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Global Market Report - 16 April

Lex Hall  |  16 Apr 2020Text size  Decrease  Increase  |  
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Australian shares are tipped for sharp early losses as global equities sour and a likely bleak unemployment figure looms.

The SPI200 futures contract was down 122 points, or 2.23 per cent, at 5,340.0 points at 8am Sydney time on Thursday, suggesting local stocks will follow Wall Street lower as concerns mount over the coronavirus fallout.

The Dow Jones Industrial Average fell 1.86 per cent to 23,504.35, the S&P 500 lost 2.20 per cent to 2,783.36, and the Nasdaq dropped 1.44 per cent, to 8,393.18 overnight as dismal economic data and first-quarter earnings reports sent investors scurrying.

The local jobless rate is tipped to rise from 5.1 to 5.4 per cent in figures due to be released by the Australian Bureau of Statistics at 11.30am.

Economists say the March jobs drop could be the tip of the iceberg as widespread COVID-19 shutdowns and social restrictions were not implemented until the second half of the month, meaning the April data will be worse again.

The IMF forecasts unemployment to rise to an average of 7.6 per cent in 2020 and 8.9 per cent in 2021.

Treasury has forecast the economic shock of the virus will see Australia's unemployment rate hit 10 per cent in the June quarter, leaving 1.4 million people out of work.

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Treasury said the rate could have tripled to 15 per cent were it not for the government's $130 billion wage subsidy scheme.

Oil and gold prices have fallen while copper also took a hit overnight.

The S&P/ASX200 benchmark index finished Wednesday down 21.4 points, or 0.39 per cent, to 5,466.7 points.

The Australian dollar was buying 63.23 US cents at 8am, up from 63.54 US cents at the close of markets on Wednesday.


China shares closed lower on Wednesday, as investor worries over an expected sharp drop in the country’s first-quarter economic growth offset a brief boost from a widely expected cut to medium-term lending rates.

At the close, the Shanghai Composite index was down 0.57 per cent at 2,811.174, extending losses of 0.15 per cent by midday.

The blue-chip CSI300 index was down 0.74 per cent, with its financial sector sub-index lower by 0.79 per cent, the consumer staples sector down 0.73 per cent, the real estate index down 1.63 per cent and the healthcare sub-index down 0.84 per cent.

Hong Kong’s benchmark share index ended lower on Wednesday as forecast of a deep recession this year by the International Monetary Fund outweighed monetary stimulus from China’s central bank.

At the close of trade, the Hang Seng index was down 290.06 points, or 1.19 per cent, at 24,145.34. The Hang Seng China Enterprises index fell 1.25 per cent to 9,724.7.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.08 per cent, while Japan’s Nikkei index closed down 0.45 per cent.


European shares closed firmly in the red on Wednesday, ending a five-day rally as the first batch of earnings reports underlined the business damage from the coronavirus pandemic, while energy stocks sank on worries of a plunge in oil demand.

Declines for Total, Royal Dutch Shell and BP sent the European energy index to its lowest point this month as oil prices were hit by forecasts of global demand crumbling to its worst levels in a quarter of a century.

The pan-European STOXX 600 index slipped 3.3 per cent, after having risen almost 8 per cent since 6 April on early signs the health crisis was ebbing and on hopes that sweeping lockdown measures would soon be lifted.

The benchmark index has recovered about 22 per cent since hitting an eight-year low in March, but is still down almost 26 per cent from a record high hit in mid-February, and analysts warned an uptick in coronavirus cases could spark another sell-off.

US majors JPMorgan Chase & Co and Johnson and Johnson kicked off the first-quarter earnings season on Tuesday with glum forecasts for 2020 as the pandemic crushed business activity and erased liquidity.

ASML Holding NV, a key European supplier to chipmakers such as Samsung and Intel, fell 3.2 per cent after reporting worse-than-expected earnings on Wednesday.

Dutch navigation and digital mapping company TomTom shed 4.9 per cent after saying it expected negative free cash flow this year and lower revenue from its automotive and consumer businesses.

Overall, analysts expect earnings for STOXX 600 firms to slide 22 per cent in the first quarter and 34.2 per cent in the second, deepening a corporate recession even as some economies consider lifting strict stay-at-home orders.

French shares fell 3.8 per cent as France became the fourth country to report more than 15,000 deaths due to the coronavirus after Italy, Spain and the US.

Britain's domestically focused mid-cap index slumped another 4.6 per cent on signs the country was heading for a longer lockdown and forecasts the economy could be facing its deepest recession in 300 years.

North America

US stocks fell on Wednesday as dismal economic data and first-quarter earnings reports compounded concerns over the extent of damage from the coronavirus outbreak.

Shares of Bank of America and Citigroup Inc dropped as they joined JPMorgan Chase & Co and Wells Fargo & Co in reporting a slump in first-quarter profits.

Also, Goldman Sachs Group Inc’s quarterly profit nearly halved, as it set aside more money to cover for corporate loans expected to go bust in the coming months.

In further evidence of economic damage from the coronavirus, US retail sales plunged 8.7 per cent in March, manufacturing output dropped by the most in over 74 years and a survey showed manufacturing activity in New York state plunged in April to its lowest in the series’ history.

The International Monetary Fund has predicted that this year the global economy would witness its sharpest slump since the 1930s.

US stocks have recovered from their March trough, boosted by a raft of US monetary and fiscal stimulus and on early signs that coronavirus cases were peaking in some hotspots. However, the S&P 500 is still down about 18 per cent from its 19 February record closing high.

The Dow Jones Industrial Average fell 445.41 points, or 1.86 per cent, to 23,504.35, the S&P 500 lost 62.7 points, or 2.20 per cent, to 2783.36 and the Nasdaq Composite dropped 122.56 points, or 1.44 per cent, to 8393.18.

J.C. Penney Co Inc shares dropped 27.3 per cent as sources said the retailer was exploring filing for bankruptcy protection after the virus outbreak upended its turnaround plans.

Shares of Citigroup and Bank of America were down more than 5 per cent each on the day, while Goldman’s stock ended nearly flat. “Loan loss reserves were greater than expected in the first quarter, and it sounds like it might continue into the second quarter. We saw it yesterday and got a confirmation of the trend today,” said Barclays analyst Jason Goldberg.

Goldman did better, he said, because “lending is a smaller component of their business.”

Analysts expect S&P 500 earnings to have fallen 12.8 per cent in the first quarter, according to IBES data from Refinitiv.

The biggest US health insurer UnitedHealth Group Inc rose 4.1 per cent as it maintained its 2020 profit outlook at a time when major companies have withdrawn forecasts due to the coronavirus pandemic.

The CBOE volatility index also climbed after closing Tuesday at its lowest level since 5 March.

is senior editor for Morningstar Australia

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