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Global Market Report - 17 June

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

The Australian share market is expected to rise in early trade after US indices climbed on a record jump in retail sales and the prospect of more economic stimulus.

The Australian SPI 200 futures contract was higher by 29 points, or 0.49 per cent, to 5,974.0 at 8am Sydney time on Wednesday.

Those figures follow a good day on Wall Street, where all three major US stock indices posted their third consecutive daily gains.

Commerce Department data showed US retail sales jumped by a record 17.7 per cent in May, blowing past the 8.0 per cent increase analysts expected.

Investor risk appetite was given a further boost by the Trump administration's anticipated $US1 trillion ($1.4 trillion) infrastructure package aimed at jump-starting the economy.

There was also hope for overcoming the COVID-19 pandemic. A UK-led drug trial showed low doses of a generic steroid drug called dexamethasone reduced COVID-19 death rates among the most severe cases.

An outbreak in Beijing this week of 100 cases of the virus and a rise in infections in much of the US have made investors worry the effects of the pandemic are far from over.

The Australian dollar was buying 68.82 US cents at 8am, lower from 69.41 US cents at the close of trade on Tuesday.

Asia

China shares ended higher on Tuesday, with sentiment lifted by confidence in Beijing’s capability to control the latest resurgence of coronavirus cases and expectations of bilateral Sino-US talks.

At the close, the Shanghai Composite index was up 1.44 per cent at 2,931.75, posting its biggest daily gain in more than two weeks.

Hong Kong shares rose to their highest in more than two weeks on Tuesday, tracking gains from the global markets after the US Federal Reserve widened its bond buying program.

At the close of trade, the Hang Seng index was up 567.14 points, or 2.39 per cent, at 24,344.09.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 2.78 per cent, while Japan’s Nikkei index closed up 4.88 per cent.

Europe

The pan-European STOXX 600 index recorded its best day in a month on Tuesday, joining a global rally after the prospect of historic monetary and fiscal stimulus revived hopes of an economic rebound from the COVID-19 pandemic.

The index rose 2.9 per cent, recovering some of the losses of recent sessions when grim economic forecasts and a resurgence in infections in the United States and China encouraged investors to play safe.

German and Italian shares outperformed their European peers, with cyclical sectors including travel, construction, banks and autos gaining 3–4 per cent.

Aggressive global stimulus has helped to power a rebound in European equity markets since a coronavirus-fuelled crash in March, with the STOXX 600 index now only about 16 per cent below its February record high.

The US Federal Reserve will start purchasing corporate bonds on Tuesday through the secondary market corporate credit facility, one of several emergency facilities to shore up liquidity.

But Fed Chairman Jerome Powell said a full US economic recovery will not occur until the American people are sure that the novel coronavirus epidemic has been brought under control.

Further boosting global sentiment, a report said the Trump administration was preparing a nearly $1 trillion infrastructure proposal, while talk that US firms may be allowed to work with China’s Huawei on new 5G standards eased trade jitters.

Europe’s volatility index retreated for a second straight day and was on track for its biggest daily percentage fall in a month.

Travel and leisure stocks rose 1.7 per cent, with the British cinema operator Cineworld rising 1 per cent after saying it expected all of its theatres to reopen by July.

The German airline Lufthansa was 2.5 per cent higher after saying late on Monday it was seeking agreements with worker representatives by June 22 on how to make cuts equivalent to 22,000 full-time positions.

The German online fashion retailer Zalando fell 4.2 per cent after Swedish investment firm Kinnevik AB sold a stake.

Equipment rental giant Ashtead Group soared 9.6 per cent to a record high after proposing a dividend at a time when most firms have scrapped payouts to shore up cash reserves to ride out the economic slump.

North America

Wall Street advanced on Tuesday as the prospect of additional stimulus and a record jump in retail sales suggested the US economy could bounce back sooner than expected, five months into its pandemic-inflicted recession.

All three major US stock indexes posted their third consecutive daily gains.

The Dow and the S&P remain about 11 per cent and 8 per cent below their respective record closing highs reached in February, while the tech-heavy Nasdaq hovers about 1 per cent below its all-time closing high reached on 10 June.

Data released by the Commerce Department showed retail sales jumped by a record 17.7 per cent in May, blowing past the 8 per cent increase analysts expected.

Investor risk appetite was given a further boost by the Trump administration’s anticipated $1 trillion dollar infrastructure package aimed at jump-starting the economy.

Amid a resurgence of new COVID-19 cases in China and the United States, along with unabated progression of the pandemic in Latin America and elsewhere, a UK-led drug trial showed low doses of generic steroid drug dexamethasone reduced COVID-19 death rates among the most severe cases.

At the beginning of his two-day testimony before Congress, Federal Reserve Chairman Jerome Powell said, “Until the public is confident that the disease is contained, a full recovery is unlikely.”

The Dow Jones Industrial Average rose 526.82 points, or 2.04 per cent, to 26,289.98, the S&P 500 gained 58.15 points, or 1.90 per cent, to 3,124.74 and the Nasdaq Composite added 169.84 points, or 1.75 per cent, to 9,895.87.

All 11 major sectors of the S&P 500 ended the session well in the black, with energy and healthcare leading the charge.

The upbeat retail sales data helped push S&P 500’s Retail index 2.3 per cent higher, led by Nordstrom Inc and Kohls Corp, which surged by 12.9 per cent and 9.0 per cent, respectively.

Much stronger than expected homebuilder sentiment data helped home improvement retailer Home Depot Inc provide among the biggest boosts to the blue-chip Dow. Its shares rose 3.6 per cent.

Shares of Eli Lilly and Co surged 15.7 per cent after announcing its breast cancer therapy’s success in a late-stage study.

Oracle Corp was up 2.5 per cent after Wells Fargo hiked its price target on the company’s shares ahead of its earnings release expected after the bell.

Streaming platform Roku Inc rose 12.4 per cent in heavy volume, with no clear impetus, and the company declined to comment.

is content editor for Morningstar Australia

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