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Global Market Report - 31 March

Lex Hall  |  31 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise despite a fall on Wall Street as an increase in Treasury yields forced investors to sell tech stocks.

The Australian SPI 200 futures contract was up 56 points, or 0.8 per cent, at 6,766 points at 8.30am Sydney time on Tuesday, suggesting a positive start to trading.

The S&P 500 ended down slightly on Tuesday, with investors selling tech-related growth shares following a rise in US Treasury yields.

At the same time, S&P 500 financials, industrials and consumer discretionary rose, extending the recent rotation out of growth and into so-called value names.

The Dow Jones Industrial Average fell 100.3 points, or 0.3 per cent, to 33,071.07, the S&P 500 lost 12.21 points, or 0.31 per cent, to 3,958.88 and the Nasdaq Composite dropped 14.25 points, or 0.11 per cent, to 13,045.39.

Locally, AGL Energy will look to win support from investors to create two ASX-listed companies through a demerger after splitting its retail and supply arms to form a green electricity retailer and generation giant dominated by coal power, The Australian reports.  

Australia's share market closed lower for a second consecutive day on Tuesday after considerable losses in major sectors including materials and health.

The S&P/ASX200 benchmark index closed down 61.1 points, or 0.9 per cent, to 6,738.4 on Tuesday.

The All Ordinaries closed lower by 66.6 points, or 0.95 per cent, to 6,969.8.

The heavyweight sectors of materials and health lost 1.88 and 1.05 per cent respectively.

The smaller energy sector shed 1.56 per cent.

Gold was down 1.8 per cent at $US1,682.19 an ounce; Brent oil was down 1.5 per cent to $US64.02 a barrel; Iron ore was down 0.8 per cent to $US166.58 a tonne.

Meanwhile, the Australian dollar was buying 75.86 US cents at 8.30am, down from 76.52 US cents at Tuesday’s close.

Asia

China shares climbed more than 1 per cent on Tuesday, underpinned by gains in new energy and healthcare stocks, as investors cheered upbeat corporate earnings.

The blue-chip CSI300 index rose 1.0 per cent, to 5,094.73, while the Shanghai Composite Index added 0.6 to 3,456.68. Both indexes were up for a third straight session.

Leading the gains, the CSI300 new energy index and the CSI300 healthcare index rose 2.1 per cent and 1.7 per cent, respectively.

The Hang Seng index added 1.2 per cent to 28,672.76 points, while the Hong Kong China Enterprises Index gained 1.1 per cent to 11,063.61.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.42 per cent, while Japan’s Nikkei index closed up 0.16 per cent.

Europe

European shares headed towards record highs on Tuesday on hopes of a vaccine-driven economic recovery, while investors looked past the fallout of a US hedge fund default that hit banking stocks a day earlier.

The pan-European STOXX 600 index gained 0.5 per cent, trading less than a percent below its pre-pandemic peak.

Bank stocks jumped 2.0 per cent, rebounding after a 1 per cent drop on Monday, as US and European government bond yields rose on hopes of stronger economic growth and inflation ahead. 

Swiss lender Credit Suisse gained 1.5 per cent, following its near 14 per cent slide in the previous session as it warned of “highly significant and material” losses after the fund, named by sources as Archegos Capital, defaulted on margin calls.

“Though Archegos uncertainties are still hanging over the markets, European investors felt settled enough to push the region’s indices higher,” Connor Campbell, a financial analyst at SpreadEx, said in a note.

The German DAX rose 0.5 per cent to scale a record high, boosted by automakers and a 2.0 per cent rise in Deutsche Bank.

“If all goes well in the next 48 hours, it (the DAX) could close out March above 15,000,” said Campbell.

The benchmark STOXX 600 is on course to end the first quarter with a near 8 per cent gain - its fourth straight quarterly rise - as global growth optimism overshadowed sluggish vaccination drives in the euro zone and new corornavirus-related lockdowns.

Economically sensitive cyclical sectors such as autos, banks and travel & leisure have been the top performers this quarter as investors snapped up the cheap stocks on hopes that re-opening of economies will spur growth in the sectors.

Data showed French consumer confidence rose unexpectedly in March despite new restrictions on large parts of the country and the prospect of more curbs on the way.

Italian luxury puffer jacket maker Moncler rose 2.3 per cent and Swiss watch group Swatch gained 2.5 per cent after Deutsche Bank upgraded their stocks to “buy”.

Spanish mobile phone mast operator Cellnex slipped 1.9 per cent after it launched a 7 billion euro ($10.8 billion) capital raise.

Defensive sectors such as utilities and healthcare fell, while rising yields weighed on highly valued technology stocks.

North America

The S&P 500 ended down slightly on Tuesday, with investors selling tech-related growth shares following a rise in US Treasury yields.

At the same time, S&P 500 financials, industrials and consumer discretionary rose, extending the recent rotation out of growth and into so-called value names.

The Nasdaq was on track for its first monthly loss since November following the recent rise in Treasury yields. Tech stocks, which have a low-rate environment heavily baked into their high valuations, have been among the hardest hit by the rise in yields.

“It’s somewhat of a leadership-less market,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “Investors’ preferences are flipping around here almost on a daily basis, primarily between tech plus and cyclicals.

“Cyclicals have certainly had the upper hand here for a while, trading off the reopening of the economy. Tech plus holds in there because it’s really the promise of the future - it should provide investors with steady growth.”

The benchmark US 10-year Treasury yield hit a 14-month high of 1.776 per cent early on Tuesday, but was at about 1.717 per cent by late afternoon in New York.

The Dow Jones Industrial Average fell 100.3 points, or 0.3 per cent, to 33,071.07, the S&P 500 lost 12.21 points, or 0.31 per cent, to 3,958.88 and the Nasdaq Composite dropped 14.25 points, or 0.11 per cent, to 13,045.39.

“For the next day or two, (value stocks) will probably be leaders because we have quarter-end and institutions want to make sure that they have exposure to the names that performed well,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in New York.

Bets on a swift economic rebound backed by vaccine rollouts and unprecedented stimulus have helped the S&P 500 and the Dow hit record closing highs recently.

On Wednesday, President Joe Biden will unveil more details about the first stage of his infrastructure plan, which could be worth as much as US$4 trillion.

Bank stocks rebounded as investors took heart from signs that the impact from the fall of a US hedge fund did not ripple out to broader markets.

Wells Fargo & Co jumped after the lender said it had a prime brokerage relationship with Archegos Capital and that it no longer had any exposure and did not experience any losses.

With Reuters

is content editor for Morningstar Australia

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