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Global Market Report - 1 July

Lex Hall  |  01 Jul 2020Text size  Decrease  Increase  |  
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Australia

Shares are tipped to fall slightly at the start of trade on the Australian market amid worries about economic recovery from the impact of the coronavirus pandemic.

The Australian SPI 200 futures contract was lower by 7.0 points, or 0.12 per cent, to 5,885.0 point at 8am Sydney time on Wednesday.

In the US, Federal Reserve Chairman Jerome Powell reiterated comments that the path of the economy is "highly uncertain" due to the virus impact.

He was testifying before congress to help introduce a coronavirus economic rescue package.

The nation's top infectious diseases expert, Dr Anthony Fauci, said there was no guarantee the US will have an effective COVID-19 vaccine and warned the virus spread "could get very bad".

He warned the number of daily new reported infections could surge to 100,000 if Americans do not start following public health recommendations.

The S&P 500 rallied to finish higher, gaining 47.05 points, or 1.54 per cent, to 3,100.29.

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The Dow Jones Industrial Average rose 217.08 points, or 0.85 per cent, to 25,812.88, and the Nasdaq Composite added 184.61 points, or 1.87 per cent, to 10,058.77.

In Australia today, economists will be watching data on building approvals for May and the manufacturing industry.

Meanwhile, AMP has completed the sale of its life insurance business to Resolution Life, which may provide a boost for its share price.

The Australian dollar was higher on growing risk appetite, buying 69.02 US cents at 8am, higher from 68.54 US cents at the close of trade on Tuesday.

Asia

Chinese shares ended higher on Tuesday, led by gains in technology stocks, as upbeat US and China data renewed global economic recovery hopes.

At the close, the Shanghai Composite index was up 0.78 per cent at 2,984.67, while the blue-chip CSI300 index was up 1.32 per cent.

Hong Kong stocks firmed on Tuesday to post their best month in six, as upbeat US and Chinese data renewed hopes for economic recovery and offset worries about US sanctions against the city over Beijing’s national security law.

At the close of trade, the Hang Seng index was up 125.91 points or 0.52 per cent at 24,427.19. The Hang Seng China Enterprises index rose 0.01 per cent to 9,758.63.

Hong Kong stock market will be closed on Wednesday for Hong Kong Special Administrative Region Establishment Day.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.69 per cent, while Japan’s Nikkei index closed up 1.33 per cent.

Europe

European stocks slipped on Tuesday, with banks and energy firms leading the losses at the end of a strong quarter, while UK markets took a hit from a worse-than-expected GDP reading.

The pan-European STOXX 600 index looked set to post a more than 12 per cent rise in the quarter—its best since March 2019—as unprecedented stimulus, hopes of a COVID-19 vaccine and relatively fewer virus cases in Europe powered a rebound from March lows.

Still, the index is down 13.6 per cent for the year.

Asian stocks gained after data showed China's factory activity expanded at a stronger pace in June as the government lifted lockdowns and stepped up investment, helping the exporter-heavy German DAX rise in early trade.

Chipmakers STMicroelectronics, Infineon Technologies, ASM International rose between 1.9 per cent and 3.6 per cent following an upbeat revenue forecast from US-based Micron Technology.

The STOXX 600 fell about half a percent, with banks and oil & gas firms falling more than 1.5 per cent.

WHO chief Tedros Adhanom Ghebreyesus said on Monday the pandemic is not even close to being over, with many US states marking a record spike in new COVID-19 infections.

UK's FTSE 100 underperformed as data showed Britain's economy shrank by the most since 1979 in the first quarter of 2020 as households slashed their spending.

Also weighing on the blue-chip index, Royal Dutch Shell fell 2.1 per cent after saying it would write down the value of its assets by up to $22 billion after lowering its long-term outlook on oil and gas prices.

Investors will focus on testimony by the US Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin later in the day for hints on more US stimulus.

Prosus NV, one of the world’s largest technology investors, rose 3.9 per cent after reporting a better-than-expected rise in full-year profit.

Scandal-hit payments company Wirecard jumped 99.4 per cent, extending gains for a second day.

North America

The S&P 500 rallied on Tuesday to finish higher and secure its biggest quarterly percentage gain in more than two decades as improving economic data bolstered investor beliefs that a stimulus-backed rebound for the US economy was on the horizon.

Coming off a drop of 20 per cent in the first quarter, the biggest quarterly decline since the financial crisis in the fourth quarter of 2008, the S&P rallied more than 19.95 per cent to notch its biggest quarterly gain since 1998, at the height of the tech boom.

The gains have been fuelled by unprecedented levels of fiscal and monetary stimulus and the easing of restrictions.

But the S&P 500 is still down about 4 per cent on the year, and gains in June stood at just 2 per cent due to the flare-up in virus cases that has threatened to delay reopenings and derail a tentative economic recovery. Federal Reserve Chairman Jerome Powell reiterated in comments on Tuesday that the path of the economy is “highly uncertain.”

Still, comments from Anthony Fauci, the US government’s top infectious diseases expert, who said there was no guarantee the US will have an effective COVID-19 vaccine and warned the virus spread “could get very bad,” were a reminder that a full economic recovery could be a long road.

Gains were capped on the Dow, pressured by a 5.75 per cent drop in Boeing Co, as the airplane maker gave back some of Monday’s 14 per cent surge after Norwegian Air cancelled orders for 97 aircraft and said it would claim compensation.

The Dow Jones Industrial Average rose 217.08 points, or 0.85 per cent, to 25,812.88, the S&P 500 gained 47.05 points, or 1.54 per cent, to 3,100.29 and the Nasdaq Composite added 184.61 points, or 1.87 per cent, to 10,058.77.

The 17.78 per cent gain in the Dow marked its best quarterly performance since a 21.56 per cent rally in the first quarter of 1987 while the Nasdaq’s 30.63 per cent jump was its best quarter since a 48.18 per cent gain in the fourth quarter of 1999.

While coronavirus cases continue to surge in many states, the US economy is showing signs of pickup, with data indicating consumer confidence increased much more than expected in June.

Simmering US-China tensions also remained a possible headwind, with Washington beginning to eliminate Hong Kong’s special status under US law in response to China’s national security law for the territory. China said it would retaliate.

All of the 11 major S&P 500 sectors traded higher, with a 2.2 per cent rise in energy stocks leading the pack.

Micron Technology Inc jumped 4.8 per cent as it forecast higher-than-expected current-quarter revenue on strong demand for its chips that power notebooks and data centres.

The company’s results also boosted other chipmakers and lifted the Philadelphia semiconductor index by 2.7 per cent.

Uber advanced 4.9 per cent after reports that the ride-hailing services company was in talks to buy food-delivery app Postmates.

is senior editor for Morningstar Australia

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