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Global Market Report - 6 January

Lex Hall  |  06 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to slip following choppy trading on Wall St as investors were buffeted by the lead-up to a Senate runoff in the US state of Georgia.

The Australian SPI 200 futures contract was down 4 points, or 0.1 per cent, at 6595 points at 8.30am Sydney time on Wednesday, suggesting a negative start to trading.

Wall Street shares gained on Tuesday in choppy trading, as investors took advantage of the previous session’s slump to buy them back, ahead of the outcome of the Senate runoff elections in the battleground state of Georgia.

The Dow Jones Industrial Average was up 167.71 points, or 0.55 per cent, to 30,391.60, the S&P 500 gained 26.21 points, or 0.71 per cent, to 3,726.86 and the Nasdaq Composite added 120.51 points, or 0.95 per cent, to 12,818.96.

Locally, US suitor Ares Management is in talks with at least three parties, including Macquarie Group, to participate in buying AMP’s bank as part of its broader $6 billion-plus takeover bid for the 172-year-old wealth group, The Australian reports.

The S&P/ASX200 benchmark index closed lower by 2.3 points, or 0.03 per cent, to 6681.9 on Tuesday.

The All Ordinaries closed higher by 2.0 points, or 0.03 per cent, at 6955.7.

The materials sector had the greatest gains, 1.81 per cent, helped by rises of more than two per cent for BHP and Rio Tinto.

Gold was up 0.4 per cent to $US1950.21 an ounce; Oil was up 5.0 per cent to $US53.66 a barrel; Iron ore was up 1.6 per cent to $US167.86 a tonne.

Meanwhile, the Australian dollar was buying 77.66 US cents at 8.30am, up from 77.08 US cents at Tuesday’s close.

Asia

China's main Shanghai Composite index closed up 0.73 per cent at 3,528.68, while the blue-chip CSI300 index ended up 1.91 per cent.

Hong Kong shares settled higher on Tuesday for a fifth straight session, led by telecom stocks after the New York Stock Exchange said it would not delist three Chinese telecom firms targeted by the outgoing Trump administration.

At the close of trade, the Hang Seng index was up 177.05 points, or 0.64 per cent, at 27,649.86. The Hang Seng China Enterprises index rose 0.48 per cent to 10,774.15.

Japanese shares slid on Tuesday as the government looks set to declare a state of emergency to deal with rising covid-19 infections while uncertainty about Senate runoffs in the US state of Georgia also curbed investors’ risk appetite.

Nikkei share average dipped 0.37 per cent to 27,158.63, while the broader Topix ticked down 0.19 per cent to 1,791.22, both indexes marking their third straight session of losses.

Europe

European stocks slipped on Tuesday as losses in defensive sectors offset gains in oil and retail stocks, while investors looked past a new national lockdown in Britain to curb a surge in coronavirus cases.

The pan-European STOXX 600 index fell 0.2 per cent, following losses on Wall Street over worries about Senate runoffs in the US state of Georgia.

UK’s FTSE 100 rose 0.6 per cent, boosted by oil majors Royal Dutch Shell and BP, as crude prices inched higher with deadlocked talks between major producers about potential changes in February output set to continue.

The domestically focussed midcap index gained 0.9 per cent as UK’s finance minister Rishi Sunak announced plans to support businesses struggling under a third covid-19 lockdown.

“The stock market reaction to a new lockdown in England could have been a lot worse, but it is fair to say there were plenty of signs in recent days that full lockdown was coming, such as similar restrictions being announced in Scotland yesterday,” said Russ Mould, investment director at AJ Bell.

“Nonetheless, given the severity of the lockdown restrictions... one might have expected a repeat of last year’s trends with lockdown losers slumping on the stock market and beneficiaries rallying. That’s not entirely the case this time round.”

European stocks rallied to fresh February highs on the first trading session in 2021 on Monday on hopes the vaccines will spur a speedy economic rebound.

The global mood dampened on Tuesday ahead of the Senate election outcome, which could have a big impact on incoming US President Joe Biden’s ability to pursue his preferred economic policies.

Stocks considered as safe-havens like utilities, healthcare and food & beverage were among the biggest sectoral decliners in Europe.

Germany’s DAX index dropped 0.6 per cent with the government looking to extend a lockdown, while France’s CAC 40 slipped 0.4 per cent.

Retailers were a bright spot, with Britain’s Next jumping 8.0 per cent after it said its Christmas sales were much better than expected.

Shares in Marks and Spencer, Morrisons and Tesco rose between 0.2 per cent and 1.2 per cent after market researcher Kantar said British grocery sales hit a record high in December.

German chipmaker Dialog Semiconductor PLC gained 2.7 per cent after it gave an upbeat fourth-quarter revenue forecast due to strong demand for 5G phones and tablets.

ASML rose 0.2 per cent after analysts at RBC and Liberum raised their price targets on the stock.

North America

Wall Street shares gained on Tuesday in choppy trading, as investors took advantage of the previous session’s slump to buy them back, ahead of the outcome of the Senate runoff elections in the battleground state of Georgia.

The Georgia election will determine the balance of power in Washington.

Overall, Analysts expect the stock market to consolidate December’s gains in January, as asset managers looked to rebalance their portfolios that had been heavily tilted toward equities.

The latest polls from data website 538 here gave a slight edge to the two Democratic challengers who need to win both races for Democrats to gain US Senate control from Republicans.

Along with their narrow majority in the House of Representatives, a “blue sweep” of Congress could usher in larger fiscal stimulus. It could also pave the way for President-elect Joe Biden to push through greater corporate regulation and higher taxes.

“Historically after a strong December, January’s returns tend to be more muted and this January may be more muted with the Georgia elections providing some volatility along with the uncertainty toward tax policies,” said King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco.

The Cboe Volatility Index flip-flopped after closing at its highest level in two months on Monday, which saw Wall Street’s main indexes drop to two-week lows as investors booked profits at the start of the year.

The Dow Jones Industrial Average was up 167.71 points, or 0.55 per cent, to 30,391.60, the S&P 500 gained 26.21 points, or 0.71 per cent, to 3,726.86 and the Nasdaq Composite added 120.51 points, or 0.95 per cent, to 12,818.96.

Energy stocks jumped about 7 per cent on the back of higher oil prices.

Consumer staples, utilities and healthcare were the laggards.

Although the start of vaccine rollouts and massive monetary support powered the major US stock indexes to record levels recently, the discovery of a more contagious variant of the coronavirus and the latest virus-related curbs have muddied the economic outlook.

Britain, where the new variant first emerged, began its third national lockdown, while New York on Monday found its first case of the highly contagious mutation of the coronavirus.

In terms of economic data, stocks got a boost from a survey by the Institute of Supply Management, which showed that US manufacturing activity rose to its highest level in nearly 2½  years in December, likely as spiralling new covid infections pulled demand away from services towards goods.

Chipmaker Micron Technology Inc rose about 3.8 per cent after Citigroup raised its rating on the stock to “buy” on expectations of a recovery in demand and pricing for DRAM chips.

US-listed shares of China Telecom Corp Ltd and China Mobile Ltd added about 7.1 per cent and 8.6 per cent respectively, while those of China Unicom Hong Kong Ltd advanced 12 per cent after the NYSE reversed its decision to delist the stocks.

is content editor for Morningstar Australia

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