks marked their lowest close in more than 10 weeks on Wednesday, tracking an overnight slump in Wall Street, on concerns of potential US rate hikes and global policy tightening.

Elevated US Treasury yields also dampened risk appetite, sending the Hang Seng index down 2.03 per cent to 27,918.14, its weakest close since 11 January. The Hang Seng China Enterprises index fell 2.37 per cent to 10,847.98.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1.21 per cent, while Japan’s Nikkei index closed down 2.04 per cent.

Europe

European stocks were subdued on Wednesday, as concerns about new lockdown measures overshadowed a surprise return to economic growth for the euro zone in March.

After falling as much as 0.7 per cent in earlier in the day, the pan-European STOXX 600 index ended flat.

Euro zone stocks also cut losses after IHS Markit’s flash composite PMI, seen as a good guide to economic health, bounced above the 50 mark, separating growth from contraction, to 52.5 this month compared with February’s 48.8.

While the data gave investors some relief, a third wave of coronavirus infections and renewed lockdown measures in Europe, as well as a slow vaccine roll-out are likely to weigh on the final reading of the survey and April’s numbers.

“We believe this is a pause, not the end of the equity rally yet,” said Michele Morganti, an equity strategist at Generali Insurance Asset Management.

“Covid management is a bumpy road. We nevertheless think that recovery will be quite strong in the second half of the year.”

Another piece of data showed a flash estimate of euro zone consumer morale improved to -10.8 this month from -14.8 in February.

“The sharp increase in euro zone consumer confidence in March came as a big surprise given tighter restrictions across the bloc and ongoing difficulties with the AstraZeneca vaccine,” said Melanie Debono, Europe economist at Capital Economics.

The European stocks benchmark has pulled away from a one-year peak hit last week after major economies like Germany and France imposed new lockdowns.

Meanwhile, the European Union is set to extend covid-19 vaccine export curbs to Britain and other areas with much higher vaccination rates, and to cover instances of companies backloading contracted supplies, EU officials said.

Among individual stocks, Italian defence and aerospace group Leonardo fell -6.1 per cent after it postponed the initial public offering of its US electronics unit DRS

Commerzbank rose 1.6 per cent even as Germany’s No. 2 lender said it expects a net loss for 2021.

Big gains for chipmakers helped limit market losses.

Shares in ASM International, ASML and Infineon Technologies, were up between 0.3 per cent and 5.2 per cent after US firm Intel Corp announced a $20 billion plan to expand its advanced chip manufacturing capacity.

French supermarket retailer Carrefour rose 2.3 per cent after saying it had agreed to buy Brazil’s third biggest food retailer Grupo BIG in a deal that values it at $1.3 billion.

North America

The S&P 500 closed lower on Wednesday as optimism about the economic recovery by Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen was unable to halt a decline in technology shares for a second straight day.

The remarks by the top two US economic officials mirrored what they told Congress the day before, with Powell saying on Wednesday the most likely case is 2021 will be “a very, very strong year.”

While the three major indexes closed lower, investors sold last year’s big performers, the technology shares that doubled the Nasdaq index from year-ago lows, and bought the underpriced value-oriented stocks poised to do well in the recovery.

Wall Street has seesawed this week as a months-long rotation into economically sensitive energy and financial shares, which have gained on an outlook for economic growth, was briefly upended by falling bond yields that prompted beaten-down technology stocks to rise.

The 10-year yield fell to about 1.6 per cent, a slide that in recent days had propped up tech stocks that rely on low-cost capital. Value-oriented shares on Wednesday closed flat, outpacing a 1.4 per cent decline in growth stocks, which include tech shares.

Investors have focused on the yield on the benchmark 10-year Treasury note, pondering whether there is room for long-term interest rates to run, said David Kelly, chief global strategist at JPMorgan Asset Management.

“We’re in a little bit of a lull here. We know that the economy is primed to begin to really accelerate in the second quarter,” Kelly said. “But we haven’t seen that acceleration yet so that’s what we’re waiting for.”

Adding to an upward bias for most of the session was data showing US factory activity picked up in early March amid strong growth in new orders. But supply chain disruptions continued to exert cost pressures on manufacturers, keeping inflation fears in focus.

“Everybody’s bullish about the prospects of a recovery right now,” said David Yepez, lead equity analyst and portfolio manager at Exencial Wealth Advisors. “In order for the market to bottom we need to have more fear, and I don’t feel like the market has fear right now.”

Financials gained 0.4 per cent and industrials rose 0.7 per cent, while energy jumped 2.5 per cent as crude prices rebounded from a 6 per cent fall in the last session.

The Dow Jones Industrial Average fell 3.09 points, or 0.01 per cent, to 32,420.06. The S&P 500 lost 21.38 points, or 0.55 per cent, to 3,889.14 and the Nasdaq Composite dropped 265.81 points, or 2.01 per cent, to 12,961.89.

Volume on US exchanges was 12.72 billion shares, compared with the 14.0 billion average for the full session over the last 20 trading days.

Apple Inc, Tesla Inc, Amazon.com Inc, Facebook Inc and Microsoft Corp led decliners on the S&P 500 and the Nasdaq.

Intel Corp retreated 2.3 per cent after earlier gains as the company, in its efforts to expand chipmaking capacity, announced plans to spend as much as US$20 billion to build two factories in Arizona and open its factories to outside customers.

US-listed shares of Taiwan Semiconductor dropped 5.2 per cent, while semiconductor equipment makers Lam Research Corp, Applied Materials Inc and ASML Holding rose. Applied Materials was the third-biggest boost on the S&P 500, after oil giants Chevron Corp and Exxon Mobil Corp.

Bitcoin gained after Tesla’s founder, Elon Musk, said the company’s electric vehicles can now be bought using bitcoin and the option will be available outside the US later this year.

GameStop Corp tumbled 33.8 per cent after the videogame retailer said it might cash in on a meteoric rise in its share price to fund its e-commerce expansion.

With Reuters

is content editor for Morningstar Australia

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