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Global Market Report - 4 September

Lex Hall  |  04 Sep 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to plunge as falls in tech stocks pushed Wall Street to its sharpest fall since June and fears of a long recovery hurt sentiment.

The Australian SPI 200 futures contract was down 42 points, or 2.3 per cent, to 5,970 points at 8.30am Sydney time on Friday, suggesting a negative start to trading.

Wall Street’s main indexes closed sharply lower on Thursday, marking their deepest one-day declines since June as investors dumped the high-flying technology sector, while economic data highlighted concerns about a long and difficult recovery.

The Dow Jones Industrial Average fell 807.77 points, or 2.78 per cent, to close at 28,292.73, the S&P 500 lost 125.78 points, or 3.51 per cent, to 3,455.06 and the Nasdaq Composite dropped 598.34 points, or 4.96 per cent, to 11,458.10.

The S&P/ASX200 benchmark index closed up by 49.4 points, or 0.81 per cent, to 6,112.6 points on Thursday. The ASX200 is higher by 0.64 per cent for the week, following two consecutive weeks of losses. The All Ordinaries index finished higher by 49.2 points, or 0.79 per cent, to 6,301.0.

Gold is down 0.7 per cent to $US1,930.30 an ounce; Brent oil is down 1.1 per cent to $US43.96 a barrel; Iron ore is up 2.1 per cent to $US127.31 a tonne.

Meanwhile, the Australian dollar was buying 72.68 US cents at 8.30am, down from 73.09 US cents at Thursday’s close.

Asia

China stocks slipped on Thursday, as worries about Sino-US tensions outweighed optimism stemming from upbeat services sector data.

The CSI300 index was unchanged at 4,842.91 at the end of the morning session, while the Shanghai Composite Index lost 0.1 per cent, to 3,402.69.

The tech-heavy start-up board ChiNext eased 0.2 per cent, while the STAR50 index shed 0.8 per cent.

In Hong Kong, the Hang Seng index dropped 0.4 per cent, to 25,031.77, while the Hong Kong China Enterprises Index lost 0.1 per cent, to 9,989.98.

Japan's Nikkei share average hit a six-month high on Thursday and reached its highest level in three decades in dollar terms, as hopes of more global and domestic economic stimulus boosted sentiment.

Nikkei rose 1.35 per cent to 23,561.01 by midday, its best level since 21 February. Converted to dollars, that put the index at its highest since 1990.

Europe

European shares retreated on Thursday with technology stocks leading losses in tandem with their US peers, while a swathe of middling local economic data fuelled bets on continued easy monetary policy.

The pan-European STOXX 600 index shed 1.4 per cent after gaining as much as 1.3 per cent earlier in the day, as the technology sector plummeted 3.8 per cent from a 19-year closing high.

The losses came in line with a 3.8 per cent drop in Wall Street's tech-heavy Nasdaq index, triggered by high valuations and US jobless claims suggesting a stalling in the country's labour market.

Technology has marked the speediest recovery among its peers from pandemic lows but has also been seen as long overdue for some capitulation of gains.

Weak local retail sales and service sector data earlier in the day augured an uneven economic recovery. But markets clung to the prospect of continued liquidity measures, after a particularly dismal inflation reading earlier in the week.

The European Central Bank is expected to follow the US Federal Reserve in keeping monetary policy easy.

The selling spread to most other European sectors, with travel and leisure stocks among the few still trading positive.

The day’s losses kept the STOXX 600 comfortably within a trading range seen since early June. After bouncing from March lows, a recovery in local equities and the economy appeared to be stalling.

French stocks fell despite the government unveiling a 100 billion euro stimulus plan to fish its economy out of a pandemic-induced slump.

French drugmaker Sanofi and its British peer GSK fell despite starting a clinical trial for a protein-based covid-19 vaccine candidate.

British Engineering business owner Melrose Industries topped the STOXX 600 after it flagged signs of a pick-up in some of its markets as the coronavirus crisis slashed its first-half profit by 90 per cent.

Online food services provider Hellofresh bottomed out the STOXX 600, plunging more than 10 per cent in its worst day in more than two years.

North America

The Nasdaq led the pullback with a decline of almost 5 per cent a day after it and the S&P 500 posted record closing highs.

The Nasdaq’s biggest drags came from heavyweights Apple, Microsoft, Amazon.com, Tesla and Nvidia Corp.

The S&P tech sector and the Philadelphia chip index both fell almost 6 per cent on the day.

Markets had soared from March lows, powered by fiscal and monetary support hopes for a swift economic recovery. But some participants said investors had become too optimistic.

“Think about the mounting number of risks the market has been shrugging off over the last couple of months here,” said Emily Roland, co-chief investment strategist and John Hancock Investment Management. “We’re 60 days away from the election. That may be an area where investors are getting a bit spooked.”

She added: “Looking at the data today, the market has had the ability to power higher and hasn’t paid any attention to a macro environment which, yes, is improving which is encouraging, but the economy remains fragile here.”

Earlier in the day, data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, but remained extraordinarily high. The next big data focus for investors is Friday morning’s monthly payrolls report.

Separately, a survey showed US services industry growth slowed in August, likely as the boost from the reopening of businesses and fiscal stimulus faded.

While S&P and Nasdaq’s percentage declines on Thursday were their deepest since 11 June, it was the Dow’s biggest one-day plunge since 26 June.

It was the Nasdaq’s third-biggest one-day fall from a record close, according to data from Bespoke Investment Group.

Wall Street’s fear gauge crossed its 200-day moving average to hit its highest level in weeks. It closed up 7 points at 33.60.

Still, some investors seemed unconcerned in the face of the sell-off.

“(Investors) are in love with tech stocks and it’s going to take more than this for them to fall out of love with them,” said Mike Zigmont, head of trading and research at Harvest Volatility Management in New York.

Sebastian Leburn, senior portfolio manager at Boston Private in Florida, said the decline was “just a rotation” out of technology stocks: “I don’t think it’s anything ominous.”

Another key Nasdaq component, Tesla, tumbled 9 per cent on Thursday after falling sharply the previous two sessions.

PVH Corp rose 3.3 per cent after the Calvin Klein owner posted a surprise quarterly profit, boosted by strong online demand for comfortable and casual clothing during the coronavirus-led shift to work from home.

is content editor for Morningstar Australia

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