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Global Market Report - 17 December

Lex Hall  |  17 Dec 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise after record gains on the tech-heavy Nasdaq as investors cheered economic stimulus and a pledge of lower rates for longer.

The Australian SPI 200 futures contract was up 22 points, or 0.3 per cent, to 6633 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

Wall Street rose on Wednesday, with the Nasdaq closing at record highs as investors awaited a potential fiscal economic stimulus package and after the Federal Reserve repeated a pledge to keep its benchmark interest rate near zero.

The Dow Jones Industrial Average fell 0.15 per cent to end at 30,154.93 points, while the S&P 500 gained 0.18 per cent to 3,701.26. The Nasdaq Composite climbed 0.5 per cent to 12,658.19.

Locally, the midyear budget update shows Australia’s economic resurgence has shaved $11.2 billion off the projected cost of JobKeeper payments, with 640,000 fewer people expected to need wage subsidy support in the final three months of the year ahead of the covid-19 welfare package ending in March, The Australian reports.

The S&P/ASX200 benchmark index closed higher by 47.9 points, or 0.72 per cent, to 6679.2 on Wednesday. The rise was the index's biggest gain since 1 December.

The All Ordinaries closed higher by 50 points, or 0.73 per cent, to 6916.7.

Gold was up 0.2 per cent at $US1856.71 an ounce; Brent oil was up 0.6 per cent to $US51.06 a barrel; Iron ore was up 0.9 per cent to $US156.45 a tonne.

Meanwhile, the Australian dollar was buying 75.64 US cents at 8.30am, up from 75.58 US cents at Wednesday’s close.

Asia

China’s main Shanghai Composite index closed flat at 3,366.98 points, while the blue-chip CSI300 index ended up 0.18 per cent, with consumer stocks lifted by data-fuelled confidence on economic recovery.

Hong Kong shares edged up on Wednesday, with tech and healthcare stocks leading the gains, while the index tracked global equities higher on positive vaccine news and stimulus hopes.

At the close of trade, the Hang Seng index was up 253.00 points or 0.97 per cent at 26,460.29.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.26 per cent, while Japan’s Nikkei index closed up 0.26 per cent.

Europe

European shares closed higher on Wednesday on upbeat regional business activity data, rising hopes of a Brexit trade deal and the possible roll-out of a covid-19 vaccine on the continent before the new year.

Rallying for a third straight session, the pan-European STOXX 600 index closed 0.8 per cent higher, having touched a near 10-month peak during the session.

Flash PMIs for December showed the euro zone economy far exceeded expectations, with manufacturers reporting strong growth fuelled by rising exports and a booming performance from Germany. However, the region’s largest economy headed into a stricter lockdown on Wednesday.

“The resilience of the economy ahead of stricter measures is an important positive take away in very uncertain times,” said Bert Colijn, senior economist, eurozone at ING.

Colijn warned that “the worst could still be to come” as new curbs take effect.

But hopes for an end to the pandemic buoyed sentiment, as a European Commission official said the EU could give final approval for the Pfizer-BioNTech covid-19 vaccine as early as 23 December The bloc’s medical regulator has moved forward its meeting following approvals in Britain and the United States.

On the Brexit front, continuing talks saw markets hold out hope for a deal, but the two sides still struggled to compromise on fishing, Ireland’s state broadcaster RTE said.

London’s FTSE 100 weathered a higher pound to rise 0.9 per cent and break a three session losing run.

While most sectors in Europe rose, banks slid 1.1 per cent, reversing some of the previous two sessions’ almost 3 per cent gain. Spain’s lender-heavy IBEX ended in the red.

Auto stocks hit a near three-month high with German tire maker Continental surging 2.9 per cent after it sharply raised its medium term forecast for earnings before interest and taxes.

The German DAX stock index posted its best session in three months, up 1.5 per cent.

Investors will also be watching the US Federal Reserve’s policy decision, with markets focused on its bond-buying plans and any details on how the vaccine roll-out has changed the economic outlook. The decision is due at 2 p.m. ET (1900 GMT).

Among individual stocks, Biotech firm Galapagos NV skidded to the bottom of the STOXX 600 after its partner for experimental rheumatoid arthritis treatment, Gilead Sciences, decided not to pursue US approval for the drug.

Topping the index was a 23.3 per cent jump in Altice Europe after its founder increased an offer to take the telecoms group private by 30 per cent.

North America

Wall Street rose on Wednesday, with the Nasdaq closing at record highs as investors awaited a potential fiscal economic stimulus package and after the Federal Reserve repeated a pledge to keep its benchmark interest rate near zero.

Stocks traded in positive territory after the Fed promised to keep funnelling cash into financial markets to fight the recession, even as policymakers’ outlook for next year improved following the initial rollout of a coronavirus vaccine.

“To the extent that we are seeing a slight rise post the meeting, it likely reflects continued confidence on the part of investors who believe low rates for an extended period provides support to stock prices even at these elevated levels,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

Gains in tech stocks, many of which have benefited from changes in consumer habits because of the pandemic, pushed the Nasdaq to a record high. Microsoft surged.

Investor sentiment has oscillated in recent sessions between optimism about the early distribution of a covid-19 vaccine and worries about record infection rates in the US. Despite the pandemic, the S&P 500 has climbed over 14 per cent in 2020.

US congressional negotiators were “closing in on” a US$900 billion ($1.2 trillion) covid-19 aid bill that will include US$600 to US$700 stimulus cheques and extended unemployment benefits, and Congress could start voting within 24 hours, politicians and aides said.

With the market’s focus on aid to consumers and business to combat the economic fallout from the virus, the “news of the day” was a possible deal in Washington, said William Northey, senior investment director at US Bank Wealth Management in Minneapolis.

“That appears to be coming closer to a reality,” he said.

Data showed US retail sales fell 1.1 per cent last month from October, as new coronavirus infections and decreasing household income weighed on spending.

The S&P 500 airlines index dropped after JPMorgan issued multiple downgrades in the sector, citing valuations.

Southwest Airlines Co fell after flagging a higher cash burn in the fourth quarter, as well as increased trip cancellations in December.

Alphabet edged down after Texas Attorney-General Ken Paxton said he would file a multi-state lawsuit against the parent company of Google.

The Dow Jones Industrial Average fell 0.15 per cent to end at 30,154.93 points, while the S&P 500 gained 0.18 per cent to 3,701.26. The Nasdaq Composite climbed 0.5 per cent to 12,658.19.

Twitter Inc rose after JPMorgan upgraded the stock to “overweight,” saying it expects the social media company to stage a significant rebound in online advertising following a pandemic-fuelled decline.

Marijuana producers Aphria Inc and rival Tilray Inc both gained after the two companies agreed to combine their operations and create the largest cannabis producer by sales.

is content editor for Morningstar Australia

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