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Global Market Report - 26 March

Lex Hall  |  26 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following a late rally on Wall Street as investors cheered optimism over the recovery and sought stocks that would benefit.

The Australian SPI 200 futures contract was up 12 points, or 0.2 per cent, at 6,766 points at 8.30am Sydney time on Friday, suggesting a positive start to trading.

US stocks rose in a late-day rally on Thursday as investors bought stocks likely to do well in the recovery and picked up beaten-down Apple and Tesla shares in anticipation that the US economy grows at its fastest pace in decades this year.

The Dow Jones Industrial Average rose 199.42 points, or 0.62 per cent, to 32,619.48. The S&P 500 gained 20.38 points, or 0.52 per cent, to 3,909.52 and the Nasdaq Composite added 15.79 points, or 0.12 per cent, to 12,977.68.

Locally, the ongoing tenure of AMP chief executive Francesco De Ferrari and the strategic direction of the pressured 172-year-old wealth group remains clouded, even after the company late Thursday issued a statement assuring investors and staff he remained in the role, The Australian reports.

Shares closed marginally higher on the ASX on Thursday despite being down in the final minutes of trade.

The S&P/ASX200 benchmark index closed up by 11.8 points, or 0.17 per cent, to 6,790.6 on Thursday.

The All Ordinaries closed higher by 8.7 points, or 0.12 per cent, to 7,022.6.

The ASX200 was up by 0.35 per cent at 1200 AEDT, but fell during the last couple of hours of the session.

The health sector was best and gained 1.01 per cent.

Gold was down 0.3 per cent at $US1,730.34 an ounce; Brent oil was down 4.0 per cent to $US61.86 a barrel; Iron ore was down 1.0 per cent to $US159.85 a tonne.

Meanwhile, the Australian dollar was buying 75.83 US cents at 8.30am, down from 75.95 US cents at Thursday’s close.

Asia

China’s blue-chip stock index closed at its lowest level in more than three months on Thursday amid investor concern over possible policy tightening and rising tensions between China and major Western countries over Xinjiang.

The Shanghai Composite index finished down 0.1 per cent at 3,363.59 points. The blue-chip CSI300 index edged just 0.05 per cent lower, but that was enough to push it to its lowest close since 11 December.

The Hang Seng index finished down 0.07 per cent at 27,899.61 points. It had slipped as much as 1.48 per cent earlier, dragged down by a 4.95 per cent drop in the Hang Seng TECH index on the SEC news.

Japanese shares closed higher on Thursday as investors scooped up beaten-down cyclical stocks, although gains were capped by technology shares that tracked Nasdaq lower.

The Nikkei 225 Index ended 1.14 per cent higher at 28,729.88, ending a four-day losing streak, while the broader Topix jumped 1.4 per cent to close at 1,955.55 after falling in three straight sessions.

Europe

European stocks inched lower on Thursday as investors swapped energy and retail stocks with shares of companies seen as safer during heightened economic uncertainty following a new round of coronavirus restrictions in the euro zone.

The pan-European STOXX 600 index slipped 0.1 per cent, with oil & gas stocks falling 1.4 per cent on the back of weaker crude prices.

Global sentiment took a hit after a selloff in Chinese technology shares on worries that they will be delisted from US bourses, while the number of coronavirus cases in Germany saw the biggest increase since 9 January.

European markets have struggled this week despite a surprisingly strong recovery in March business activity.

Investors also looked past a survey that showed German consumer morale improved for the second month in a row heading into April, but a recent decision to extend restrictions clouded the outlook.

“To some extent, these negative covid-19 developments should be offset by a resilient manufacturing sector and a sizable cyclical rebound in H2 20,” Barclays analysts wrote in a note.

“However, there is no question that the recovery in the EU will be at a much slower pace than in the US given these covid-19 setbacks, but also because its stimulus is far smaller and less cyclical.”

Analysts expect the euro area to grow by 3.9 per cent this year and the United Kingdom by 4.9 per cent.

Investors will focus on a European Union summit later in the day where leaders will discuss how to speed up vaccinations and whether to block vaccine shipments to countries with higher inoculation rates such as Britain, or which are not sharing doses they produce.

H&M dropped 2.2 per cent after at least one Chinese online retailer appeared to drop its products following social media attacks on the Swedish company for saying it was “deeply concerned” about reports of forced labour in the farwestern region of Xinjiang in China.

Shares of German sportswear firm Adidas, which also came under fire in China, was down 4 per cent.

Cineworld slumped 10.4 per cent after it reported a US$3 billion loss for 2020 and said it will ask shareholders to approve a raise in its debt ceiling.

Gains in defensive sectors such as utilities, telecoms and food & beverage, which tend to decouple from the economic cycle, offered some support to the market.

North America

US stocks rose in a late-day rally on Thursday as investors bought stocks likely to do well in the recovery and picked up beaten-down Apple and Tesla shares in anticipation that the US economy grows at its fastest pace in decades this year.

President Joe Biden cited as economic progress Labor Department data that showed a declining number of Americans claimed unemployment insurance, news investors shrugged off earlier as Wall Street traded lower most of the session.

The labour report on Thursday showed claims for unemployment benefits dropped to a one-year low last week, a sign that the US economy is on the verge of stronger growth as the public health situation improves and temperatures rise.

An end-of-quarter rebalancing of investment portfolios by institutional investors added to another mostly seesaw session in which the major Wall Street indexes rose and fell amid the ongoing rotation from growth into so-called value stocks.

Value stocks again outperformed growth stocks, rising 1.2 per cent in the former compared with a 0.1 per cent slide in the latter, even as Apple Inc and Tesla Inc led the rally. Tesla added 1.6 per cent and Apple 0.4 per cent.

“It’s a very confused stock market, there isn’t real leadership,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

“One day cyclicals are in favour, the next day it’s tech-plus is in favour,” he said. “But on the positive side, there isn’t what I call aggressive selling.”

The Dow Jones Industrial Average rose 199.42 points, or 0.62 per cent, to 32,619.48. The S&P 500 gained 20.38 points, or 0.52 per cent, to 3,909.52 and the Nasdaq Composite added 15.79 points, or 0.12 per cent, to 12,977.68.

Volume on US exchanges was 12.69 billion shares, compared with the 13.84 billion average for the full session over the last 20 trading days.

Earlier, the Dow was higher while the Nasdaq fell, a reverse correlation that already has occurred far more this year than is typical in an entire year, said David Bahnsen, chief investment officer at the Bahnsen Group in Newport Beach, California.

“Any reverse correlation between the Dow and Nasdaq is pretty embedded right now, and I expect it will continue,” Bahnsen said. “There is ongoing rotation out of tech, there’s ongoing de-risking for some of the small caps.”

The Nasdaq Composite has fallen in March after four straight months of gains as rosy economic projections lifted demand for undervalued cyclical stocks, but also raised fears of higher inflation as seen in the jump in 10-year Treasury yields.

The rapid rise in the 10-year is not bearish but rather a bullish indicator, Bahnsen said.

The yield of the benchmark Treasury note rose to 1.6297 per cent.

“It is happening because we’re vaccinating, it is happening as the economy reopens, it is happening because we’re going to get a really big, high single-digit GDP number this year,” he said.

The CBOE volatility index also seesawed, closing down at 19.84.

Shares of Nike Inc fell 3.4 per cent as the sporting goods giant faced a Chinese social media backlash over its comments about reports of forced labour in Xinjiang.

Darden Restaurants Inc surged 8.2 per cent, the largest percentage gainer on the S&P 500, after it announced a new share buyback plan and forecast upbeat fourth-quarter revenue and profit.

With Reuters

is content editor for Morningstar Australia

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