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Global Market Report - 15 July

Lex Hall  |  15 Jul 2020Text size  Decrease  Increase  |  
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Australia

Australia's share market is tipped to open higher after energy and materials stocks helped Wall Street close higher.

The Australian SPI 200 futures contract was higher by 28.0 points, or 0.47 per cent, to 5941.0 points at 8am Sydney time on Wednesday.

Overnight, US markets ended higher as investors bought energy and materials stocks and looked beyond a recent surge in coronavirus cases.

The S&P 500 energy, materials, industrial, health and consumer staples indices all jumped.

However, the S&P's banks index dropped as three major lenders set aside $US28 billion to cover potential losses on loans to borrowers hurt by the pandemic.

The Dow Jones Industrial Average rose 556.79 points, or 2.13 per cent, to 26,642.59, the S&P 500 gained 42.37 points, or 1.34 per cent, to 3,197.52 and the Nasdaq Composite added 97.73 points, or 0.94 per cent, to 10,488.58.

In Australia today, investors will be watching for any news that a COVID-19 cluster has spread in Sydney. The outbreak, first detected at a pub in Sydney's southwest, has been found to have infected 30 people and tracing continues.

Melbourne is in the early stages of a six-week lockdown following community transmission of the virus, which has blunted investors' optimism.

The Australian dollar meanwhile was buying 69.77 US cents at 8am, higher from 69.54 US cents at the close of trade on Tuesday.

Asia

China shares closed lower on Tuesday as investors consolidated their positions from a recent bull run, and as uncertainty over China’s economic outlook and relationship with the US weighed despite encouraging trade data.

At the close, the Shanghai Composite index was down 0.83 per cent at 3,414.62. The index trimmed losses that had pushed it down more than 2 per cent in afternoon trade. It has gained 14.4 per cent this month.

Hong Kong shares ended lower on Tuesday, as renewed US-China tensions and fresh coronavirus restrictions in the city and overseas due to a rising number of cases dented hopes of a swift global economic recovery.

Hong Kong will tighten social distancing measures again from Wednesday as the Asian financial hub posted a third wave of coronavirus infections. 

Washington on Monday rejected China’s disputed claims to offshore resources in the South China Sea, and China announced sanctions against US officials and entities in retaliation for US sanctions over alleged human rights abuses against the Uighur Muslim minority. 

At the close of trade, the Hang Seng index was down 294.23 points or 1.14 per cent at 25,477.89. The Hang Seng China Enterprises index fell 1.61 per cent to 10,405.27.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1 per cent, while Japan’s Nikkei index closed down 0.87 per cent.

Europe

European stocks were hit by a selloff in technology shares on Tuesday, as US peers slumped on fears of new coronavirus restrictions, while London blue-chips outperformed on a boost for the telecoms and energy sectors.

The pan-European STOXX 600 index fell 0.8 per cent after two days of gains, with technology stocks posting their biggest drop in over a month, down 2.6 per cent.

Shares in SAP SE, ASML Holding, Prosus and Infineon Technologies fell between 2.6 per cent and 5 per cent, tracking continued declines in US tech majors on worries that another lockdown in California to contain a surge of coronavirus infections may slow a US economic recovery.

Globally, a Reuters tally showed the number of coronavirus infections hit 13 million on Monday, climbing by a million in just five days.

Travel & leisure stocks, one of the pandemic’s worst casualties, fell 2.7 per cent for the worst session in three weeks.

London's FTSE 100 cut losses to end slightly higher as oil stocks cheered recovering crude prices. BP rose 2.6 per cent.

Sources said BP delivered 3 million barrels of Iraqi oil to the Shanghai International Energy Exchange this month, becoming the first major global trader to make a physical delivery since China launched the futures market in 2018.

Telecom operators BT Group and Vodafone rose after Prime Minister Boris Johnson ordered equipment from Chinese telecom equipment maker Huawei be banned from Britain’s 5G network by 2027.

Meanwhile, data on Tuesday showed euro zone industry output recovered from record declines, but was lower than expected. Separately, Germany’s ZEW research institute, said the outlook for Europe’s largest economy remains largely unchanged in July versus the previous month.

North America

Wall Street surged on Tuesday, with the Dow Jones Industrial Average ending more than 2 per cent higher as investors bought energy and materials stocks and looked beyond a recent rise in coronavirus cases.

The S&P 500 energy, materials and industrial indexes jumped more than 2 per cent, while health, technology and consumer staples each rose more than 1 per cent.

Amazon slipped 0.6 per cent. It and other recently strong performing technology and growth stocks, including Facebook and Netflix, recovered from deeper losses, giving the Nasdaq a last minute spurt.

JPMorgan Chase & Co, the largest US lender, rose 0.6 per cent after it posted a smaller-than-expected 51 per cent drop in second-quarter profit.

Wells Fargo & Co tumbled 4.6 per cent after booking a quarterly loss for the first time since the 2008 financial crisis. Citigroup Inc dropped 3.9 per cent after it reported a steep fall in quarterly profit.

The S&P 500 banks index dropped 1.2 per cent as the three banks set aside a combined $28 billion to cover potential losses on loans to borrowers hurt by the coronavirus pandemic.

Wall Street has reclaimed most of its coronavirus-driven losses since March as a raft of monetary and fiscal stimulus and upbeat economic data raised hopes of a swift post-pandemic recovery.

But a recent record surge in COVID-19 cases and new business restrictions, particularly in California, has again raised uncertainty about how it may take for the economy to recover.

Alabama, Florida and North Carolina reported record daily increases in COVID-19 deaths on Tuesday.

Following a drop of more than 2 per cent in the Nasdaq on Monday, some investors had worried that Wall Street’s recent rally might be ending. With Tuesday’s quick rebound, the Nasdaq has gone two months without suffering two days in a row of declines.

Investors are bracing for what could be the sharpest drop in quarterly earnings for S&P 500 firms since the 2008 financial crisis, according to Refinitiv IBES data.

The Dow Jones Industrial Average surged 2.13 per cent to end at 26,642.59 points, while the S&P 500 gained 1.34 per cent to 3,197.52.

The Nasdaq Composite added 0.94 per cent to 10,488.58.

Delta Air Lines Inc dropped 2.65 per cent after it warned it will be more than two years before the industry sees a sustainable recovery from the “staggering” impact of the coronavirus pandemic, with demand largely tracking the curve of infections in different places.

Moderna Inc jumped 4.5 per cent after it said it plans to start a late-stage clinical trial for its COVID-19 vaccine candidate on or around 27 July.

is content editor for Morningstar Australia

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