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Global Market Report - 28 July

Lex Hall  |  28 Jul 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to start higher after a positive lead from Wall Street where investors bet on technology stocks due to report earnings this week.

The Australian SPI 200 futures contract was higher by 26.0 points, or 0.43 per cent, to 6,034.0 points at 8am Sydney time on Tuesday.

In the US overnight, shares in Apple, Amazon.com, Facebook and Alphabet saw strong gains, which boosted markets.

Investors also weighed progress in US government stimulus efforts against rising covid-19 cases in the country, with Senate Republicans racing to complete details of a $US1 trillion ($1.4 trillion) coronavirus aid proposal.

The Dow Jones Industrial Average rose 0.43 per cent to 26,584.77, the S&P 500 gained 0.74 per cent, to 3,239.41 while the Nasdaq Composite added 1.67 per cent to 10,536.27.

Gold prices climbed as high as $US1,941.90, while Brent crude oil rose 7 US cents to $US43.41 dollars a barrel.

In Australia, investors will continue to monitor the coronavirus situation in Victoria after the state on Monday posted a record 532 new cases and six more deaths.

The market will also be watching weekly payroll data for an indication on whether the unemployment rate has been easing.

Meanwhile, the Australian dollar was buying 71.47 US cents at 8am Sydney time, up from 71.32 US cents at Monday's close.

The greenback has fallen against most currencies, which BK Asset Management's Kathy Lien attributed to the prospect of double digit declines in GDP growth in the US.

Asia

Chinese shares clawed back lost ground on Monday after data showed that China’s economic recovery is continuing to build momentum, but heightened Sino-US tensions kept gains in check.

At the close, the Shanghai Composite index was up 0.26 per cent at 3,205.23 and the blue-chip CSI300 index was up 0.51 per cent. 

Industrial firms’ profits rose for a second straight month in June and at the fastest pace in more than a year, adding to signs that an economic recovery from the coronavirus crisis is gaining momentum, but officials warned of continued uncertainty.

Hong Kong shares fell on Monday, extending losses from the previous session on rising Sino-US tensions, and as a jump in covid-19 cases in the city weighed on investor sentiment.

At the close of trade, the Hang Seng index was down 102.07 points, or 0.41 per cent, at 24,603.26. The index had dropped 2.2 per cent on Friday after China ordered the closure of the US consulate in the southwestern city of Chengdu.

Japanese shares slid to a 1½-week low on Monday as worries over worsening ties between China and the US soured investor mood, and a firmer yen weighed on exporters.

The benchmark Nikkei 225 index fell 0.16 per cent at 22,715.85, its lowest closing since 17 July.

Europe

European shares slipped on Monday with travel stocks leading the declines after Britain imposed a two-week quarantine on travellers returning from Spain after a surge in coronavirus cases.

The pan-European STOXX 600 closed down 0.3 per cent, extending declines after it recorded its first weekly fall in four on Friday.

Travel and leisure stocks dropped 3.4 per cent, with UK-based airlines and tour operators such as TUI, Easyjet, British Airways-owner IAG falling between 6 per cent and 11.3 per cent.

The broader index sank to a two-month low, further cementing its status as the worst performer in Europe this year with a 40 per cent loss.

Adding to the sector’s woes, Ireland’s Ryanair cut its annual passenger target by a quarter and warned a second wave of covid-19 infections could lower that further.

Lufthansa and Air France dropped about 5 per cent each after the British government said it was watching the situation in Germany and France closely.

Spanish stocks fell 1.7 per cent, lagging its European peers, also hit by a weakness in banking shares.

Germany's DAX stayed afloat, helped by a 2.7 per cent gain for software giant SAP SE after it announced plans to spin off and float Qualtrics, the US specialist in measuring online customer sentiment.

Still, concerns over a resurgence in coronavirus cases overshadowed an Ifo Institute survey that showed German business morale improved further in July after posting a record increase in June.

Investors globally were on edge as ties between the world’s two largest economies deteriorated after China took over the premises of the US consulate in the southwestern city of Chengdu in retaliation for China’s ouster last week from its consulate in Houston, Texas.

French car parts group Faurecia fell 6.4 per cent after saying that it expects to return to profit and cash generation in the second half of the year, helped by cost controls.

Ubi Banca fell 8.8 per cent, while Intesa Sanpaolo slipped 0.8 per cent after the expiry of a deadline for investors to buy Ubi Banca’s shares and tender them in Intesa Sanpaolo’s takeover offer, the day before the formal end of the offer.

North America

Wall Street’s main indexes closed higher on Monday as investors bet on some of the market’s most high-profile stocks ahead of earnings reports while they weighed progress in US government stimulus efforts against rising US covid-19 cases.

Apple, Amazon.com, Facebook and Alphabet, all due to report earnings this week, were among the top boosters of the S&P 500. The technology-heavy Nasdaq posted a 1.7 per cent gain, outperforming the S&P and the Dow.

Netflix and Microsoft also gained, noted John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio, who said investors were buying stocks in the group, which fell in recent sessions.

The Dow Jones Industrial Average rose 114.88 points, or 0.43 per cent, to 26,584.77, the S&P 500 gained 23.78 points, or 0.74 per cent, to 3,239.41 and the Nasdaq Composite added 173.09 points, or 1.67 per cent, to 10,536.27.

The biggest gainers among the S&P’s 11 major sectors were technology, up 1.6 per cent, and materials, up 1.4 per cent, followed by real estate, up 1.1 per cent. Financials, down 1.3 per cent, and utilities, down 0.8 per cent, were the only sectors to end the day lower while energy eked out a small gain of 0.2 per cent.

US Senate Republicans raced to complete details of a US$1 trillion ($1.4 trillion) coronavirus aid proposal before enhanced unemployment benefits expire on Friday. The aid proposal, which could involve a reduction in emergency federal weekly unemployment benefits from US$600 to US$200, would then need to be negotiated with Democrats.

After the market closed, senate majority leader Mitch McConnell said the package would address health, schools and include direct payments to Americans of $1,200 each.

Some investors have worried whether the package would provide sufficient support for the economy. These concerns were reflected in gains in assets viewed as safe havens such as the big growth companies and gold, according to Kristina Hooper, chief global market strategist at Invesco in New York.

Trillions of dollars in fiscal and monetary stimulus have been pivotal pushing the S&P 500 closer to its February record high. It ended Monday’s session 4.3 per cent below the record.

On Monday, as the world confronted the prospect of rising covid-19 infections, countries in Asia and Europe imposed new restrictions.

In the US, where infection rates have climbed since June, two baseball games were cancelled due to the virus while President Donald Trump’s national security adviser Robert O’Brien was the most senior official to test positive.

Investors kept their eye on earnings, with 189 S&P 500 companies scheduled to report results this week. About 80 per cent of the 130 S&P 500 firms that have reported so far have beaten a low bar of earnings estimates, according to IBES Refinitiv data.

Few expected any major announcement at a two-day Federal Reserve meeting, but analysts said policymakers were likely to lay the groundwork for more action later this year.

Moderna shares finished up 9 per cent after US and company officials said its covid-19 vaccine may be ready for widespread use by year-end. The drugmaker announced it started a trial to demonstrate safety and effectiveness, which could be the final hurdle prior to regulatory approval.

is content editor for Morningstar Australia

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