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Global Market Report - 30 July

Lex Hall  |  30 Jul 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is set for a strong start after a rally on Wall Street following the US Federal Reserve reiterating supportive measures for the economy.

The Australian SPI 200 futures contract was higher by 54.0 points, or 0.90 per cent, to 6,029.0 points at 8am Sydney time on Thursday.

In the US overnight, trading momentum picked up after the Fed said it will keep interest rates at a record low as the economy struggles through the recession created by the coronavirus pandemic and pledged to continue buying Treasury and mortgage bonds.

The Dow Jones Industrial Average ended 0.61 per cent higher to 26,539.57, the S&P 500 gained 1.24 per cent, to 3,258.44 and the Nasdaq Composite added 1.35 per cent to 10,542.94.

Gold prices have surged to record levels this week, and rose after the Fed decision. Spot gold was trading at $US1970.40 at 8am.

In Australia today, building approvals data for June will show any continuing impact of the virus crisis on investment.

Financial services provider Macquarie Group will hold its annual general meeting.

Rio Tinto reported a better-than-expected first half profit late on Wednesday. The global miner saw a sharp V-shaped recovery in China as stimulus spurred industrial activity.

The Australian dollar was buying 71.90 US cents at 8am, up from 71.73 US cents at Wednesday's close.

Asia

China’s benchmark index posted the biggest gain in more than a week on Wednesday as investors bought up shares after recent slumps, while the tech-focused STAR board soared on new listings.

At the close, the Shanghai Composite index was up 2.06 per cent at 3,294.55, its best daily performance since 20 July.

The blue-chip CSI300 index was up 2.42 per cent, the largest daily gain since last Monday, with its financial sector sub-index higher by 2.22 per cent, the consumer staples sector up 0.82 per cent, the real estate index up 1.12 per cent and the healthcare sub-index up 4.04 per cent.

Hong Kong’s Hang Seng index edged up on Wednesday, buoyed by strong inflows from the onshore market, though concerns over a resurgence of coronavirus cases in the city kept gains in check.

At the close of trade, the Hang Seng index was up 117.41 points, or 0.47 per cent, at 24,801.94. The Hang Seng China Enterprises index rose 0.37 per cent to 10,176.14.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.2 per cent, while Japan’s Nikkei index closed down 1.15 per cent.

Europe

Europe’s main stocks benchmark closed nearly flat on Wednesday, as investors waited to hear from the US Federal Reserve, but a flurry of earnings reports drove big swings in individual stocks.

In a busy earnings day, the pan-European STOXX 600 closed down 0.1 per cent, with healthcare and banks dragging on the main index, while retailers jumped 1.4 per cent.

Drugmaker GlaxoSmithKline fell 3.2 per cent as it missed second-quarter profit estimates after lower sales of its existing vaccines, while lender Barclays dropped 6.1 per cent as it set aside a higher than expected 1.6 billion pounds ($3 billion) to cover a possible rise in loan losses due to the pandemic.

The pair helped keep London's FTSE 100 nearly flat.

France's CAC 40 outperformed its continental peers with a 0.6 per cent rise after positive earnings updates from luxury group Kering, electrical equipment group Schneider Electric and consulting firm Capgemini.

Profits for STOXX 600 companies are expected to drop by a record 59 per cent in the second quarter, according to Refinitiv data. But with much of the decline priced in, European stocks are on course to end July with gains as investors bet on more stimulus.

Euro zone banks took a beating as Deutsche Bank fell 2.5 per cent after giving a slightly improved outlook for the year, but chief executive Christian Sewing damped speculation that the lender was eager to revive merger talks with Commerzbank.

Spain’s Santander slid 4.7 per cent as it reported a record net loss of 11.1 billion euros ($18 billion) in the second quarter.

Chemicals giant BASF SE dropped 4.9 per cent as it said its dividend policy and the value of assets on its balance sheet might be revised given uncertainty caused by the coronavirus crisis.

UK retailer Next jumped 7.7 per cent as it raised its profit forecast after sales fell less than feared over the past three months.

North America

US stocks closed higher on Wednesday, adding to gains after the Federal Reserve repeated a pledge to use its “full range of tools” to support the economy but cautioned that the outlook “will depend significantly on the course of the virus.”

At the end of its two-day policy meeting the Fed said it will keep its interest rate target range until it is confident the economy has weathered the coronavirus pandemic and is on track for maximum employment and price stability goals.

While strategists said they found no surprising decisions after the meeting, many pointed out that the Fed’s focus on the virus highlighted the uncertainties it faces.

The Dow Jones Industrial Average rose 160.29 points, or 0.61 per cent, to 26,539.57, the S&P 500 gained 40 points, or 1.24 per cent, to 3,258.44 and the Nasdaq Composite added 140.85 points, or 1.35 per cent, to 10,542.94.

All 11 major S&P sectors ended the day higher with the energy and financial sectors leading percentage gains.

Wall Street’s major indexes had already been higher before the Fed commentary as investors anticipated earnings reports due on Thursday from Amazon.com, Facebook, Apple Inc and Alphabet’s Google.

These companies were among the biggest boosts for Nasdaq even as the chief executives of all four companies also faced jabs from lawmakers at a congressional hearing on antitrust issues.

Investors were also focused on contentious negotiations in Washington around what should go into the government’s next coronavirus relief plan.

Of the S&P 500 firms that have reported results, 79.1 per cent have surpassed a low bar of quarterly profit expectations, according to Refinitiv IBES data.

Advanced Micro Devices shares finished up 12.5 per cent after the chipmaker raised its full-year revenue forecast and boosted the Philadelphia chip index.

Starbucks Corp climbed 3.7 per cent after the coffee chain said business was “steadily recovering” worldwide and it would report a profit in the current quarter.

Boeing Co shares slipped after it slashed production of its biggest twin-engined jets and reported a bigger-than-expected loss due to the fallout from the pandemic.

Recent data pointed to a possible slowdown in business and hiring as several US states reimposed restrictions after a spike in covid-19 infections, while deaths in the country caused by the disease surpassed 150,000 on Wednesday.

is content editor for Morningstar Australia

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