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Global Market Report - 16 June

Lex Hall  |  16 Jun 2020Text size  Decrease  Increase  |  
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Australia

The ASX is set for big early gains following Wall Street's enthusiasm over the Federal Reserve's plan to buy individual corporate bonds to help prop up the economy.

The local SPI 200 futures contract was higher by 141 points, or 2.46 per cent, to 5876.0 at 8am Sydney time on Tuesday.

The Federal Reserve's purchases will be part of its $US1 trillion ($1.5 trillion) bond-buying program to keep lending markets running smoothly, which allows big employers to easily access cash.

They are also the latest reminder the US central bank is doing everything it can to support markets during the coronavirus pandemic, analysts say.

The S&P 500 rose 25.28 points to finish at 3,066.59—9.4 per cent below its record set in February.

The Dow Jones Industrial Average gained 157.62 points, or 0.6 per cent, to finish at 25,763.16. The Nasdaq composite added 137.21, or 1.4 per cent, to 9,726.02.

In Australia on Tuesday, the Reserve Bank's June board meeting minutes will be published.

Economists will be looking for any comments about the Aussie dollar's recent surge and the expected timing of economic recovery.

NSW Treasurer Dominic Perrottet is expected to tell Australia's most populous state its economy will shrink by 10 per cent this financial year due to the coronavirus crisis.

Unemployment in the state is tipped to reach 7.5 per cent.

The Australian dollar was buying 69.19 US cents at 8am, higher from 67.88 US cents at the close of trade on Monday.

Asia

China’s main Shanghai Composite index closed down 1.02 per cent at 2,890.03 points, while the blue-chip CSI300 index ended down 1.2 per cent.

Hong Kong stocks dropped on Monday, in line with broader Asia, as growing concerns about a new wave of coronavirus infections prompted a selloff in equities.

At the close of trade, the Hang Seng index was down 524.43 points, or 2.16 per cent, at 23,776.95. The Hang Seng China Enterprises index fell 1.8 per cent to 9,655.83.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 2.24 per cent, while Japan’s Nikkei index closed down 3.47 per cent.

Europe

European shares closed lower on Monday on concerns of a second wave of coronavirus infections after Beijing reported a record number of new cases.

The pan-European STOXX 600 fell 0.3 per cent, slipping further from its 5.7 per cent fall last week but losses moderated towards the close, with analysts pointing to investors booking some profits after a recent rally.

Major European indexes had touched three-month highs earlier in the month after monetary support from the European Central Bank and optimism over the gradual reopening of economies from coronavirus-led lockdown.

Global stock markets also began the week on a downbeat note as the outbreak in Beijing, which has been traced to a wholesale food market, revived fears of the economic damage from the health crisis.

Reuters reported BlackRock has pumped about 16 billion euros ($26 billion) into 810 European companies since the end of January, more than half of them in distress due to the coronavirus pandemic.

Miners as well as travel and leisure stocks were among the worst performers of the day.

BP fell 2.2 per cent as it said it would incur an up to $17.5 billion writedown in the value of its assets after lowering its long-term oil and gas price outlook in expectation of an accelerated transition away from fossil fuels.

Swiss sensor maker Sensirion jumped 22.7 per cent after lifting its 2020 outlook as sales of gas sensors for medical ventilators needed to treat COVID-19 patients surged.

H&M reported a sharp but slightly smaller-than-expected drop in second-quarter sales as measures to slow the COVID-19 pandemic hit retailers. Shares of the world’s second-biggest fashion retailer edged 0.4 per cent higher.

Meanwhile, European countries eased some border controls on Monday after coronavirus lockdowns, although Spain kept its borders shut.

North America

Wall Street closed higher on Monday following an announcement by the US Federal Reserve regarding its corporate bond purchasing program that boosted investor confidence, which had been wavering amid a spike in new COVID-19 cases.

All three major US stock indexes reversed losses in afternoon trading, following the Fed’s decision to apply an indexing approach to its secondary market corporate credit facility to create a more diversified portfolio.

A flood of liquidity in the form of fiscal and economic stimulus, along with uneven but steady re-openings of state and local economies, sparked a remarkable rally in the stock market since its late-March trough.

Gains were led by cyclical stocks, with S&P 500 financials enjoying the day’s biggest percentage gains.

The S&P 500 Banking index rose 1.6 per cent.

But surging new cases of COVID-19 in China, where the pandemic originated, prompted the reintroduction of containment measures, and record hospitalisations in several US states dampened investor risk appetite.

On the flipside, an uptick in China’s factory output and a much better-than-expected Empire State manufacturing report gave evidence that the pandemic-hobbled global economy was on the road to recovery.

Earlier, the US Federal Reserve announced it had opened registration for its Main Street Lending program to help businesses weather the storm of mandated lockdowns.

Last week, the central bank provided its first pandemic era outlook, and market participants will be closely following Fed chair Jerome Powell’s testimony this week before congress for details on the central bank’s sombre economic projections.

The Dow Jones Industrial Average rose 157.62 points, or 0.62 per cent, to 25,763.16, the S&P 500 gained 25.28 points, or 0.83 per cent, to 3,066.59 and the Nasdaq Composite added 137.22 points, or 1.43 per cent, to 9,726.02.

All 11 major sectors of the S&P 500 closed in the black, led by financials and consumer staples.

Drugmaker Moderna Inc gained 7.4 per cent following a report that Israel is in advanced talks to buy its coronavirus vaccine.

is content editor for Morningstar Australia

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