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Global Market Report - 1 September

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

Australian shares are set to fall despite the S&P500 posting its biggest August gain in more than three decades.

The Australian SPI 200 futures contract was down 48 points, or 0.8 per cent, to 5,982 points at 8.30am Sydney time on Tuesday, suggesting a negative start to trading.

While the S&P boasted its steepest August percentage gain since 1986 it ended Monday slightly lower. The Dow also lost ground as investors took a pause although the Nasdaq closed higher thanks to high-flying stocks including Apple Inc.

The Dow Jones Industrial Average fell 223.82 points, or 0.78 per cent, to close at 28,430.05, the S&P 500 lost 7.7 points, or 0.22 per cent, to 3,500.31 and the Nasdaq Composite added 79.82 points, or 0.68 per cent, to 11,775.46. 

Australia's share market closed lower on Monday, but gained 2.24 per cent in August despite a coronavirus-plagued reporting season. 

The S&P/ASX200 benchmark index closed down by 13.3 points, or 0.22 per cent, to 6,060.5 points. The All Ordinaries index finished lower by 14.9 points, or 0.24 per cent, to 6,245.9.

Locally, the Reserve Bank of Australia is widely expected to keep rates on hold when it meets today. 

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Gold was up 0.3 per cent to $US1,969.66 an ounce; Brent oil was down 0.5 per cent to $US45.60 a barrel; iron ore was up 0.1 per cent to $US124.47 a tonne.

Meanwhile, the Australian dollar was buying 73.79 US cents at 8.30am, up from 73.48 US cents at Monday’s close.

Asia

China stocks erased gains to close lower on Monday, dragged by financials and healthcare firms, after investors booked profits as major indexes approached key resistance levels.

The blue-chip CSI300 index fell 0.6 per cent to 4,816.22, after hitting a more than five-year high in the morning session, while the Shanghai Composite Index slipped 0.2 per cent to 3,395.68, trading not far below at 2½-year high hit in mid-July.

Hong Kong stocks reversed earlier gains to end lower on Monday, weighed down by financial and consumer staples firms.

At the close of trade, the Hang Seng index was down 245.01 points, or 0.96 per cent, at 25,177.05. The Hang Seng China Enterprises index fell 1.88 per cent to 9,991.48.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.4 per cent, while Japan’s Nikkei index closed up 1.12 per cent.

Europe

European shares ended Monday lower, weighed down by weak financial stocks after disappointing German and Italian inflation data, but closed August higher thanks to optimism over new stimulus measures and a covid-19 vaccine.

The pan-European STOXX 600 index ended 0.6 per cent lower on the day, with the bulk of losses coming right before the close, in line with declines on Wall Street.

The index added about 2.9 per cent in August, but still remains around 15 per cent below pre-pandemic highs due to middling economic data and a resurgence in covid-19 cases. It has stuck to a roughly 30-point trading range since June.

Travel and leisure stocks led gains for the month, adding nearly 15 per cent as countries relaxed some virus-driven curbs on travel. Still, the sector remains sensitive to any spikes in cases, and is among the worst performers this year.

Financials were the biggest weights on the index for the day, after German and Italian inflation data missed expectations for August.

EU inflation data is due on Tuesday and is widely expected to remain below the European Central Bank’s target.

The weak inflation reading could prompt action from the ECB to release more money into the market, a stance that would be similar to one promised by the US Federal Reserve last week.

Utility stocks were among the few gainers for the day, with Suez topping the STOXX 600 after larger peer Veolia offered to buy a 29.9 per cent stake in the French water and waste firm from gas and power utility Engie for 2.9 billion euros ($4.7 billion).

The three stocks were the top performers on the STOXX 600 for the day.

British markets were closed for a holiday.

North America

The Federal Reserve’s commitment to tolerate inflation and keep interest rates low, positive developments in vaccines and treatments for covid-19 and a rally in tech-focused stocks have helped the S&P 500 and Nasdaq hit record highs in August.

But while states such as New Jersey continued to ease restrictions on Monday, investors noted that across the US, total coronavirus cases topped 6 million on Sunday as many states in the Midwest reported increasing infections, according to a Reuters tally.

Technology, then healthcare and utilities stocks were the biggest percentage gainers among the 11 major S&P sectors while energy was the biggest percentage decliner.

With the S&P reaching 3.8 per cent above its pre-crisis record during the session, Mona Mahajan, senior US investment strategist at Allianz Global Investors in New York, said investors were showing some caution by favouring technology as they looked warily at US and overseas covid-19 numbers.

The Nasdaq, meanwhile, ended the day almost 20 per cent above its pre-crisis record closing high. Its top two boosts for Monday were from Apple Inc and Tesla Inc after their stock splits.

While the splits did not provide a fundamental reason to buy the stocks, Mahajan noted that the lower prices may be making the momentum stocks more attractive to some retail investors.

For the month the S&P showed a gain of 7.01 per cent, its biggest advance for August since 1986 when it rose 7.1 per cent that month.

The three main indexes showed their fifth straight monthly rise following March lows, even as economic data pointed to an uneven recovery from the steep downturn.

For the S&P, this was its longest winning steak on a monthly basis since a six-month run from April to September 2018.

And the benchmark’s 35.6 per cent gain since April marked the strongest five-month run for the S&P since 1938, according to data from Bespoke Investment Group.

Apple ended the day 3.4 per cent higher at US$129.04 while Tesla closed up 12.6 per cent at US$498.32.

Aimmune Therapeutics Inc’s shares soared 171.6 per cent after Swiss food group Nestle SA offered to pay US$2 billion for full ownership of the peanut allergy treatment maker.

Shares of Microsoft Corp, Walmart Inc and Oracle Corp—all suitors for TikTok’s US assets—fell as China’s new rules around tech exports meant a deal with TikTok owner ByteDance could need Beijing’s approval.

is senior editor for Morningstar Australia

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