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Global Market Report - 30 June

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

Shares are expected to rise early on the Australian market after US stock indices registered strong gains on investor optimism from better-than-expected US housing data.

The Australian SPI 200 futures contract was higher by 67 points, or 1.15 per cent, to 5874.0 at 8am Sydney time on Tuesday.

In the US, data showed the number of Americans signing contracts to buy homes rose a record 44.3 per cent in May from a month earlier, far more than the 17 per cent rise economists were expecting.

The US markets were also bolstered by a 14 per cent jump in Boeing shares after the first day of certification flight testing with US aviation officials for the company's beleaguered 737 MAX jet.

The Dow Jones Industrial Average rose 2.32 per cent, the S&P 500 gained 1.47 per cent, while the Nasdaq Composite added 1.2 per cent.

In Australia today, Reserve Bank deputy governor Guy Debelle will discuss the bank's response to the pandemic as part of an Economic Society of Australia webcast.

Late on Monday, the owners of the Australian swimsuit maker Seafolly appointed administrators, citing a sales downturn from the virus.

The Australian dollar was buying 68.67 US cents at 8am, lower from 68.84 US cents at the close of trade on Monday.

Asia

China stocks ended lower on Monday as sharp spikes in new coronavirus infections at home and around the world raised concerns about the country’s nascent economic recovery.

At the close, the blue-chip CSI300 index fell 0.7 per cent to 4,109.72, while the Shanghai Composite Index lost 0.6 per cent to 2,961.52. The tech-heavy start-up board ChiNext Composite index eased 0.4 per cent on profit-taking.

Hong Kong’s stock benchmark fell 1 per cent on Monday, as sharp spikes in new COVID-19 infections globally and China’s impending national security law on the city curbed risk appetite.

The Hang Seng index closed 1.0 per cent lower at 24,306.09. The China Enterprises Index, which tracks Hong Kong-listed China companies, also lost 1.0 per cent to end at 9,753.25.

Around the region, MSCI’s Asia ex-Japan stock index fell 0.8 per cent and Japan’s Nikkei index fell more than 2 per cent.

Europe

European shares ended a volatile session higher on Monday, lifted by strong gains on Wall Street and a rally in cyclical stocks as improving data spurred hopes of a faster economic recovery.

After hovering near flat earlier in the session, the pan-European STOXX 600 index rose 0.4 per cent and eurozone blue-chip stocks jumped 0.9 per cent.

The euro zone banks were the biggest gainers, up 3.2 per cent after data showed a recovery of economic sentiment across the bloc intensified in June.

A bright start for Wall Street also lifted the mood, as talks of more stimulus helped investors to look past a spike in the global death toll from COVID-19.

Aside from banks, other growth-sensitive sectors such as oil and gas, industrial companies and automakers led gains in Europe.

Although the pace of a market recovery has slowed following an initial rally from March lows, European stocks have outperformed their US counterparts in June, helped by the region’s relative success in reopening its economy and the European Union’s proposed 750 billion euro ($1.2 trillion) recovery fund.

The world’s largest asset manager BlackRock upgraded European equities to “overweight” on Monday, with the region poised to benefit from the restarting of economies.

German scandal-hit payments company Wirecard soared 154.5 per cent following a near 170 per cent plunge over the last three weeks after reports that French payments processor Worldline and other private investors are interested in buying parts of the company.

Austrian sensor producer AMS jumped 5.1 per cent after Reuters reported the company was poised to get the go-ahead from the European Union for its acquisition of German lighting group Osram.

Commerzbank surged 5.7 per cent after a German newspaper reported that the lender’s board will likely approve more branch closures and job cuts at an extraordinary meeting next week.

Consumer stocks, such as Unilever, Danone and Nestle, weighed on the markets, falling between 0.1 per cent and 2.6 per cent.

North America

Wall Street stocks closed higher on Monday and the S&P 500 was poised to clinch its biggest quarterly percentage gain since 1998 as investors hoped for a stimulus-backed economic rebound, while a surge in Boeing shares helped boost the blue-chip Dow.

The planemaker’s shares jumped more than 14 per cent after a 737 MAX took off on Monday from a Seattle-area airport on the first day of certification flight testing with US Federal Aviation Administration and company test pilots, a crucial moment in Boeing’s worst-ever crisis.

A spike in virus infections in southern and western states last week sent the S&P 500 down nearly 3 per cent, but the threat of a deeper-than-feared recession has led investors to expect more stimulus measures from the Federal Reserve or congress.

But the sting of rising infections was blunted by the pricing of the antiviral drug remdesivir, which has been shown to alter the course of COVID-19, by Gilead Sciences. The company also agreed to send nearly all of its supply of the drug to the US over the next three months.

While the S&P 500 is up more than 17 per cent for the quarter, the index is down slightly for the month, as stocks have been buffeted by signs of progress in battling the coronavirus and a recent resurgence in cases.

The Dow Jones Industrial Average rose 580.25 points, or 2.32 per cent, to 25,595.8, the S&P 500 gained 44.19 points, or 1.47 per cent, to 3,053.24 and the Nasdaq Composite added 116.93 points, or 1.2 per cent, to 9,874.15.

Each of the 11 major S&P sectors was in positive territory, led by industrial stocks.

The benchmark S&P 500 has rebounded about 36 per cent from its 23 March closing low. Monday's gains pushed the index above its 200-day moving average, a technical support level it had fallen through with last week's decline.

Data on Monday showed contracts to buy previously owned homes rebounded by the most on record in May, suggesting the housing market was starting to turn around. Later this week, investors will focus on employment and consumer confidence data.

Still, Wall Street was looking for more stimulus measures to buttress the economy. Analysts at Morgan Stanley said a further injection of cash was critical to the bank’s thesis for a “V”-shaped US economic recovery.

The BlackRock Investment Institute downgraded US equities to “neutral,” citing risks of fading fiscal stimulus, an extended epidemic as well as renewed US-China trade tensions.

Although a US$3 trillion ($4.4 trillion) aid bill was passed by the House of Representatives in May, the Republican-controlled Senate has not taken up the package and lawmakers are not expected to move toward another coronavirus bill until sometime in July.

Coty Inc jumped 13.4 per cent after the company said it would buy a 20 per cent stake in Kim Kardashian West’s makeup brand for US$200 million.

is content editor for Morningstar Australia

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