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Global Market Report - 16 March

Lex Hall  |  16 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to edge higher following record highs on Wall Street as investors cheered concrete signs of recovery. 

The Australian SPI 200 futures contract was up 9 points, or 0.1 per cent, at 6,787 points at 8.30am Sydney time on Tuesday, suggesting a positive start to trading.

The S&P 500 and Dow Jones Industrial Average closed at record highs on Monday, as investors eyed an economic recovery from the coronavirus and awaited cues from the Federal Reserve this week amid caution over rising borrowing costs.

The Dow Jones Industrial Average rose 0.53 per cent to end at 32,953.46 points, while the S&P 500 gained 0.65 per cent to 3,968.94. The Nasdaq Composite climbed 1.05 per cent to 13,459.71. It remains down almost 5 per cent from its 12 February record high close.

Locally, more than $12 billion in accelerated personal income tax cuts are expected to flow through to households over the next seven months as the government moves from wage subsidies to stimulus to pump-prime the economy when JobKeeper payments cease, The Australian reports.

Shares have closed slightly higher on the Australian market, despite losses in the first few hours' of trading.

The S&P/ASX200 benchmark index closed higher by 6.2 points, or 0.09 per cent, to 6,773 on Monday.

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The All Ordinaries closed higher by 4.5 points, or 0.06 per cent, at 7,019.1.

The top sector was health, up 1.08 per cent.

The materials sector proved a drag, down 0.61 per cent, following a drop in iron ore prices.

Gold was up 0.1 per cent at $US1,729.00 an ounce; Brent oil was down 0.7 per cent to $US68.73 a barrel; Iron ore was down 1.3 per cent to $US163.33 a tonne.

Meanwhile, the Australian dollar was buying 77.51 US cents at 8.30am, up from 77.22 US cents at Monday's close.

Asia

China stocks fell on Monday, weighed down by heavy losses in high-flying consumer, healthcare and new energy stocks as policy tightening fears persisted.

The CSI300 index fell 1.7 per cent to 5,061.66 points at the end of the morning session, while the Shanghai Composite Index lost 0.6 per cent, to 3,432.01 points.

In Hong Kong, the Hang Seng index added 0.6 per cent, to 28,907.15 points, while the Hong Kong China Enterprises Index gained 0.4 per cent, to 11,221.61.

Japanese shares inched higher on Monday as optimism around the passage of a massive US stimulus package boosted cyclical stocks, although declines in SoftBank Group and other tech companies limited gains.

The Nikkei share average edged up 0.17 per cent to close at 29,766.97, while the broader Topix gained 0.91 per cent to close at 1,968.73.

Europe

European stocks ended flat on Monday, with declines led by financial and mining stocks, while gains in betting firm Flutter Entertainment and optimism about a strong economic rebound helped limit losses.

The pan-European STOXX 600 index was flat, inching closer to a record peak set last year, with travel and leisure, automakers and food & beverage sectors among the top gainers.

Basic resources and energy stocks fell 1.5 per cent each, while financials dropped 1 per cent.

Flutter jumped 6.8 per cent to the top of UK’s FTSE 100 index after the betting group said it was considering listing a small shareholding of its US FanDuel business.

Danone gained 2.9 per cent after the company’s board ousted chairman and chief executive Emmanuel Faber due to growing pressure from shareholders. Its stock was on course to post its biggest percentage gain in more than four months.

The STOXX 600 index is 2.6 per cent away from its all-time high, but trading has been volatile on worries that a rise in inflation could pressure central banks to put a lid on easy money, which is vital for economic recovery.

Rising bond yields have weighed on highly valued growth sectors such as technology, while driving gains in economically sensitive pockets in the market like banks, energy and automakers.

“It is like the markets have remembered to be happy about economic recovery again,” said Russ Mould, investment director at AJ Bell.

“For a time the focus was so fixed on accompanying inflation risks, the upside from a rebound in the economy as countries reopen was lost ... and those concerns over rising prices haven’t disappeared entirely though.”

Meanwhile, China’s economy continued to recover as data showed a surge in factory and retail sector activity in the first two months of the year, beating expectations.

Investors are now awaiting the US Federal Reserve meeting later this week for direction on monetary policy.

Among other stocks, Milan-listed shares of carmaker Stellantis gained 2.1 per cent after Deutsche Bank started coverage with a “buy” rating.

German used-car retailer Auto1 rose 0.8 per cent after brokerages boosted their ratings on the company a month after it raised 1.83 billion euros ($2.82 billion) in its initial public offering.

Swiss drugmaker Roche gained 2.1 per cent after it said it would buy GenMark Diagnostics, a US-based maker of molecular diagnostic tests, in a US$1.8 billion deal.

North America

The S&P 500 and Dow Jones Industrial Average closed at record highs on Monday, as investors eyed an economic recovery from the coronavirus and awaited cues from the Federal Reserve this week amid caution over rising borrowing costs.

In a concrete sign that the worst of the damage from the coronavirus pandemic may be over for the airline industry, Delta Air Lines, Southwest Airlines and JetBlue Airways said leisure bookings were rising.

Gains in the major indexes accelerated near the end of the trading session.

The S&P 1500 airlines index jumped over 4 per cent to a one-year high, while other travel-related stocks, including Carnival Corp, Wynn Resorts and MGM Resorts jumped between 2 per cent and 5 per cent.

Nine of the 11 major S&P sector indexes rose, led by utilities and real estate, each up more than 1 per cent.

It was the Dow’s sixth straight record high close in a recent surge fueled by mass vaccinations and congressional approval of a US$1.9 trillion ($2.5 trillion) aid bill. Expectations of a recovery accelerated demand for stocks expected to outperform as the economy reopens, such as banks, energy, materials companies.

On Monday, the Russell growth index outperformed the Russell value index in a modest reversal of investors’ recent trend away from technology and other high-growth stocks.

“With the vaccine positive news and the stimulus, we think there will continue to be a fair amount of rotation out of the stay-at-home stocks,” said Greg Bassuk, CEO of AXS Investments. “We are bullish on financial services and energy coming out of the pandemic.”

The S&P 500 has gained almost 6 per cent in 2021, while the Dow has added nearly 8 per cent.

At the end of Fed’s two-day meeting on Wednesday, policymakers are expected to forecast that the US economy will grow in 2021 at its fastest rate in decades while reiterating their dovish stance for the foreseeable future.

The yield on benchmark 10-year Treasuries ticked lower to 1.60 per cent, below its 13-month peak of 1.64 per cent on Friday. Wall Street has been roiled in recent weeks by a spike in longer-dated US bond yields due to fears of an increase in inflation.

The Dow Jones Industrial Average rose 0.53 per cent to end at 32,953.46 points, while the S&P 500 gained 0.65 per cent to 3,968.94. The Nasdaq Composite climbed 1.05 per cent to 13,459.71. It remains down almost 5 per cent from its 12 February record high close.

Volume on US exchanges was 12.5 billion shares, compared with the 14.5 billion average for the full session over the last 20 trading days.

Tesla rose about 2 per cent after the company dubbed chief executive Elon Musk “Technoking of Tesla” in a formal regulatory filing.

Eli Lilly and Co shares slumped 9.1 per cent after a mid-stage trial testing its experimental Alzheimer’s drug led to “mixed” results, reducing the chances for the drug’s accelerated approval, according to analysts.

With Reuters

is senior editor for Morningstar Australia

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