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Global Market Report - 29 June

Lex Hall  |  29 Jun 2020Text size  Decrease  Increase  |  
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Australia

Shares are likely to fall at the opening of the trading week on the Australian market mainly on investor concerns about the coronavirus remaining out of control in the US.

The Australian SPI 200 futures contract was lower by 91.0 points, or 1.56 per cent, to 5,757.0 at 8am Sydney time on Monday.

Stocks on Wall Street finished last week sharply lower as coronavirus infections in the US hit an all-time high, prompting states like Texas and Florida to reverse course on the reopening of businesses.

For a third consecutive day on Saturday, the number of confirmed US cases rose by more than 40,000, one of the largest surges in the world.

The major indices fell more than 2.0 per cent and have provided a weak lead for their Australian counterpart.

The US virus cases have injected jitters into a market that has been mostly riding high since April on hopes that the global economy will recover from a deep recession as businesses open doors.

Gold prices have increased as worried investors flock to safe haven assets, while oil prices have fallen on weakening demand.

Australia itself is not immune from increasing virus cases. Victoria has recorded double-digit increases in new COVID-19 infections for 12 days running, and had 90 new cases over the weekend.

The ASX200 fell 0.65 per cent last week, with the US virus rate a major catalyst.

The Australian dollar was buying 68.50 US cents at 8am, lower from 68.83 US cents at the close of trade on Friday.

Asia

Financial markets in mainland China were shut for the Dragon Boat Festival, while Hong Kong markets were closed for it on Thursday, when global equities slipped on worries of further coronavirus outbreaks across the world.

Hong Kong shares ended lower on Friday, after US lawmakers moved closer to sanctioning people and companies they consider China’s accomplices in curbing the city’s autonomy, while new coronavirus outbreaks globally also soured the sentiment.

The Hang Seng index closed down 0.9 per cent at 24,549.99. The Hang Seng China Enterprises index fell 0.8 per cent.

Japanese shares bounced back on Friday, tracking overnight Wall Street gains, with banks leading the rally in both markets, after US regulators’ decision to ease some rules allayed fears over a spike in fresh COVID-19 cases.

The benchmark Nikkei average rose 1.1 per cent to 22,512.08, rebounding from a 1½-week closing low hit in the previous session. For the week, the index eked out a marginal gain of 0.1 per cent.

Europe

European stocks closed lower on Friday as losses on Wall Street following a surge in US coronavirus cases added to worries over the pace of the global economic recovery.

The pan-European STOXX 600 index fell 0.4 per cent after hovering in positive territory earlier in the session.

Banks were the biggest decliners, down 2.2 per cent, while their transatlantic peers took a hit from the US Federal Reserve’s move to cap shareholder payouts.

Financial markets this week have swung between fears that a resurgence in COVID-19 cases could trigger fresh restrictions and optimism over improving economic data in Europe as many countries relax lockdown measures.

European Central Bank President Christine Lagarde said the euro zone is “probably past” the worst of the economic crisis caused by the pandemic, but the recovery will be uneven.

However, the STOXX 600 lost some steam heading into the close as investors focused on a record one-day rise in US COVID-19 cases.

The STOXX 600 recorded a near 2 per cent decline for the week, with travel and leisure stocks lagging the most.

Air France-KLM closed 3.4 per cent lower after rising earlier on news the Dutch government will provide 3.4 billion euros ($5.5 billion) in support to its Dutch arm.

UK stocks outperformed their European peers with a 0.2 per cent rise as the British government took more steps to relax the coronavirus lockdown.

Britain’s biggest retailer Tesco rose 1.9 per cent after it reported an 8.7 per cent increase in underlying UK sales in its first quarter, boosted by the coronavirus lockdown.

AMS rose 1.5 per cent after the Austria-based semiconductor company rejected media allegations of market manipulation during its takeover of Osram.

Sweden’s H&M fell 5.5 per cent after the world’s second-biggest fashion retailer saw a slightly deeper than expected loss in the second quarter.

Adidas slipped 2.1 per cent after Nike Inc reported an unexpected quarterly loss.

North America

Wall Street’s major indexes tumbled more than 2 per cent on Friday as several US states imposed business restrictions in response to a surge in coronavirus cases.

Some US states that were spared the brunt of the initial coronavirus outbreak or moved early to lift restrictions are seeing a resurgence in new infections. On Friday, Texas and Florida ordered bars to close down again.

A Wall Street Journal report that the Phase One US-China trade deal could be at risk placed additional pressure on US stocks. According to that report, Chinese officials warned that “meddling” in Hong Kong and Taiwan could lead Beijing to back away from its commitment to purchase US farm goods.

Among sectors, financial, communication services and energy shares outpaced the broader S&P 500 in declines. S&P 500 bank shares plummeted 6.1 per cent after the Federal Reserve limited dividend payments and barred share repurchases until at least the fourth quarter following its annual stress test.

Renewed concerns over the novel coronavirus pandemic have threatened to derail a strong rally for Wall Street that has erased much of the S&P 500’s steep losses from March. The benchmark index ended below its 200-day moving average, an indicator of long-term momentum.

The uptick in coronavirus cases likely triggered a test of that technical level, said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

The Dow Jones Industrial Average fell 730.05 points, or 2.84 per cent, to 25,015.55, the S&P 500 lost 74.71 points, or 2.42 per cent, to 3,009.05 and the Nasdaq Composite dropped 259.78 points, or 2.59 per cent, to 9,757.22.

For the week, the S&P 500 fell 2.87 per cent, the Dow lost 3.31 per cent, and the Nasdaq shed 1.87 per cent.

Facebook Inc shares shed 8.3 per cent, weighing the most on the S&P 500, after Unilever PLC and Verizon Communications Inc joined an advertising boycott that called out the social media giant for not doing enough to stop hate speech on its platforms.

Nike Inc shares dropped 7.6 per cent as the footwear maker, hurt by store closures due to the pandemic, posted a surprise quarterly loss.

Gap Inc shares surged 18.8 per cent after the retail chain entered a 10-year deal with rapper and fashion designer Kanye West to create a line of clothing under his Yeezy brand.

Friday also marked the reconstitution of the FTSE Russell indexes, including the large-cap Russell 1000 and small-cap Russell 2000. Daily trading volume is often among its highest levels of the year during the reconstitution, though volume this year has spiked on several occasions amid steep market sell-offs.

is content editor for Morningstar Australia

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