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Global Market Report - 15 February

Lex Hall  |  15 Feb 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following a record on the S&P 500 last week and a sell-off in tech stocks as fiscal aid looms. 

The Australian SPI 200 futures contract was up 37 points, or 0.55 per cent, at 6,780 points at 8.30am Sydney time on Monday, suggesting a positive start to trading.

The S&P 500 and Nasdaq set record closing highs on Friday as investors bought energy, financial and materials shares and sold big tech stocks in anticipation of new fiscal aid from Washington to help the US economy recover.

The Dow Jones Industrial Average rose 27.7 points, or 0.09 per cent, to 31,458.4, the S&P 500 gained 18.45 points, or 0.47 per cent, to 3,934.83 and the Nasdaq Composite added 69.70 points, or 0.5 per cent, to 14,095.47.

Locally, welfare payments could be streamlined into a single payment for unemployed Australians receiving up to a dozen other supplements or subsidies under a proposal being considered by the Morrison government as it maps out options for a permanent rise in the JobSeeker rate, The Australian reports.

The S&P/ASX200 benchmark index closed lower by 43.4 points, or 0.63 per cent, to 6,806.7 on Friday.

The All Ordinaries closed down by 40.8 points, or 0.57 per cent, at 7,081.3.

The ASX indices were lower early and continued their descent after the lockdown decision, in response to an outbreak at the Holiday Inn at Tullamarine Airport.

Spot gold was down 0.1 per cent to $US1,824.23/oz; Brent crude was up 2.5 per cent to $US62.69 a barrel.

Meanwhile, the Australian dollar was buying 77.61 US cents at 8.30am, up from 77.48 US cents at Friday's close.

Asia

Chinese markets closed for Lunar New Year holidays.

Japan's benchmark Nikkei Stock Average climbed above 29,000 to its highest point in more than 30 years Monday, as investors welcomed positive earnings reports and progress around US stimulus talks.

The Nikkei index surged to levels not seen since August 1990, gaining over 600 points, or 2 per cent, to close at 29,388.

Europe

European shares reversed earlier losses to close higher on Friday, led by ASML and L’Oreal, although a dip in Volkswagen weighed on Germany’s main index.

The pan-European STOXX 600 index closed up 0.6 per cent at a three-week high for a second straight week of gains.

ASML Holding NV rose 3 per cent after the Dutch equipment maker said the chip shortages slowing car production were a symptom of a broader increase in demand.

The world’s biggest cosmetics group L’Oreal hit a three-month high after forecasting a strong rebound in makeup sales.

Germany’s DAX underperformed, ending flat as carmaker Volkswagen slipped 0.7 per cent after the company said deliveries slid in January.

Gains in Spain’s IBEX were capped after data showed consumer prices rising slightly below expectations in January.

ING Groep NV jumped 6.7 per cent after the largest Dutch bank reported better-than-expected quarterly pre-tax earnings of 1.05 billion euros ($1.64 billion).

Analysts expect growth in corporate earnings this year, driven by stimulus-induced liquidity, but are wary of next year as the measures may start to fade.

Market participants were hopeful that a proposed $1.9 trillion US stimulus bill would be passed soon by lawmakers, with a stalling recovery in the US labour market strengthening the case for it.

“We’re still not out of the woods...and the market is potentially overdue a reckoning,” said Connor Campbell, analyst at spreadbetter Spreadex.

“Once the (US stimulus) package has been implemented, it will be interesting to see how markets will behave, as they will no longer have this big thing to cling on to.”

The STOXX 600 is about 5 per cent away from its peak of February 2020 after rallying 50 per cent since a crash in March, aided by historic monetary and fiscal stimulus and the rollout of covid-19 vaccines.

“We believe a hospitalization rate low enough to enable sustainable reopening and economic recovery can be achieved by April in the US and by June in Europe,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Britain’s coronavirus-ravaged economy shrank 9.9 per cent in 2020, the biggest annual fall in output since modern records began, but it avoided heading back towards recession at the end of last year, data showed.

London’s FTSE 100 index erased early losses to rise 0.9 per cent with healthcare stocks in the lead.

North America

The S&P 500 and Nasdaq set record closing highs on Friday as investors bought energy, financial and materials shares and sold big tech stocks in anticipation of new fiscal aid from Washington to help the US economy recover.

The major indices traded in a tight range during the week in which investors rotated out of growth-oriented stocks that have dominated an almost year-long rally and bought cyclical and under-priced value stocks.

The S&P energy, financials and materials sectors rose on expectations they will benefit from a reopened economy, while heavyweights Apple Inc, Tesla Inc and Microsoft Corp were lower most of the session. All three closed higher in a late market surge.

Value and cyclicals outperform in a rising interest rate, higher-growth environment, which the US economy is on the cusp of entering, said Thomas Hayes, chairman and managing member of hedge fund Great Hill Capital LLC in New York.

“We’re under-estimating the lag effect of all the money in the system as more and more vaccinations are delivered and as more of the country reopens” from business shutdowns, he said.

“We are continuing this rotation that would be consistent with the new business cycle, and as (bond) yields go up, value and cyclicals will lead,” Hayes said.

The Cboe Volatility Index, Wall Street’s so-called fear gauge, closed below 20 for first time since February 2020.

A sharp drop in new covid-19 cases and hospitalizations in recent weeks have helped drive markets to new highs, though a near-term pullback could occur from the new coronavirus variants and potential snags in vaccine distributions.

The latest data showed US consumer sentiment unexpectedly fell in early February as households were still worried about the economy despite expectations for additional stimulus.

A Reuters poll showed the US economy is expected to reach pre-covid-19 levels within a year as the proposed US$1.9 trillion fiscal bill helps boost economic activity, but employment will likely take more than a year to fully recover.

US President Joe Biden turned to a bipartisan group of local officials for support on his US$1.9 trillion coronavirus relief plan to help millions of unemployed workers and for schools to reopen.

The Lipper data late on Thursday showed US-based stock funds attracted US$22.9 billion in the week to Wednesday, the largest weekly inflow since March 2008.

US stock markets will be closed on Monday for the Presidents Day holiday.

The S&P 500 set hit an all-time peak on Friday, while the Nasdaq and Dow did earlier in the week

The Dow Jones Industrial Average rose 27.7 points, or 0.09 per cent, to 31,458.4, the S&P 500 gained 18.45 points, or 0.47 per cent, to 3,934.83 and the Nasdaq Composite added 69.70 points, or 0.5 per cent, to 14,095.47.

Volume on US exchanges was 13.27 billion shares.

The small-cap index rose for the fifth week out of six full weeks this year. PayPal Holdings Inc rose 4.7 per cent after several brokerages raised their price targets following the payments company’s investor day call a day earlier. Walt Disney Co reported a surprise quarterly profit.

However, its shares fell 1.7 per cent from a record high after a more than 13 per cent run up to its results over the last two weeks. Dating app operator Bumble Inc jumped 7.3 per cent, a day after a stellar debut sent its shares up more than 75 per cent. Chief executive officer Whitney Wolfe Herd’s stake in the women-centric dating app operator was worth nearly US$2 billion.

With Reuters

is content editor for Morningstar Australia

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