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Global Market Report - 8 October

Lex Hall  |  08 Oct 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to follow Wall Street higher amid renewed optimism over a partial stimulus deal in the US.

The Australian SPI 200 futures contract was up 30 points, or 0.5 per cent, to 6,050 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

US stocks closed sharply higher on Wednesday as investors regained optimism that at least a partial deal on more US fiscal stimulus may happen.

The Dow Jones Industrial Average rose 529.45 points, or 1.91 per cent, to 28,302.21, the S&P 500 gained 58.38 points, or 1.74 per cent, to 3,419.33 and the Nasdaq Composite added 210.00 points, or 1.88 per cent, to 11,364.60.

Locally, the federal government’s superannuation overhaul will increase the pressure on poor-performing funds to merge or improve, amid increased scrutiny on returns, fees and marketing spend, The Australian reports.

The S&P/ASX200 benchmark index finished higher by 74.3 points, or 1.25 per cent, to 6,036.4 on Wednesday. Tuesday's federal budget delivered measures such as tax cuts and instant asset write-offs for most businesses, which helped investors shrug off a negative lead from Wall Street. The All Ordinaries index closed better by 75.4 points, or 1.22 per cent, to 6,239.6.

Gold was up 0.5 per cent at $US1,887.23 an ounce; Brent oil was down 1.6 per cent to $US41.96 a barrel. 

Meanwhile, the Australian dollar was buying 71.36 US cents at 8.30am, up from 71.21 US cents at Wednesday’s close.

Asia

Japanese shares ended little changed on Wednesday, as fears of a slower economic recovery from the coronavirus crisis resurfaced after US President Donald Trump halted talks for an additional stimulus package until after the election.

The benchmark Nikkei share average was little changed at 23,422.82 at the close, while the broader Topix was almost flat at 1,646.47.

Chinese markets will reopen after a week-long holiday on Friday.   

Europe

European stocks mostly fell on Wednesday, failing to join a recovery in global equities following a selloff on doubts over US stimulus, with blue-chip shares weighing the most.

The pan-European STOXX 600 index edged 0.1 per cent lower to break a four-session winning run. Blue-chip stocks fell 0.3 per cent.

The healthcare sector was the biggest drag, with telecom, media and real estate stocks also falling.

Asian markets and Wall Street stocks rebounded strongly from overnight losses triggered by US President Donald Trump calling off talks over a coronavirus relief package until after the election.

Later on, however, Trump urged Congress to provide $1,200 stimulus checks for Americans and other support for airlines and small businesses.

“You can look at this as partly a negotiating tactic,” said Craig Erlam, senior market analyst at Oanda in London. “You call off talks now in the hopes that the Democrats will cede a little bit of ground. But I’m sceptical we’ll get one before the election.”

The benchmark STOXX 600 hit a two-week high earlier this week on reports of improvements in Trump’s health after he tested positive for covid-19, although trading has been choppy amid uncertainties about the November election.

Positive earnings reports and upbeat brokerage recommendations helped limit the losses in Europe.

German logistics group Deutsche Post jumped 3.9 per cent as it said it expected "exceptionally strong" business up to Christmas as ecommerce keeps booming during the pandemic.

Dialog Semiconductor rose 3.2 per cent after it forecast better-than-expected revenue in its third quarter.

Miners rose after JP Morgan took an "extreme overweight" position, citing a boost to the sector from China's recovery and potential US stimulus.

BHP, Anglo American and Rio Tinto gained more than 2 per cent, boosting the UK's commodity-heavy FTSE 100.

Beverages companies AB InBev, Heineken, and Pernod Ricard rose between 1.3 per cent and 3.5 per cent after Jefferies upgraded the stocks to "buy", while double upgrading Diageo.

Britain's biggest supermarket chain Tesco slipped 0.7 per cent, giving back gains after it reported a jump in sales.

Nexi slid 5.7 per cent after top shareholder Mercury UK Holdco said it was selling 13.4 per cent of its stake in the Italian payments group, a day after Nexi announced a merger with rival SIA.

North America

After abruptly calling off negotiations on a comprehensive bill on Tuesday, President Donald Trump later that day urged Congress to pass a series of smaller, standalone bills that would include a bailout package for the airline industry battered by the coronavirus pandemic. Airline shares jumped.

Indexes held gains after the Federal Reserve released minutes from its last policy meeting. The minutes showed US central bankers, having agreed unanimously in August on a broad new approach to monetary policy, were divided in September over how to apply their new principles in practice.

“The only reason we were down yesterday was the tweet from President Trump, which he walked back last night. That’s why the market started off stronger and continued stronger. I think there’s full-blown expectations that some form of stimulus agreement is going to occur sooner than later,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

Top White House officials downplayed the possibility of more coronavirus relief, while House Speaker Nancy Pelosi disparaged Trump for backing away from talks on a comprehensive deal.

Eli Lilly and Co rose after saying it had submitted a request to the US Food and Drug Administration for emergency use of its experimental covid-19 antibody treatment.

With the presidential election just weeks away, focus later Wednesday may turn to a debate between Vice President Mike Pence and Democratic opponent Kamala Harris.

Reuters/Ipsos opinion polls released on Tuesday showed Democratic presidential candidate Joe Biden expanding his lead over Trump in battleground Michigan and the two candidates locked in a toss-up race in North Carolina ahead of the 3 November election.

Investors also are preparing to hear soon from companies on the third quarter. Analysts expect earnings at S&P 500 companies to have dropped about 21 per cent in the quarter from a year ago, according to IBES data from Refinitiv.

is content editor for Morningstar Australia

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