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Global Market Report - 14 July

Lex Hall  |  14 Jul 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are likely to drop in early trade after US markets finished lower following California's decision to extend closures of indoor venues to slow the spread of coronavirus.

The Australian SPI 200 futures contract was lower by 45.0 points, or 0.76 per cent, to 5,892.0 points at 8am Sydney time on Tuesday.

California, which accounts for 15 per cent of the US economy, contributed to the late turn in the markets.

Selling accelerated after its governor ordered a scaling back of the state's reopening, shutting bars and banning indoor restaurant dining statewide and closing churches, gyms and hair salons.

Also adding to nervousness in the market was the White House's decision to reject nearly all Chinese claims in the South China Sea.

The Dow Jones Industrial Average ended 0.04 per cent higher at 26,085.8 points, while the S&P 500 lost 0.94 per cent to 3,155.22. The Nasdaq Composite dropped 2.13 per cent, to 10,390.84.

Oil prices also slipped about 1 per cent after the World Health Organisation reported more than 230,000 new cases of coronavirus on Sunday, a one-day record.

US West Texas Intermediate (WTI) crude was at $US40.10 per barrel.

In Australia today, weekly jobs and wages data is due from the Australian Bureau of Statistics and will provide an update of how the economy is coping amid the pandemic.

Overseas travel data for June will also be published, which will likely be grim reading for workers in the travel industry.

The benchmark S&P/ASX200 index finished Monday up 59.3 points, or 0.98 per cent, at 5,977.5 points, while the All Ordinaries index gained 53 points, or 0.88 per cent, at 6,089.3.

The Australian dollar was buying 69.43 US cents at 8am, lower from 69.75 US cents at the close of trade on Monday.

Asia

China stocks firmed on Monday, with the tech-heavy start-up index hitting its highest level in more than 4½ years on hopes of earnings improvement.

At the close, the Shanghai Composite index was up 1.77 per cent at 3,443.29, while the blue-chip CSI300 index was up 2.1 per cent.

Hong Kong stocks ended higher on Monday, tracking other Asian markets, though gains were pared in the afternoon after Beijing announced sanctions against US officials and entities.

At the close of trade, the Hang Seng index was up 44.71 points, or 0.17 per cent, at 25,772.12. The Hang Seng China Enterprises index rose 0.33 per cent to 10,575.88.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.77 per cent, while Japan’s Nikkei index closed up 2.22 per cent.

Europe

European shares rose on Monday as progress on a possible COVID-19 vaccine, some upbeat earnings reports and stimulus talks fed into hopes of an economic recovery from the coronavirus-induced downturn.

The pan-European STOXX index rose 1 per cent, with miners gaining 1.7 per cent on optimism over China’s recovery and surging metal prices.

Other growth-oriented sectors such as travel & leisure, banks, technology stocks and oil & gas rose between 1.9 per cent and 1.4 per cent.

Two experimental coronavirus vaccines by German biotech firm BioNTech and US pharmaceutical giant Pfizer have received the US Food and Drug Administration’s “fast track” designation, the companies said on Monday.

Shares of BioNTech’s depository receipt on the Frankfurt exchange jumped 13.5 per cent.

This week also kicks off the US and European quarterly earnings season and includes a summit over the European Union recovery fund and a European Central Bank policy meeting.

Companies listed on the STOXX 600 are expected to report a 54 per cent drop in second-quarter profit, the worst ever reading for Europe, according to Refinitiv data.

Nordic bank DNB rose 9.9 per cent after an earnings beat, while private security company G4S gained 9.3 per cent on announcing that first-half profit would surpass expectations.

While the ECB is not expected to make a major move, European leaders will meet on 17–18 July to hammer out details on the 750 billion euro ($1.2 billion) recovery fund.

Financial markets have taken comfort from trillions of dollars in stimulus even as the World Health Organisation reported a record increase in global coronavirus cases on Sunday.

In other company news, Finnish valves maker Neles surged 37.6 per cent and hit a record high after Swedish industrial group Alfa Laval announced a recommended 1.73 billion euro ($1.96 billion) cash bid.

Meanwhile, Atlantia slumped 15.2 per cent after Italy’s prime minister dismissed the toll road operator’s bid to keep its lucrative toll road concession.

French video games group Ubisoft fell 5 per cent as it announced staff departures after a review in response to allegations of misconduct at the company.

North America

The S&P 500 and Nasdaq ended lower on Monday, pulled down by Amazon, Microsoft and other recent big-name leaders of Wall Street’s recent rally.

The S&P 500 dipped after briefly touching its highest level since 25 February. The index has rebounded over 40 per cent since mid-March, even as COVID-19 infections rose rapidly in Arizona, California and Texas and about 35 other states.

Stocks that outperformed in recent months, including Amazon, Microsoft, Nvidia and Facebook, ended down more than 2 per cent after gaining earlier in the day.

Selling accelerated after California Governor Gavin Newsom ordered a massive retrenchment of the state’s reopening, shutting bars and banning indoor restaurant dining statewide and closing churches, gyms and hair salons in hardest-hit counties.

Tesla dropped 3.1 per cent after surging 16 per cent earlier in the session. The electric car maker’s stock has been on a blistering rally over the past two weeks as investors bet the electric car maker could report a quarterly profit and potentially join the S&P 500.

Shares of German biotech firm BioNTech jumped over 10 per cent and Pfizer climbed 4 per cent as two of their experimental coronavirus vaccines received the US FDA’s “fast track” designation.

Merger news also perked up investors as chipmaker Analog Devices announced a $21 billion deal to buy rival Maxim Integrated Products, sending its stock 8 per cent higher. Analog shares fell 5.8 per cent.

PepsiCo Inc gained 0.3 per cent after it said it benefited from a surge in at-home consumption of salty snacks such as Fritos and Cheetos during lockdowns.

The Cboe Volatility Index, Wall Street’s fear gauge, closed at its highest level since 26 June. Its 4.9-point gain for the session was its largest since 11 June.

Investors are bracing for what could be the sharpest drop in quarterly earnings for S&P 500 firms since the financial crisis, according to IBES Refinitiv data. Results from big banks will be in focus this week.

The Dow Jones Industrial Average rose 0.04 per cent to end at 26,085.8 points, while the S&P 500 lost 0.94 per cent to 3,155.22.

The Nasdaq Composite dropped 2.13 per cent, to 10,390.84.

The S&P 500 technology index fell 2.12 per cent, leading declines.

Recent economic data has strengthened belief that the stimulus-pumped US economy is on the road to recovery, helping investors look past a recent spike in US infections.

is content editor for Morningstar Australia

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