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Global Market Report - 5 February

Lex Hall  |  05 Feb 2020Text size  Decrease  Increase  |  
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Australia

Australian stocks look set to rise following a rebound in most markets as China's stimulatory measures calm fears about the impact of the coronavirus. 

The SPI200 futures contract was up 43 points, or 0.62 per cent, at 6831 at 8am Sydney time on Wednesday.

US and European stocks rallied overnight and the benchmark S&P500 climbed back above the 3300 mark.

The Australian benchmark S&P/ASX200 index finished Tuesday up 25.4 points, or 0.37 per cent, at 6948.7, while the broader All Ordinaries index gained 27.7 points, or 0.39 per cent, to 7047.6.

On Wall St, the Dow Jones Industrial Average rose 1.44 per cent to 28,807.63, the S&P 500 gained 1.50 per cent and the Nasdaq Composite added 2.1 per cent.

China's central bank said its huge liquidity injections through open market operations this week showed its determination to stabilise market expectations and restore market confidence.

The People's Bank of China injected a total of 1.7 trillion yuan ($360 billion) via reverse repos on Monday and Tuesday.

In local news, the market will be looking to hear what Reserve Bank Governor Philip Lowe will say in a speech about the year ahead in Sydney on Wednesday.

The Australian dollar was buying 67.38 US cents at 8am, up from 67.18 US cents on Tuesday.

Asia

Chinese stocks ended higher on Tuesday as the central bank vowed to stabilise the market, regaining some ground from the coronavirus-led rout that erased almost $400 billion in market value from the Shanghai benchmark in the previous session.

The Shanghai Composite index closed up 1.3 per cent at 2783.29 — the biggest daily gain since 13 December, 2019.

The blue-chip CSI300 index jumped 2.6 per cent, clocking its biggest daily gain since 1 July 2019.

CSI300’s sub-index for the financial sector gained 2 per cent, the consumer staples sector jumped 2.9 per cent, the real estate index were up 2.2 per cent and the healthcare sub-index climbed 3 per cent.

Hong Kong stocks climbed for a second straight session on Tuesday, as measures by China’s central bank calmed investors concerned about the rapidly spreading coronavirus outbreak.

At the close of trade, the Hang Seng index was up 1.2 per cent at 26,675.98. The Hang Seng China Enterprises index rose 1.6 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.59 per cent, while Japan’s Nikkei index closed up 0.49 per cent.

Europe

European shares clocked their biggest one-day gain in nearly four months on Tuesday as upbeat earnings updates from BP and Glencore along with China’s moves to support its markets lifted sentiment.

China’s central bank injected 1.7 trillion yuan ($243 billion) on Monday and Tuesday to stabilize markets that fell heavily on heightened fears over the potential economic fallout from the fast-spreading coronavirus.

In line with a pick up in global stocks, the pan-European STOXX 600 index finished up 1.6 per cent, building on Monday’s gains after virus fears knocked 3 per cent off the index last week.

But with more than 400 deaths and several travel bans on China, headlines about the coronavirus outbreak are expected to sway markets in the near term.

Broad-based gains in Europe were led by a 3.5 per cent jump in the basic resources sector. Packed with mining companies focused on China, the sector broke a three-day losing run as Glencore rallied 5.2 per cent after it maintained 2020 output targets.

Oil company BP was the biggest boost to STOXX 600 after it raised its dividend and reported better-than-expected fourth-quarter profit.

Along with a rebound in oil prices the oil and gas sector, which has also been sold off heavily over the past week, posted its best day in nearly five months.

Topping the pan-regional index was Danish medical equipment manufacturer Ambu which soared 24 per cent after reporting better-than-expected quarterly revenue.

But a clutch of poor earnings kept a lid on gains.

Micro Focus International tumbled 22 per cent. The British IT company said chairman Kevin Loosemore will step down this month after full-year results fell short of expectations.

Italian carmaker Ferrari slipped 2.3 per cent despite meeting profit targets as it provided only a cautious upgrade to its outlook for 2020.

Also languishing at the bottom of the STOXX 600 index was Swiss inspections group SGS, logging its worst day in more than 3½ years after the company’s second-biggest investor, the von Finck family, cut its stake.

North America

The Nasdaq hit a record high on Tuesday and the S&P 500 posted its biggest one-day gain in about six months as fears of a heavy economic impact from the coronavirus outbreak waned after China’s central bank intervened.

The Dow notched its biggest single-day rise in more than five months, as the stock market recovered from steep losses in the prior week.

The People’s Bank of China injected a total of 1.7 trillion yuan ($242.74 billion) through reverse repos on Monday and Tuesday, as the central bank said it sought to stabilize financial market expectations and restore market confidence.

The stimulus boosted investor sentiment even as fallout from the coronavirus from China is expected to deliver a short, sharp blow to both Chinese and global economic activity in the first quarter.

The Dow Jones Industrial Average rose 407.82 points, or 1.44 per cent, to 28,807.63, the S&P 500 gained 48.67 points, or 1.50 per cent, to 3297.59 and the Nasdaq Composite added 194.57 points, or 2.1 per cent, to 9467.97.

Data showed new orders for US-made goods increased by the most in nearly 18 months in December, flattered by robust demand for defense aircraft.

Technology shares led gains among the S&P 500 sectors, rising 2.6 per cent. Shares of chip companies, which are particularly exposed to China, surged, with the Philadelphia Semiconductor index up 3.1 per cent.

Shares of Alphabet fell 2.5 per cent, after the Google parent posted its first holiday-quarter revenue miss in five years.

Fourth-quarter earnings season is roughly halfway done, with S&P 500 companies expected to have increased earnings by 1.6 per cent in the period, according to IBES data from Refinitiv. However, earnings in 2020 are expected to rise 8.7 per cent.

In company news, shares of Tesla surged 13.7 per cent, extending a stunning rally for the electric vehicle maker’s stock.

Shares of eBay jumped 8.8 per cent after a Wall Street Journal report that New York Stock Exchange owner Intercontinental Exchange has made a takeover offer for the company.

Ralph Lauren Corp shares rose 9.2 per cent after the company’s results.

is content editor for Morningstar Australia

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