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Global Market Report - 8 April

Lex Hall  |  08 Apr 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following gains on Wall Street as investors welcomed the reiteration of the Fed’s dovish stance on low rates.

The Australian SPI 200 futures contract was up 21 points, or 0.3  per cent, at 6920 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

Major averages hovered near unchanged on Wednesday, with the S&P 500 closing up slightly after the Federal Reserve released minutes from its most recent meeting that reinforced the US central bank’s position to remain patient before raising rates.

The Dow Jones Industrial Average rose 16.02 points, or 0.05 per cent, to 33,446.26, the S&P 500 gained 6.01 points, or 0.15 per cent, to 4,079.95 and the Nasdaq Composite dropped 9.54 points, or 0.07 per cent, to 13,688.84.

Locally, Australian exporters are defying Chinese trade bans, limiting the damage of Beijing’s punitive economic campaign by finding new markets for almost all affected products, The Australian reports. 

On Wednesday, the ASX200 closed at its highest level since the coronavirus pandemic was declared in March last year.

The benchmark S&P/ASX200 index closed up 42.1 points, or 0.61  per cent, to 6928 points.

The previous highest close since the pandemic was 6917.2 on 16 February.

The All Ordinaries on Wednesday closed higher by 43.5 points, or 0.61  per cent, to 7177.4.

Gold was down 0.4 per cent at $US1736.56 an ounce; Brent oil was up 0.5 per cent to $US63.06 a barrel; Iron ore was up 1.6 per cent to $US173.63 a tonne.

Meanwhile, the Australian dollar was buying 76.06 US cents at 8.30am, down from 76.46 US cents at Wednesday's close.

Asia

China’s main equity gauges fell on Wednesday with consumer firms dragging the market lower, as investors continued to worry that strong economic data could lead to possible policy tightening.

At the close, the Shanghai Composite index was down 0.1 per cent at 3,479.63. The blue-chip CSI300 index was down 0.71 per cent, with the consumer staples sector down 3.01 per cent after rallying nearly 6.5 per cent last week.

Hong Kong’s Hang Seng Index fell on Wednesday in its first trading session after an extended holiday as tech heavyweights and financials dragged it lower.

At the close of trade, the Hang Seng index was down 263.94 points or 0.91 per cent at 28,674.80. The index had closed at its highest level in more than a week on Apr. 1 before a five-day holiday weekend.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.27 per cent, while Japan’s Nikkei index closed up 0.12 per cent.

Europe

European stocks were little changed and closed just short of record highs on Wednesday, with healthcare shares among top decliners, while optimism over speedy vaccination drives and a weaker pound helped UK equities outperform.

The pan-European STOXX 600 index edged 0.1 per cent lower, trading just below the record closing peak of 435.26 points on Tuesday. Healthcare stocks fell 0.8 per cent, leading sectoral declines.

UK’s exporter-heavy FTSE 100 gained 0.9 per cent as a weaker pound lifted the dollar earners, while the domestically focused midcap index hit a record high as Britain began the roll-out of Moderna’s COVID-19 vaccine.

“It appears that while the UK blue chip index, and its mid-cap sibling, enjoy the optimism surrounding the country’s post-COVID comeback, sterling has been saddled with concerns over the vaccine programme,” said Connor Campbell, an analyst at Spreadex.

A rebound in economically sensitive sectors such as banks, energy and automakers pushed European stocks to pre-pandemic levels earlier this week, as investors bet on a strong global economic recovery, driven by vaccines and unprecedented stimulus measures.

A final reading of IHS Markit’s Purchasing Managers’ Index showed euro zone business activity returned to growth in March, underpinned by a record expansion in the manufacturing sector and as the service industry coped with new lockdowns better than expected.

“There is a case to be made in the second half of the year when Europe really has its moment, because it has lagged the rest in its recovery. They’ve finally managed to ramp up vaccine production and distribution,” said Julien Lafargue, head of equity strategy at Barclays Private Bank.

With earnings season set to kick off this month, investors are hoping for a strong recovery.

Profits for companies on the STOXX 600 are expected to jump 47.4 per cent in the first quarter versus beaten-down numbers a year earlier, according to Refinitiv IBES data.

Recent UK market debutant Deliveroo Holdings rose 2.1 per cent to 285.7549 pence in its first day of unrestricted trading when retailers were allowed to trade. It has shed almost 28 per cent since last week when it priced its initial public offering at 390 pence.

French M&A was also in focus, with power group EDF jumping 10.5 per cent, after sources told Reuters the government expects to spend around 10 billion euros ($15 billion) to buy out minority shareholders as part of a proposed restructuring of the company.

Amundi rose 2.9 per cent after Societe Generale said it was in exclusive talks to sell most of asset manager Lyxor to Amundi for 825 million euros ($1.25 billion).

North America

Major averages hovered near unchanged on Wednesday, with the S&P 500 closing up slightly after the Federal Reserve released minutes from its most recent meeting that reinforced the US central bank’s position to remain patient before raising rates.

The major indexes held near unchanged for most of the day but the S&P 500 briefly climbed to a session high after the minutes, in which Fed officials said it would likely take “some time” for substantial further progress on goals of maximum employment and stable prices.

The gains were minor and short-lived. Many market participants question whether the Fed will hold off so long on a rate hike.

“We thought we were going to get something new from the minutes of the Fed meeting, we were oddly mistaken on that one,” said Art Hogan, chief market strategist at National Securities in New York.

“The Fed has been more transparent all of this year about where they stand and they really are not budging from that stance.”

The yield on the benchmark 10-year US Treasury note moved higher late in the session, yet remained below a 14-month high of 1.776 per cent hit on 30 March. The recent pullback in yields has helped growth names and lifted technology and communication services stocks as the best performing sectors on the day.

The Dow Jones Industrial Average rose 16.02 points, or 0.05 per cent, to 33,446.26, the S&P 500 gained 6.01 points, or 0.15 per cent, to 4,079.95 and the Nasdaq Composite dropped 9.54 points, or 0.07 per cent, to 13,688.84.

Value stocks, which include economically sensitive sectors such as materials and industrials, maintain a strong lead this year over their growth counterparts, dominantly tech-related firms.

However, a resurgence in demand for tech stocks in recent sessions amid renewed restrictions in Canada and parts of Europe has raised questions over the longevity of the value trade.

Growth stocks, up 0.28 per cent, outperformed value shares, which were down 0.16 per cent during the session.

The upcoming earnings season and progress in a multitrillion-dollar infrastructure proposal could decide Wall Street’s path forward.

Analysts have raised expectations for first-quarter S&P 500 earnings to increase to 24.2 per cent, according to Refinitiv IBES data as of 1 April, versus 21 per cent forecast on 5 February.

But the sharp run-up in earnings expectations could leave the market primed for disappointment.

JPMorgan Chase & Co chief executive officer Jamie Dimon said the US could be in store for an economic boom through 2023 if more adults get vaccinated and federal spending continues.

Prison operator GEO Group fell 20.38 per cent after suspending quarterly dividend payments.

With Reuters

is content editor for Morningstar Australia

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