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Global Market Report - 10 December

Lex Hall  |  10 Dec 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise despite a weak lead from Wall Street as a stimulus stalemate and a fall in Facebook shares hurt investor sentiment.

The Australian SPI 200 futures contract was up 35 points, or 0.5 per cent, to 6,692 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

US stocks retreated on Wednesday from record levels as investors grew discouraged over the halting progress of economic stimulus talks, while a drop in Facebook shares provided an additional drag.

The Dow Jones Industrial Average fell 149.29 points, or 0.49 per cent, to 30,024.59, the S&P 500 lost 34.12 points, or 0.92 per cent, to 3,668.13 and the Nasdaq Composite dropped 241.61 points, or 1.92 per cent, to 12,341.16.

Locally, Standard & Poor's says Australia's top-tier AAA status is not in immediate danger after cutting the ratings of the nation's two largest states this week.

The global credit rating agency downgraded the long-term ratings of NSW and Victoria on Monday—both losing their AAA status as casualties of the pandemic, AAP reports.

The S&P/ASX200 benchmark index closed higher by 40.8 points, or 0.61 per cent, to 6,728.5 on Wednesday, after a good lead from US markets on coronavirus vaccine progress.

The All Ordinaries rose 43.2 points, or 0.62 per cent, to 6,965.4.

Gold was down 1.9 per cent at $US1,835.80 an ounce; Brent oil flat to $US48.89 a barrel; Iron ore was up 1.2 per cent to $US150.16 a tonne.

Meanwhile, the Australian dollar was buying 74.33 US cents at 8.30am, down from 74.38 US cents at Wednesday’s close.

Asia

China shares closed lower on Wednesday, led by losses in securities firms, as concerns over Sino-US relations weighed on sentiment.

At the close, the Shanghai Composite index was down 1.12 per cent at 3,371.96. The blue-chip CSI300 index was down 1.34 per cent, with its sub-index tracking securities firms lower by 3.11 per cent, the consumer staples sector down 0.92 per cent, the real estate index down 1.35 per cent and the healthcare sub-index down 1.12 per cent.

Hong Kong shares ended higher on Wednesday, tracking bullish sentiment in the region buoyed by Britain’s covid-19 vaccine rollout and other positive news related to the vaccine.

At the close of trade, the Hang Seng index was up 198.28 points or 0.75 per cent at 26,502.84. The Hang Seng China Enterprises index rose 0.76 per cent to 10,488.32.

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

Europe

European shares on Wednesday ended off session highs as euphoria over a potential US fiscal stimulus and vaccine optimism subsided, with investors awaiting the outcome of make-or-break Brexit trade talks.

The pan-European STOXX 600 index closed at its highest since February but trimmed gains to finish up 0.3 per cent.

London’s export-heavy FTSE 100 shaved its 1 per cent jump in the session to end 0.1 per cent higher as the pound firmed ahead of a meeting between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen in Brussels.

The last ditch attempt at a deal to govern around $1 trillion in annual trade comes after talks so far failed. Even as officials sounded skeptical of an agreement just three weeks ahead of Britain’s exit from the European Union, analysts held out hope.

“While one should not expect ... Johnson to make any inroads with Von der Leyen tonight ... the addition of respective negotiators Frost and Barnier to the guest list is a positive signal,” said Oliver Brennan, senior macro strategist at TS Lombard.

“We retain our view that in the end, a (free trade agreement) is inevitable.”

Failure to secure a deal would clog borders, upset financial markets and disrupt delicate supply chains across Europe and beyond

Germany’s DAX closed up 0.5 per cent, but retreated from a three-month peak.

Data showed German exports rose less than expected in October, but foreign trade still gave Europe’s largest economy a boost at the start of the fourth quarter as it struggles to avoid slipping into a double-dip contraction.

Gains in Europe were led by autos, while the tech sector lost, dragged down by a 12 per cent slide in chipmaker STMicroelectronics after it postponed its US$12 billion ($16 billion) annual sales target by a year to 2023.

STM’s Paris listed shares also dropped 12 per cent pulling France’s main index 0.3 per cent lower.

Eyes on Thursday will also be on the outcome of the European Central Bank meeting with more emergency bond buying and cheap liquidity for banks expected.

But analysts at JPMorgan say given asset purchase programs are nearing self-imposed limits, the euro zone may need more fiscal support. The 750 billion euro ($1.2 trillion) European Recovery Fund yet to be agreed on might still prove insufficient to generate a return to pre-pandemic GDP levels in 2021, they said.

Among other individual stocks, lighting company Signify NV, slid 4.2 per cent after a downbeat revenue forecast.

Greek stocks rose 0.6 per cent, up for the 14th straight session, their longest winning streak ever.

North America

US stocks retreated on Wednesday from record levels as investors grew discouraged over the halting progress of economic stimulus talks, while a drop in Facebook shares provided an additional drag.

Investors are banking on a long-awaited relief package to help buttress an economy that has been battered from the covid-19 pandemic and related lockdowns that have led to millions of layoffs and overwhelmed the healthcare system.

US Senate Majority Leader Mitch McConnell said lawmakers were still looking for a path toward an agreement on covid-19 aid, as the US House of Representatives prepared to vote on a one-week funding bill to provide more time for a deal.

“There is a lot of talk, they say they are making progress and then they say they are so far apart, it is frustrating,” said Tim Ghriskey, Chief Investment Strategist at Inverness Counsel in New York, New York.

“The other thing is we’ve had this meteoric rise without any real pullback so at some point we are going to see a pullback, you need some digestion, certainly,” he added.

The Dow Jones Industrial Average fell 149.29 points, or 0.49 per cent, to 30,024.59, the S&P 500 lost 34.12 points, or 0.92 per cent, to 3,668.13 and the Nasdaq Composite dropped 241.61 points, or 1.92 per cent, to 12,341.16.

Positive updates on the covid-19 vaccine development along with hopes for a fresh fiscal stimulus package have helped fuel a rise in Wall Street’s main indexes to all-time highs, with the S&P 500 surpassing 3,700 points for the first time on Tuesday.

Facebook shares extended declines late in the session, down 1.91 per cent after the US Federal Trade Commission and a big coalition of states sued the social media company on Wednesday, saying it broke antitrust law.

With overall valuations now at extremely high levels, some investors worry stocks could be more vulnerable to any bad news such as unexpected setbacks in the roll-out of coronavirus vaccines or delays in stimulus.

DoorDash Inc opened at US$182 after pricing at US$102 per share in its debut on Wednesday after the food delivery startup raised US$3.37 billion in one of the biggest US stock market launches so far in 2020.

Home improvement chain Lowe’s Cos Inc jumped 5.80 per cent after announcing a new $15 billion share repurchase plan.

Drugmaker Eli Lilly advanced 4.99 per cent after flagging positive data for its experimental drug from a late-stage diabetes clinical trial.

is content editor for Morningstar Australia

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