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Global Market Report - 3 September

Lex Hall  |  03 Sep 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise as defensive and value stocks boosted Wall Street.

The Australian SPI 200 futures contract was up 32 points, or 0.5 per cent, to 6,083 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

The S&P 500 closed higher on Wednesday for the ninth time in the past 10 sessions, with defensive and value stocks taking their turns to lead the gains after data showed US private payrolls expanded last month, but at a much slower pace than expected.

The Dow Jones Industrial Average rose 454.84 points, or 1.59 per cent, to close at 29,100.5, the S&P 500 gained 54.19 points, or 1.54 per cent, to 3,580.84 and the Nasdaq Composite added 116.78 points, or 0.98 per cent, to 12,056.44.

The S&P/ASX200 benchmark index closed up 109.8 points, or 1.84 per cent, to 6,063.2 points on Wednesday, despite figures that showed the economy shrunk by 7.0 per cent for the June quarter. It was the best day for the index since the gains of 1.88 per cent on August 4.

The All Ordinaries index finished higher by 108.6 points, or 1.77 per cent, to 6,251.8.

Gold is down 1.4 per cent to $US1,942.72 an ounce; Brent oil is down 2.6 per cent to $US44.39 a barrel; Iron ore is up 2.1 per cent to $US127.31 a tonne.

Meanwhile, the Australian dollar was buying 73.33 US cents at 8.30am, down from 73.37 US cents at Wednesday’s close.

Asia

China stocks closed mixed on Wednesday as tech shares gained but material and energy shares weighed.

At the close, the Shanghai Composite index was down 0.17 per cent at 3,404.80, while the blue-chip CSI300 index was up 0.04 per cent.

Hong Kong stocks ended lower on Wednesday, weighed down by energy and financial firms.

At the close of trade, the Hang Seng index was down 64.76 points or 0.26 per cent at 25,120.09. The Hang Seng China Enterprises index fell 0.12 per cent to 10,000.96.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.89 per cent, while Japan's Nikkei index closed up 0.47 per cent.

Europe

European shares closed higher on Wednesday as signs of a recovery in global manufacturing activity helped chemical and industrial stocks, while the tech sector marked its strongest close in more than 19 years, tracking gains on Wall Street.

The pan-European STOXX 600 index rose 1.7 per cent after closing lower for the past four sessions.

The chemicals sector ended at a record high as positive manufacturing data from the euro zone, US and China this week pointed to a recovery in global factory activity.

Local technology stocks mirrored gains in their US peers, ending at their strongest level since 2001. The sector has been more resilient than most through the pandemic, having turned positive for the year by early July.

Still, weak inflation data and the lack of clear progress against the pandemic augured an uneven economic recovery, fears of which have kept the STOXX 600 in a tight trading range since June.

Data on Wednesday showed that German retail sales fell unexpectedly in July, dashing hopes that household spending in Europe's largest economy will be powerful enough to drive a strong recovery in the third quarter. But German stocks rose more than 2 per cent.

In corporate news, Barratt Developments, Britain’s biggest housebuilder, surged 8.7 per cent after it flagged an improvement in forward sales, despite reporting a near 30 per cent fall in annual housing completions and revenue.

The stock was the best performer in the personal and household goods sector, which led gains among its European peers for the day.

Italian infrastructure group Atlantia topped the STOXX 600 on hopes that it would clinch a deal over its motorway unit Autostrade per l’Italia.

Belgian real estate firm Aedifica rose 4 per cent after it clocked strong rental income growth over the 12 months to June 30.

European banks, however, lagged their peers, retreating 0.7 per cent as uncertainty over the pandemic seemed likely to create a shaky credit environment.

North America

The indexes gained steam in afternoon trading and hit session highs in the final half hour.

The Federal Reserve’s “Beige Book” report showed a modest increase in activity for US businesses and an increase in employment through late August, while economic growth remained sluggish in parts of the country.

The blue-chip Dow edged closer to its 12 February record high, coming in just 1.6 per cent below the milestone while the tech-heavy Nasdaq, which closed the session almost 23 per cent above its pre-crisis high, rose at a slower pace on Wednesday.

While much of the rally from March lows has already been fueled by Federal Reserve support, Lindsey Bell, chief investment strategist at Ally Invest, said investors may still be digesting the central bank’s policy announcement last week which indicated continued support.

“What you’re seeing today is a bit of a rotation after yesterday’s blockbuster day,” said Bell. “Unless you really think tech is going to completely crash it can take a breather and allow some of the other value-oriented and cyclical sectors to take the reins for a while.”

In comparison the S&P value index rose 1.8 per cent while the growth index added 1.4 per cent.

The defensive utilities, consumer staples and real estate, which have trailed the broader market this year, were some of the biggest gainers among major S&P sectors on Wednesday, rising between 2 per cent and a little over 3 per cent. Health stocks also closed up 2 per cent.

Financials, a value sector which has also sharply underperformed this year, closed up 1.5 per cent on Wednesday.

The high-flying technology sector ended the day up 0.9 per cent, but at least one trader said investors showed up looking for bargains after it had turned negative in the morning.

US private payrolls increased last month from July, according to the ADP report, but fell short of economists’ forecast. Investors are now waiting for the government’s comprehensive employment report which is slated for Friday.

Janet Walker, senior portfolio manager at Abbot Downing in San Francisco, expects Friday’s government payroll numbers to also reflect a stalling from July to August. As a result she says it will be important for US lawmakers to reach an agreement for a new fiscal coronavirus relief bill.

Weakness in the jobs report “could become a bigger risk if there’s a delay in stimulus,” she said. “For us to continue to recover we’re going to need to see additional stimulus.”

Nvidia Corp, one of the benchmark’s biggest boosts on Wednesday, gained after several brokerages hiked their price targets on its shares after its announcement of powerful gaming chips in collaboration with Micron Technology Inc and Samsung Electronics Co Ltd.

is content editor for Morningstar Australia

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