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Global Market Report - 9 September

Lex Hall  |  09 Sep 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to fall as US stocks extended their losses, including a more than 20 per cent plunge in Tesla.

The Australian SPI 200 futures contract was down 93 points, or 1.6 per cent, to 5,893 points at 8.30am Sydney time on Wednesday, suggesting a negative start to trading.

US stocks closed lower for a third straight session on Tuesday as heavyweight technology names extended their sell-off to send the Nasdaq into correction territory, while Tesla suffered its biggest daily percentage drop after the stock was passed over for inclusion in the S&P 500.

The Dow Jones Industrial Average fell 632.42 points, or 2.25 per cent, to 27,500.89, the S&P 500 lost 95.12 points, or 2.78 per cent, to 3,331.84 and the Nasdaq Composite dropped 465.44 points, or 4.11 per cent, to 10,847.69.

Australia's share market closed more than one per cent higher yesterday and above 6,000 points after a late flurry from investors. The S&P/ASX200 benchmark index closed up by 63.0 points, or 1.06 per cent, at 6,007.8 points on Tuesday. The index was at 5,991.9 at 4pm, before the adjustment. The All Ordinaries index finished higher by 60.3 points, or 0.98 per cent, to 6,190.2.

Gold was flat at $US1,933.68 an ounce; Brent oil was down 4.6 per cent to $US40.08 a barrel; Iron ore was flat at $US129.12 a tonne.

Meanwhile, the Australian dollar was buying 72.11 US cents at 8.30am, down from 72.97 US cents at Tuesday’s close.

Asia

China stocks were set to extend their three-day losing streak on Tuesday, dragged down by consumer firms, as sentiment was weighed by worries over escalating Sino-US tensions.

President Donald Trump on Monday again raised the idea of de-coupling the US and Chinese economies, suggesting the United States would not lose money if the world's two biggest economies no longer did business.

The CSI300 index fell 0.5 per cent to 4,646.07 points at the end of the morning session, on track for its fourth straight day of declines, while the Shanghai Composite Index lost 0.3 per cent to 3,281.29 points and is set for a fifth session of losses.

Hong Kong stocks recouped earlier losses to close higher on Tuesday, helped by gains in financial and telecoms firms.

At the close of trade, the Hang Seng index was up 0.14 per cent at 24,624.34 after falling as much as 1 per cent. The Hang Seng China Enterprises index rose 0.67 per cent to 9,830.39.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.22 per cent, while Japan's Nikkei index closed up 0.8 per cent.

Europe

European shares fell on Tuesday on fears that Britain was in danger of leaving the European Union without a trade agreement, with energy firms and technology stocks among the biggest decliners.

The oil & gas sub-index tumbled 3.7 per cent marking its worst day in nearly 11 weeks, as oil prices plunged over 8 per cent on demand worries.

As tech firms on Wall Street deepened a selloff from last week, European tech stocks slipped 2.1 per cent, giving back a chunk of the previous session’s gain.

“Stocks in Europe had free rein yesterday as the US exchanges remained closed because it was Labour Day. The weakness that we saw in big US tech names last week, is still in play, and that is driving sentiment over here,” said David Madden, market analyst at CMC Markets UK.

News that Softbank made big option purchases during the run-up in the US stock market also made investors question a rally in equity markets, with the trades being revealed just as a tech-led rally faltered.

The pan-European STOXX 600 slid 1.2 per cent, with declines in French energy group Total  and German enterprise software maker SAP dragging down the index.

Britain began a new round of Brexit trade talks this week by telling the European Union that it was ramping up preparations to leave the bloc without an agreement as the two sides bicker over rules that govern nearly US$1 trillion ($.14 trillion) in trade.

The STOXX 600 has traded in a limited range since June, but markets are bracing for the European Central Bank’s policy meeting on Thursday, which could act as the next catalyst.

French electricity giant EDF sank 8 per cent after announcing its nuclear output fell 17.6 per cent in August due to the effects of the pandemic and reactor outages.

Britain’s Royal Mail surged 25 per cent after raising its revenue target for the current year.

Data showed German exports rose in July, however, remained far below pre-crisis levels. Separately, figures showed the euro zone economy declined slightly less than estimated in the second quarter but was still the sharpest ever fall.

North America

Each of the 11 major S&P sectors were lower, led by declines in technology and energy. Reports on Friday that SoftBank made significant option purchases during the run-up in US stocks added to investor nervousness.

Technology once again dragged indexes lower with a drop of 4.59 per cent, the third straight decline and worst three-day performance for the sector since mid-March. Even with the recent drop, the sector remains the best performer on the year.

Energy shares slumped 3.71 per cent as oil prices fell below $40 a barrel.

Media reports of SoftBank’s option purchases also reminded investors that market makers might have billions of dollars’ worth of long positions as hedges against options trades.

Wall Street’s rally, which has been fuelled in large part by massive amounts of monetary and fiscal stimulus, screeched to a halt last week with the Nasdaq falling as much as 9.9 per cent from its intraday record as investors booked profits after a run that lifted the index about 70 per cent from its pandemic lows. Tuesday’s losses put the index down 10 per cent from its closing record, confirming a correction began on 2 September.

At session lows on Tuesday, Facebook, Amazon.com, Apple, Tesla, Microsoft, Alphabet and Netflix had collectively lost more than US$1 trillion in market capitalisation since 2 September.

Tesla plunged 21.06 per cent to suffer its biggest daily percentage drop as the electric-car maker was excluded from a group of companies being added to the S&P 500. Investors had widely expected its inclusion after a blockbuster quarterly earnings report in July. Up to Friday’s close, the stock had surged about 400 per cent this year.

JPMorgan Chase & Co fell 3.48 per cent, after a report it was probing employees who were allegedly involved in the misuse of funds intended for covid-19 relief. The wider banks index lost 3.44 per cent, also tracking Treasury yields.

A gauge of value stocks fell 1.84 per cent, but outperformed the broader market and a 3.38 per cent, decline in the growth index. Wall Street’s fear gauge climbed for the third time in four sessions.

Concerns over potential US sanctions against China’s biggest chipmaker, SMIC, hit domestic suppliers, with the PHLX semiconductor index down 3.43 per cent.

General Motors Co jumped 7.93 per cent after it acquired an 11 per cent stake worth US$2 billion in US electric-truck maker Nikola Corp. The truck maker’s shares surged 40.79 per cent.

is content editor for Morningstar Australia

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