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Global Market Report - 1 June

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

Investors could see a cautious start to the trading week in Australia with the stock market expected to consolidate after plenty of optimism last week about economic recovery.

The SPI 200 futures contract was lower by 24 points, or 0.42 per cent, to 5,725.0 at 8am Sydney time on Monday, indicating losses in early trade.

The easing of coronavirus restrictions and economic revival has buoyed investors of late, and the ASX finished May up 4.2 per cent.

Tension between the US and China over the latter's national security legislation on Hong Kong have been the main blight on optimism.

US President Donald Trump last week ended his country's special trade relationship with Hong Kong in response.

However, civil unrest in the US over the weekend means traders will be cautious, IG market analyst Kyle Rodda says.

"Early moves in markets this morning point to a slight return of risk-aversion to start what's a jam packed trading week," he said in a note.

"A risk-off skew in FX markets points to some nervousness amongst traders, quite possibly partially due to the civil unrest engulfing parts of the United States over the weekend."

Locally, coronavirus restrictions are easing further in states across the nation today.

Restaurants, pubs and clubs are allowed more customers at their venues in NSW, Queensland, South Australia and Victoria, and intra-state travel is allowed.

The main economic events scheduled for this week include the release of GDP figures for the March quarter on Wednesday.

The big question will be whether Australia can avoid a technical recession by recording a small increase.

The Reserve Bank of Australia also meets on Tuesday to consider the cash rate, although economists do not expect change to the official rate.

One Australian dollar was buying 66.65 US cents at 0800 AEST, up from 66.55 US cents at the close of trade on Friday.

Asia

China stocks edged up on Friday to end the week higher, as expectations that Beijing would take necessary measures to underpin the world's second-largest economy overshadowed concerns over escalating Sino-US tensions.

At the close, the Shanghai Composite index was up 0.22 per cent at 2,852.35, while the blue-chip CSI300 index was up 0.27 per cent.

In Hong Kong, the Hang Seng index was down 171.29 points, or 0.74 per cent, at 22,961.47. The Hang Seng China Enterprises index rose 0.1 per cent to 9,561.03.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.23 per cent, while Japan's Nikkei index closed down 0.18 per cent.

Europe

European shares fell on Friday, with investor nerves ahead of US President Donald Trump’s response to China over its national security law for Hong Kong taking some of the shine off May’s stock rally.

The pan-European STOXX 600 index fell 1.4 per cent, with the week’s outperformers—travel & leisure, banks and automakers—leading the decline.

Trump said he would hold a news conference on China later on Friday. Investors fear a US response could further damage Sino-US relations and cloud the prospect for economic recovery from a coronavirus-led slump.

China warned of countermeasures, and added that a US bill proposing to sanction Chinese officials over their treatment of the Uighur minority severely interfered in its internal affairs.

Hopes of a global economic recovery, as policymakers unleashed stimulus programmes and several countries emerged from lockdowns, helped the STOXX 600 mark a 3 per cent gain in May.

Germany's auto-heavy DAX outperformed with a 6.8 per cent monthly rise as many investors bought beaten-down cyclical stocks after improving economic data.

Coffee maker JDE Peet’s BV, one of the few big companies to go public during the coronavirus crisis, jumped 13.8 per cent on its market debut, valuing it at 15.6 billion euros ($26 billion).

Among decliners, Hugo Boss fell 9.1 per cent after Jefferies downgraded the stock to “hold”, saying its performance improvement will be derailed by two years due to the pandemic.

Renault slid 7.7 per cent on news it was launching talks with unions to restructure several French car plants and confirmed plans to cut around 15,000 jobs worldwide.

North America

US stocks finished mostly higher on Friday after President Donald Trump announced measures against China in response to new security legislation that were less threatening to the US economy than investors had feared.

The Dow ended the session slightly lower, but all three indexes rose for the week and registered a second straight month of gains. The S&P 500 added 17.8 per cent for April and May, its biggest two-month percentage gain since 2009.

The S&P 500 initially extended losses after Trump said he was directing his administration to begin the process of eliminating special treatment for Hong Kong in response to China’s plans to impose new security legislation in the semi-autonomous territory.

But Trump made no mention of any action that could undermine the Phase One trade deal that Washington and Beijing struck early this year, a concern that had cast a cloud over the market throughout the week.

Trump also said the US is terminating its relationship with the World Health Organisation, something he had threatened to do earlier this month.

S&P 500 technology shares gave the index its biggest boost, while financials were the biggest drag.

The latest confrontation between the US and China has fuelled concern that worsening tensions between the two world’s largest economies could derail the recent sharp gains in the stock market.

Expectations of a quick economic recovery from the coronavirus pandemic have driven the S&P 500 up more than 30 per cent from its March lows.

The Dow Jones Industrial Average fell 17.53 points, or 0.07 per cent, to 25,383.11, the S&P 500 gained 14.58 points, or 0.48 per cent, to 3,044.31, and the Nasdaq Composite added 120.88 points, or 1.29 per cent, to 9,489.87.

For the month, the Dow added 3.9 per cent, the S&P 500 gained 4.5 per cent, and the Nasdaq rose 6.8 per cent. For the week, the Dow and S&P 500 each rose more than 3 per cent, and the Nasdaq gained 1.8 per cent.

New York Governor Andrew Cuomo said Friday that New York City is “on track” to enter phase one of reopening on 8 June, and he said five upstate regions will now transition to phase two.

Federal Reserve Chair Jerome Powell, speaking in a webcast organised by Princeton University Friday, reiterated the US central bank’s promise to use its tools to shore up the economy amid the coronavirus pandemic.

Twitter was down 2 per cent and Facebook Inc shares slipped 0.2 per cent, a day after Trump signed an order threatening social media firms with new regulations over free speech.

Upscale department store chain Nordstrom slumped 11 per cent after it reported a near 40 per cent fall in quarterly sales due to pandemic-led store closures.

Salesforce.com slipped 3.5 per cent as the cloud-based business software maker cut its annual revenue and profit forecasts.

is content editor for Morningstar Australia

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