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Global Market Report - 13 July

Lex Hall  |  13 Jul 2020Text size  Decrease  Increase  |  
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Australia

Shares are expected to rise early on the Australian market after encouraging findings about a coronavirus drug helped US markets finish last week higher.

The Australian SPI 200 futures contract was higher by 95.0 points, or 1.62 per cent, to 5,971.0 points at 8am Sydney time on Monday.

The likely spritely start will come after Wall Street on Friday was buoyed by confirmation that Gilead Science's drug remdesivir could reduce the risk of death in severely sick coronavirus patients.

Australia's Therapeutic Goods Administration has provisionally approved the drug for use.

The data was contained in a late-stage study and helped deflect US investors' attention from a record rise in coronavirus cases in that country.

That helped the Dow Jones Industrial Average climb 1.4 per cent to 26,075.30, the Nasdaq composite added 0.7 per cent to 10,617.44, while the S&P 500 rose 1.05 per cent, to 3,185.04.

In Australia, investors will be keeping a close watch on a COVID-19 outbreak in Sydney's southwest. Nine cases have been confirmed from the Casula suburb, most of these from a hotel.

Melbourne remains in the early stages of a six-week lockdown after outbreaks spread rapidly.

In the week ahead, Chinese economic data is due for release on Thursday and is expected to show a significant bounce in GDP for the June quarter, year-on-year.

AMP Capital chief economist Shane Oliver said this would strongly support demand for Australian commodities.

On the domestic front, jobs data for June will also be published on Thursday. The figures will provide more understanding as to how the economy is responding to the pandemic.

The Australian dollar was buying 69.53 US cents at 8am, higher from 69.30 US cents at the close of trade on Friday.

Asia

Mainland China shares on Friday ended lower for the first time since 29 June after the country's state funds announced stake cuts in companies, a move that comes following a torrid bull run in the stock market, and on signs of renewed Sino-US tensions.

The bull run, encouraged by state media, has been fuelled by signs of an early economic recovery for China from the coronavirus, capital market reforms and accelerating inflows of foreign funds.

At the close, the Shanghai Composite index was down 1.95 per cent at 3,383.32, while the blue-chip CSI300 index was down 1.81 per cent. The start-up board ChiNext Composite index was higher by 0.754 per cent.

Hong Kong stocks fell on Friday, tracking Chinese equities.

Record-breaking rises in coronavirus cases across several US states further dented sentiment, stoking concerns that lockdown measures may be re-imposed, derailing a nascent economic recovery.

At the close of trade, the Hang Seng index was down 482.75 points, or 1.84 per cent, at 25,727.41. The Hang Seng China Enterprises index fell 2.23 per cent to 10,541.26.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 1.24 per cent, while Japan's Nikkei index closed down 1.06 per cent.

Europe

European shares extended losses for a fourth straight session on Friday on worries that an economic recovery may fizzle out as coronavirus cases continue to rise globally.

The pan-European STOXX 600 index slipped 0.4 per cent by 0714 GMT, with energy firms sliding 1.4 per cent as oil prices fell on worries of fuel demand.

Other growth-sensitive sectors such as miners, insurers and banks fell between 0.8 per cent and 1 per cent.

The STOXX 600 was headed for a small weekly loss as an early bump from a rally in Chinese equities was offset by fears of more business shutdowns, particularly in the United States where more than 60,500 new COVID-19 infections were reported on Thursday.

Among individual movers, Swiss duty free operator Dufry fell 5.3 per cent after announcing cuts to personnel expenses by 20 per cent to 30 per cent this year as it tackles a plunge in sales caused by the pandemic.

German genetic testing firm Qiagen rose 3.1 per cent after it reported a 68 per cent rise in quarterly earnings amid strong demand for products used in coronavirus testing.

North America

US stocks rose on Friday as a positive analysis on Gilead Sciences Inc’s antiviral drug to treat COVID-19 helped to soothe investor worries over a record rise in coronavirus cases in the US, and as financial shares surged.

The Nasdaq posted its sixth record closing high in seven days, but the index underperformed both the Dow and S&P 500, in a reversal of the recent trend.

The S&P 500 financials index rose 3.5 per cent, leading sector gains and giving the S&P 500 its biggest boost. Bank of America Corp shares increased 5.5 per cent, Citigroup Inc jumped 6.5 per cent and JPMorgan Chase & Co climbed 5.5 per cent ahead of their financial results next week, which will mark the onset of the second-quarter earnings season.

The US registered the largest single-day increase in new COVID-19 infections globally for the second day in a row on Thursday, forcing Americans to take new precautions. Several states have already backpedalled on reopening plans.

Gilead’s remdesivir significantly improved clinical recovery and reduced the risk of death in COVID-19 patients, additional data from a late-stage study showed. The drugmaker’s shares climbed 2.2 per cent as it said the finding required confirmation in clinical trials.

The Dow Jones Industrial Average rose 369.21 points, or 1.44 per cent, to 26,075.3, the S&P 500 gained 32.99 points, or 1.05 per cent, to 3,185.04 and the Nasdaq Composite added 69.69 points, or 0.66 per cent, to 10,617.44.

For the week, the Dow rose 1 per cent, the S&P 500 gained 1.8 per cent and the Nasdaq jumped 4 per cent. The Cboe Volatility index ended down on the day and fell 0.39 points for the week.

Overall profits for S&P 500 companies are expected to have fallen more than 40 per cent in the second quarter, which would be the biggest quarterly profit decline since the financial crisis, according to IBES data from Refinitiv.

The first coronavirus cases in the US were identified in January and within weeks much of the economy was shut down to slow the spread, throwing millions of Americans into unemployment. Companies across a range of industries have been dealing with the aftermath ever since.

The S&P 500 is up more than 40 per cent from its March 23 bottom, thanks in part to economic data that has pointed to a revival in business activity in June.

Carnival Corp jumped 10.8 per cent after the cruise line operator said it was planning to resume operations in a phased manner and would operate with a smaller fleet on its return.

Netflix rose 8.1 per cent after Goldman Sachs hiked its price target on the video streaming service’s shares.

is content editor for Morningstar Australia

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