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Global Market Report - 7 February

Lex Hall  |  07 Feb 2020Text size  Decrease  Increase  |  
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Australia

Australian stocks look set to open slightly higher, buoyed by optimism on global markets.

At 8am the SPI200 futures contract was up 12 points, or 0.11 per cent, at 6992.

The local bourse had its best single day in nearly a month on Thursday, with the benchmark S&P/ASX200 index finishing up 73.1 points, or 1.05 per cent, at 7049.2.

The broader All Ordinaries index closed up 67.8 points, or 0.96 per cent, at 7148.7.

Overnight, US and Asian equities were buoyed by confirmation China will cut the tariffs on a raft of US imports next week despite continued concerns over the coronavirus.

The Dow Jones Industrial Average rose 0.3 per cent, to 29,380.04, the S&P 500 gained 0.33 per cent, to 3345.77 and the Nasdaq Composite added 0.67 per cent.

The Australian dollar was buying US67.31 cents, up from US67.59 cents at the close of the market on Thursday.

Asia

China and Hong Kong stocks rallied, with a mainland gauge tracking smaller companies recouping all the losses triggered by the coronavirus as containment measures boosted sentiment.

The Shanghai Composite Index advanced 1.7 per cent to 2866.51 on Thursday, rebounding for a third day after the 7.7 per cent slump on Monday.

Hong Kong’s Hang Seng Index climbed 2.6 per cent to 27,493.70 for its biggest gain since September.

Japanese shares posted their biggest one-day gain in more than a year on Thursday as investor sentiment was buoyed after China cut tariffs on some imported goods from the US, lifting some of the gloom from a fast-spreading virus outbreak.

The benchmark Nikkei average jumped 2.4 per cent, its most since late December 2018, to a two-week closing high of 23,873.59.

Europe

Euro zone banks led European shares to new highs on Thursday amid a broader rally in global stocks prompted by China’s move to halve additional tariffs on some US goods.

The pan-European STOXX 600 index extended gains to a fourth session and closed up 0.4 per cent at 425.49 - an all-time high - but retreated slightly from 426.70 hit earlier in the session as a decline in oil prices weighed on energy majors.

Beijing said it would lower extra levies imposed last year on 1717 US products, weeks after the signing of a Phase 1 trade deal that brought a truce to a bruising trade war between the world’s two largest economies.

Trade-sensitive basic resources and technology sub-sectors in Europe rose about 0.7 per cent and 0.5 per cent, respectively.

Beijing’s decision also brewed some optimism over lessening the economic shock from a coronavirus outbreak that has killed over 500 people and caused widespread disruptions to China’s economy.

Lenders Unicredit, DNB and Nordea Bank all rallied more than 6 per cent after reporting strong quarters. Germany’s Deutsche Bank posted its best day in more than eight years after revealing that a new shareholder, Los Angeles-based Capital Group, took a 3.1 per cent stake in the company.

All this saw the euro zone banks index post its biggest daily gain in a month. Italy's bank-heavy MIB jumped 1 per cent to close its highest in nearly two years with Fiat Chrysler's 0.8 per cent rise adding to the rise.

Drugmaker Sanofi was the biggest boost to STOXX 600 as well as the main index in Paris after it forecast further profit growth for 2020. Oil major Total's 1 per cent rise on beating quarterly results also lifted French stocks.

Worries over coronavirus shaved 3 per cent off the STOXX 600 last week, but the benchmark is now on pace to log its biggest weekly gains since December 2016.

Ingo Schachel, head of equity research at Commerzbank, highlighted a strong rebound in cyclical shares.

The steelmaker soared 11 per cent after reporting a bigger-than-expected annual profit and its lowest-ever level of debt.

Swiss shares also scaled new highs on Thursday, with telecom firm Swisscom in the lead after reporting a near 10 per cent rise in full-year income.

But not all earnings shone as brightly. Swedish security companies Securitas and Assa Abloy slipped after reporting a slowdown in organic sales growth.

North America

US stocks gained for a fourth straight session on Thursday and Wall Street’s main indexes hit record highs as concerns eased over the economic fallout from the coronavirus outbreak in China.

China said it would halve additional tariffs levied against some US goods, seen by analysts as a move to boost confidence after the fast-spreading coronavirus disrupted businesses and sparked broad market volatility.

Adding to the optimism for stocks were data showing that the number of Americans filing for unemployment benefits dropped to a nine-month low last week, with investors casting an eye toward Friday’s monthly US employment report.

The Dow Jones Industrial Average rose 88.92 points, or 0.3 per cent, to 29,379.77, the S&P 500 gained 11.09 points, or 0.33 per cent, to 3345.78 and the Nasdaq Composite added 63.47 points, or 0.67 per cent, to 9572.15.

Among S&P 500 sectors, communication services and technology led the way, while energy fell the most.

Even with optimism about containing the broad economic damage from the coronavirus, the impact of the health emergency in China continued to show up in corporate reports.

Chipmaker Qualcomm Inc flagged a potential threat to the mobile phone industry from the outbreak. Its shares fell 0.3 per cent.

Investors were also digesting the acquittal on Wednesday of US President Donald Trump on impeachment charges.

With the fourth-quarter corporate reporting season more than halfway completed, S&P 500 companies are expected to have increased earnings by 2.1 per cent for the period, according to IBES data from Refinitiv.

In earnings news, Becton Dickinson and Co shares slid 11.8 per cent, contributing the biggest drag on the S&P 500, after the medical technology company cut its 2020 forecast.

Kellogg shares slumped 8.5 per cent after the breakfast cereal maker forecast full-year earnings that widely missed market expectations.

Twitter shares soared 15 per cent after the social media company reported $1 billion in quarterly revenue for the first time.

Philip Morris International shares rose 2.7 per cent after the tobacco company released results.

is content editor for Morningstar Australia

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