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Global Market Report - 17 March

Lex Hall  |  17 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to weaken following falls on Wall Street as investors awaited the outcome of the Fed's meeting.

The Australian SPI 200 futures contract was down 22 points, or 0.3 per cent, at 6,811 points at 8.30am Sydney time on Wednesday, suggesting a negative start to trading.

The S&P 500 ended lower on Tuesday, weighed down by energy and industrial stocks as investors awaited the result of the Federal Reserve’s two-day policy meeting.

The Dow Jones Industrial Average fell 0.39 per cent to end at 32,825.95 points, while the S&P 500 lost 0.16 per cent to 3,962.71. The Nasdaq Composite edged up 0.09 per cent to 13,471.57.

Locally, an accelerating economic recovery has continued to drive down the number of loans put on hold during covid, as bank chief executives prepare to discuss the nation’s pandemic recovery plan with Josh Frydenberg on Wednesday, The Australian reports.

Australia's share market has posted its strongest performance in more than a week, with most sectors higher.

The S&P/ASX200 benchmark index closed higher by 54.1 points, or 0.8 per cent, to 6,827.1 on Tuesday.

The All Ordinaries closed up by 59.9 points, or 0.85 per cent, at 7,079.

Information technology was the top sector, rising 2.95 per cent, while health and property gained more than two per cent each.

Gold was down 0.1 per cent at $US1,730.56 an ounce; Brent oil was down 0.8 per cent to $US68.34 a barrel; Iron ore was up 1.8 per cent to $US166.32 a tonne.

Meanwhile, the Australian dollar was buying 77.43 US cents at 8.30am, up from 77.22 US cents at Tuesday's close.

Asia

Chinese shares finished higher on Tuesday, edging up from the previous day’s slump as consumer and financial firms recovered, but broader gains were limited by investor wariness over possible policy tightening.

At the close, the blue-chip CSI300 index was up 0.87 per cent, after slumping more than 2 per cent on Monday. The Shanghai Composite index was up 0.78 per cent at 3,446.73.

Hong Kong shares rose on Tuesday as heavyweight tech and consumer stocks tracked Wall Street’s advance on hopes that the US Federal Reserve and other central banks will keep policies accommodative in meetings this week.

At the close of trade, the Hang Seng index was up 193.93 points, or 0.67 per cent, at 29,027.69. The Hang Seng China Enterprises index rose 1.66 per cent to 11,329.43.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.63 per cent, while Japan’s Nikkei index closed up 0.52 per cent.

Europe

European stocks rose on Tuesday as an upbeat forecast from German carmaker Volkswagen prompted a rally in the automobiles sector, while investors awaited the US Federal Reserve’s views on a recent pickup in inflation.

The pan-European STOXX 600 index rose 0.9 per cent, inching closer to a record peak set last year, while the regional autos sector jumped 2.1 per cent to its highest level since June 2018.

Leading gains among autos was Volkswagen which jumped 6.7 per cent after it said it was confident that cost cuts will help improve profit margins in the coming years.

“There is something to do with more interest as global investors are becoming more attracted to areas outside of technology which would include sectors like autos, mining and industrials,” said Chris Bailey, European strategist at Raymond James.

“Particularly for autos it is a combination of higher demand as economies recover and also these are companies with proper international businesses.”

Zalando rose 5.0 per cent after it forecast 2021 revenue growth above market expectations following a strong start to the year. Its shares touched a three-week high and lifted the wider retail index.

A gauge of volatility in European stock markets slipped to its lowest level in over one year.

Investors are focused on the Fed’s two-day policy meeting, which will end on Wednesday amid concerns that a potential spike in inflation as economies recover could prompt the central bank to tighten monetary policy sooner than expected.

Official data showed French final inflation rose largely in line with estimates in February. Meanwhile, the ZEW economic research institute said investor sentiment in Germany increased by more than expected in March, buoying the outlook for a broad-based recovery in Europe’s largest economy.

While optimism about an economic recovery has pushed markets to near-record highs, concerns remain about the pace of covid-19 vaccination in Europe, with Sweden becoming the latest country to pause AstraZeneca’s vaccine after several countries reported possible serious side-effects.

Deutsche Bank slashed 2021 economic growth forecasts for the euro area by a percentage point, citing spillover of the ongoing pandemic-linked activity curbs, but raised predictions for Britain, the US and India.

French telecoms operator Iliad SA jumped almost 4.5 per cent after saying it aimed to turn a core profit for its Italian business in the second half of this year.

German biotech firm Morphosys slumped 10.6 per cent to the bottom of STOXX 600 after forecasting a fall in 2021 revenue.

North America

The S&P 500 ended lower on Tuesday, weighed down by energy and industrial stocks as investors awaited the result of the Federal Reserve’s two-day policy meeting.

The US stock market lacked direction for much of the day after the S&P 500 and Dow Jones Industrial Average closed at record highs on Monday. Wall Street has recently benefited from optimism about a US$1.9 trillion ($2.5 trillion) fiscal stimulus package and ongoing vaccination drives that have bolstered views that the economy is on a path to recovery.

At the same time, fears about an overheating economy and a recent increase in interest rates have increased scrutiny on the Fed’s two-day meeting, where policymakers are likely to raise economic forecasts and repeat their pledge to remain accommodative for the foreseeable future.

The Nasdaq ended higher. Apple Inc rose 1.3 per cent after Evercore ISI hiked its price target on the iPhone maker’s shares to the highest among analysts covering the company, according to Refinitiv data.

Wall Street’s fear gauge hit a five-week low at 19.68 points. A midafternoon rise in the 10-year Treasury yield to 1.62 per cent nipped some enthusiasm for high-growth stocks. The benchmark US 10-year Treasury hit a 13-month high last week.

Investors have slightly increased their cash allocation, deeming that inflation and “taper tantrums” could topple the record rally in financial markets, BofA’s March fund manager survey showed on Tuesday.

“This Fed meeting is one of the most important ones for the market in a long time. It is the first we have had after the recent inflation rate rise and concerns about inflation,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta.

Data showed retail sales dropped more than expected in February due to bitterly cold weather across the country. Another report indicated winter storms in Texas led to a plunge in US factory output last month.

The Dow Jones Industrial Average fell 0.39 per cent to end at 32,825.95 points, while the S&P 500 lost 0.16 per cent to 3,962.71. The Nasdaq Composite edged up 0.09 per cent to 13,471.57.

After tumbling 11 per cent from its Feb. 12 record high through early March, the Nasdaq has mostly recovered and is now down about 4 per cent from its all-time high close.

Volume on US exchanges was 12.2 billion shares, compared with the 14.4 billion average for the full session over the last 20 trading days.

The S&P 500 energy index tumbled almost 3 per cent after a drop in oil prices while financials and industrials also retreated more than 1 per cent. The communication services and technology indexes both rose more than 0.7 per cent.

The Russell growth index rose 0.37 per cent, while the Russell value index fell 0.71 per cent in a reversal of a recent trend away from technology and other high-growth stocks.

Ford Motor Co dropped 5.4 per cent after announcing a US$2 billion convertible debt deal.

With Reuters

is content editor for Morningstar Australia

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