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Global Market Report - 1 October

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

Australian shares are set to rise after gains on Wall Street, fuelled by positive economic data and optimism over a new covid relief package.

The Australian SPI 200 futures contract was up 20 points, or 0.3 per cent, to 5,822 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

US stocks closed solidly higher on Wednesday as government leaders continued talks for a new pandemic relief package and positive economic data helped the major indexes end the third quarter in positive territory.

The Dow Jones Industrial Average rose 329.04 points, or 1.2 per cent, to 27,781.7, the S&P 500 gained 27.53 points, or 0.83 per cent, to 3,363 and the Nasdaq Composite added 82.26 points, or 0.74 per cent, to 11,167.51.

The S&P/ASX200 benchmark index was lower before the Donald Trump and Joe Biden stoush, then slipped more and closed lower by 136.2 points, or 2.29 per cent, at 5,815.9 points on Wednesday. 

The index recorded its first monthly decline (4.04 per cent) since the 21.18 per cent crash in March when the coronavirus pandemic gripped Australia. The ASX200 lost 1.39 per cent for the quarter.

Locally, Scott Morrison will pour $1.5 billion into revitalising Australian manufacturing through the covid-19 economic recovery and unveil a strategy to boost large-scale production, develop new products and expand access to global markets.

Gold was down 0.6 per cent at $US1,887.36 an ounce; Brent oil was down 0.2 per cent to $US40.95 a barrel; Iron ore was up 5.0 per cent to $US123.47 a tonne. 

Meanwhile, the Australian dollar was buying 71.68 US cents at 8.30am, up from 71.10 US cents at Wednesday’s close.

Asia

China shares closed lower on Wednesday as losses in real estate and materials stocks outweighed optimism from upbeat factory activity surveys, with the markets recording their worst monthly loss since May 2019.

The Shanghai Composite index ended down 0.2 per cent at 3,218.05 and the blue-chip CSI300 index 0.1 per cent. For the month, the Shanghai Composite index lost 5.23 per cent and the CSI300 index 4.75 per cent.

Hong Kong shares ended higher on Wednesday as sharp gains in China Evergrande Group boosted property stocks, after the developer secured investments to ease some of its liquidity crunch worries. 

At the close of trade, the Hang Seng index was up 183.52 points or 0.79 per cent at 23,459.05. The Hang Seng China Enterprises index rose 1.25 per cent to 9,397.37. 

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.05 per cent, while Japan’s Nikkei index closed down 1.5 per cent.

Europe

European shares closed nearly flat on Wednesday after their US peers rose on hopes of fresh stimulus, helping dispel early gloom over surging coronavirus cases and uncertainty about the US presidential election.

The continent's bourses trimmed their morning losses, and the pan-European STOXX 600 ended the day 0.1 per cent lower while euro zone stocks slipped 0.3 per cent.

The STOXX 600 closed out a volatile third quarter nearly flat, and posted a 1.5 per cent decline for September as worries about a second wave of covid infections hampering Europe’s economic recovery and doubts about a Brexit trade deal came to the fore.

Britain reported more than 7,000 covid cases for the second day in a row, and several European countries looked at tightening restrictions in an effort to contain the spread of the virus over autumn and winter.

A handful of M&A activity drove big moves, with TP ICAP, the world's biggest inter-dealer broker, slumping 16.4 per cent to the bottom of STOXX 600 after saying that it was in talks to buy electronic trading network Liquidnet Holdings for US$600 million to US$700 million ($837 million to $977 million).

Dutch specialty chemicals company DSM rose 4 per cent after Germany's Covestro said it would buy its resins and functional materials unit for about 1.6 billion euros ($2.6 billion). Covestro slid 7 per cent.

French waste and water management company Suez jumped 5.9 per cent after bigger rival Veolia raised its offer to buy a stake in the company.

Oil major Total gave the biggest boost to the markets, rising 3.1 per cent after saying it would hike its annual investments in renewable energy and electricity by 50 per cent amid gloomy long-term prospects for oil demand.

Another energy player Royal Dutch Shell slipped 1.3 per cent after announcing plans to cut over 10 per cent of its workforce.

The broader oil & gas index, among the worst performers in Europe alongside banks this year, rose 0.9 per cent.

North America

All three major indexes surged after US House of Representative Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin both expressed hope for a breakthrough in partisan stimulus negotiations.

But the indexes pared gains after Senate Majority Leader Mitch McConnell warned the sides remain “far apart” in their talks.

“We had the economic news which was pretty good, and continued discussions with Mnuchin and Pelosi drove hopes that we could have stimulus before the election before McConnell threw cold water on it,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

“Volatility has been the watchword all month and I don’t think we’re out of the woods yet,” Nolte added.

Market participants also were digesting Tuesday’s contentious presidential debate, where President Donald Trump and Democratic challenger Joe Biden talked over each other and traded insults as they sparred over the covid-19 pandemic, healthcare and the economy.

A spate of economic data mostly surprised to the upside, with ADP National Employment index blowing past analyst expectations and pending home sales surging to an all-time high.

The major indexes wrapped up September with their first monthly declines since March, when mandated shutdowns slammed the economy.

But the indexes showed third-quarter gains, with the S&P enjoying its biggest two-quarter winning streak since 2009 and the Nasdaq posting its biggest gain for two quarters since 2000.

Of the 11 major sectors in the S&P 500, 10 ended the session in positive territory, with healthcare and financials enjoying the largest percentage gains.

Nikola Corp stock soared by 14.5 per cent after CEO Mark Russell said he was close to a deal with an energy partner and defended the company against a short-seller's fraud allegations.

Micron Technology said it has not yet obtained new licenses needed to sell memory chips to China's Huawei Technologies, sending its shares down 7.4 per cent.

Duke Energy Corp jumped 7.5 per cent after the Wall Street Journal said the company had been approached by peer NextEra Energy regarding a possible takeover. Shares of NextEra Energy fell 2.0 per cent.

is content editor for Morningstar Australia

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