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Global Market Report - 10 March

Lex Hall  |  10 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to follow Wall Street higher as bond yields eased and tech stocks posted strong gains.

The Australian SPI 200 futures contract was up 26 points, or 0.4 per cent, at 6,802 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

US stocks rallied on Tuesday, with the Nasdaq gaining about 4 per cent to recoup heavy losses from the previous session as US bond yields retreated and investors scooped up battered technology stocks.

The Dow Jones Industrial Average rose 0.09 per cent to end at 31,832.08 points, while the S&P 500 gained 1.42 per cent to 3,875.47. The Nasdaq Composite climbed 3.69 per cent to 13,073.83.

Locally, PayPal is relishing the prospect of competing against global buy now, pay later rivals Afterpay, Klarna and Zip in the Australian market, after its BNPL solution ranked as the company’s most successful product launch in the US, The Australian reports.

The product, called PayPal Pay in 4, is set to launch here in readiness for the June end-of-financial-year sales, providing an interest-free BNPL solution at no additional cost to merchants beyond their existing account arrangements. 

Australia's share market has produced gains for investors after a mostly positive lead from US markets.

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The S&P/ASX200 benchmark index closed up 31.6 points, or 0.47 per cent, to 6,771.2 on Tuesday.

The All Ordinaries closed higher by 28.8 points, or 0.41 per cent, at 7,000.4.

The top sectors were utilities, industrials, health and consumer discretionaries, which all gained by more than one per cent.

Gold was up 2.0 per cent at $US1,717.91 an ounce; Brent oil was down 1.0 per cent to $US67.56 a barrel; Iron ore was down 5.7 per cent to $US164.41 a tonne.

Meanwhile, the Australian dollar was buying 77.10 US cents at 8.30am, down from 77.66 US cents at Tuesday’s close.

Asia

In China, the Shanghai Composite slipped 0.2 per cent to 3,415.23 at local noon break, paring a slide of 2.7 per cent. It logged a 2.3 per cent drop on Monday in the index's biggest pullback since July 24. A fourth day of decline today would be the index’s longest retreat since mid-November.

The CSI 300 Index, which tracks some of the biggest stocks in Shanghai and Shenzhen, was little changed after falling as much as 3.2 per cent.

In Hong Kong, the Hang Seng Index traded 1.4 per cent higher, reversing from losses of as much 0.8 per cent. The gauge slumped 1.9 per cent on Monday. The market last experienced a four-day slide in late January.

Japanese shares ended higher on Tuesday as investors bought consumer goods companies and property developers on expectations that they would benefit from an economic recovery from the covid-19 pandemic.

The Nikkei 225 Index climbed 0.99 per cent to 29,027.94. The broader Topix rose 1.27 per cent to 1,917.68.

Europe

European stocks ended Tuesday decidedly higher after extending gains from their best session in four months a day earlier, as a rise in shares of oil and utility companies helped counter losses in miners.

The pan-European STOXX 600 rose 0.8 per cent, with the utility sector rising more than 1.5 per cent.

Danish jewellery maker Pandora A/S jumped 7.2 per cent after reporting a 12 per cent rise in organic sales in February.

The continent’s stock markets have come under pressure as a jump in bond yields on the back of quick vaccine rollouts and a massive US coronavirus relief package have fanned worries about a potential rise in inflation.

Still, major European indexes have fared better than some of their tech-heavy US peers.

The MSCI Europe value index, which includes banking, energy and auto stocks, have risen about 9 per cent so far this year, while its growth counterpart that tracks tech and healthcare stocks is up 2 per cent.

Miners fell 1.8 per cent as Dalian iron ore futures tumbled by the 10 per cent daily limit on anti-pollution restrictions in China’s top steelmaking city of Tangshan, while metal prices were also hit by a firm dollar.

UK-listed miners Rio Tinto, BHP Group and Anglo American fell between 2.4 per cent and 4.4 per cent, weighing on the commodity-heavy FTSE 100.

Investors will closely watch a European Central Bank meeting later this week to see if policymakers have decided to step up the pace of emergency bond purchases to calm skittish markets.

“For the ECB, this will provide a challenging environment, with policymakers in Frankfurt both unwilling and unable to match the Federal Reserve’s dovishness,” said Stephen Innes, chief global market strategist at Axi.

Meanwhile, data showed German exports unexpectedly rose in January buoyed by robust trade with China.

Among other stocks, British insurer and asset manager M&G Plc gained 4.7 per cent after it posted better-than expected 2020 operating profit in its first full year as a standalone company.

German automotive parts maker Continental AG fell 8.0 per cent after it forecast 2021 outlook below expectations.

North America

US stocks rallied on Tuesday, with the Nasdaq gaining about 4 per cent to recoup heavy losses from the previous session as US bond yields retreated and investors scooped up battered technology stocks.

Tesla Inc jumped the most in almost a year, while Amazon.com Inc and Microsoft Corp posted the biggest single-day gains in several weeks. The tech stars suffered sharp losses in recent weeks as rising yields raised concerns over their high valuations.

News that a US$1.9 trillion coronavirus relief package was nearing final approval sparked a spike in yields on Monday, pushing the tech-heavy Nasdaq to end more than 10 per cent below its 12 February closing high, confirming a correction for the index.

US 10-year Treasury note yields eased to as low as 1.523 per cent after hovering near 13-month highs of 1.613 per cent on Monday. Longer-dated yields have jumped over the last month as investors price in a faster rebound and higher inflation that expected at the start of the year.

The market is adjusting to the new level in interest rates, said Kristina Hooper, chief global market strategist at Invesco in New York.

Companies whose products and services are in demand when the economy is doing well, known as cyclicals, and small-cap stocks will outperform this year, she said. Tech will end the year higher but not be the leader as it was in the past year’s rally.

“Today the 10-year is down a bit, and that takes pressure off valuations, so tech is performing well,” Hooper said. “The market is just about getting comfortable at this level of rates.”

Rising rates disproportionately hurt high-growth tech companies because they are valued on earnings expected years into the future rather than profits earned in the short term.

“Potential headwind for the market is (when) interest rates rise further from this point over the short period ... since they have risen too fast in too little time,” said Michael Sheldon, chief investment officer at RDM Financial in Westport, Connecticut.

The Dow Jones Industrial Average rose 0.09 per cent to end at 31,832.08 points, while the S&P 500 gained 1.42 per cent to 3,875.47. The Nasdaq Composite climbed 3.69 per cent to 13,073.83.

The rise in Treasury yields has accelerated a rotation from “stay-at-home” winners to stocks primed to benefit from the economy’s reopening, setting the blue-chip Dow on pace to end at a record high on Tuesday.

While the Russell 2000 growth index jumped more than 3.6 per cent on Tuesday, compared to less than a 0.5 per cent rise in Russell 2000 value index, it has sharply underperformed its value counterpart since the start of the month.

Shares of Tesla rebounded from a deep sell-off that pushed shares down 37 per cent from its peak in January to Monday. It was the largest percentage gainer on both the S&P and the Nasdaq 100.

The global economic outlook has brightened as vaccine rollouts gain speed and the United States launches a massive new stimulus package, the Organization for Economic Co-operation and Development said, hiking its 2021 growth forecasts.

The Democrat-controlled US House of Representatives will take up the relief bill on Wednesday, with the chamber’s expected approval leading to President Joe Biden’s signing the legislation into law later this week.

The bank index fell after vaulting to a new 14-year peak. Economy-linked financials, materials and industrials hovered near record highs.

GameStop also rallied more than 20 per cent, building on Monday’s rise of over 40 per cent on the video retailer’s e-commerce strategy and speculation that small investors will pour stimulus checks into markets.

With Reuters

is senior editor for Morningstar Australia

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