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Global Market Report - 17 September

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

Australian shares are set to slip as late falls in US tech stocks quelled optimism over the Fed’s renewed pledge to keep rates low for as long as the US recovery needs.

The Australian SPI 200 futures contract was down 7 points, or 0.1 per cent, to 5,944 points at 8.30am Sydney time on Thursday, suggesting a slightly negative start to trading.

The S&P 500 ended lower on Wednesday, reversing gains late in the day as losses in technology shares outweighed a Federal Reserve statement that stoked optimism it would keep US interest rates near zero for a prolonged period.

The Federal Reserve pledged to keep interest rates low until it has achieved its goal of maximum employment, but new forecasts show central bankers expect rates will stay at zero at least through 2023.

The Dow Jones Industrial Average rose 36.78 points, or 0.13 per cent, to 28,032.38, the S&P 500 lost 15.71 points, or 0.46 per cent, to 3,385.49 and the Nasdaq Composite dropped 139.86 points, or 1.25 per cent, to 11,050.47.

The S&P/ASX200 benchmark index closed higher by 61.3 points, or 1.04 per cent, to 5,956.1 points on Wednesday. The All Ordinaries index finished up 67.6 points, or 1.11 per cent, to 6,146.9.

Gold was up 0.2 per cent to $US1,957.83 an ounce; Brent oil was up 4.2 per cent to $US42.24 a barrel; Iron ore was down 3.4 per cent to $US124.20 a tonne.

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Meanwhile, the Australian dollar was buying 73.05 US cents at 8.30am, down from 73.13 US cents at Wednesday’s close.

Asia

China stocks snapped a three-session rally to close lower on Wednesday, with consumer and healthcare shares leading losses, as experts were concerned over the safety of drugs used in experimental coronavirus vaccines in the country.

At the close, the Shanghai Composite index was down 0.36 per cent at 3,283.92.

The blue-chip CSI300 index was down 0.66 per cent, with its financial sector sub-index slipping 0.23 per cent, while the real estate index closed 1 per cent firmer.

Hong Kong shares closed flat on Wednesday as investors traded cautiously ahead of the US Federal Reserve's policy meeting, where the central bank is expected to keep interest rates low to support the pandemic-stricken economy.

At the close of trade, the Hang Seng index was down 7.13 points, or 0.03 per cent, at 24,725.63. The Hang Seng China Enterprises index rose 0.17 per cent to 9,845.79.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.65 per cent, while Japan's Nikkei index closed up 0.09 per cent.

Europe

Retail stocks surged after strong results from Zara-owner Inditex on Wednesday, but it was a mixed session for the wider European market, with Britain’s exporter-heavy FTSE 100 hit by a stronger pound.

The pan-European STOXX 600 index closed up 0.6 per cent, gaining for the fourth straight session, while Britain's main FTSE 100 fell 0.4 per cent and the euro zone's blue-chip index gained 0.2 per cent.

“Whatever the Fed says, the reality is that there is more monetary stimulus coming anyway,” said Edmund Shing, global head of equity derivative strategy at BNP Paribas. “It doesn’t change that longer-term narrative for equities which I think is the real driver.”

Spain's Inditex was a star performer after it said current trade showed a progressive return to normality, with online sales growing sharply and store sales recovering. Its shares jumped 8.1 per cent, while the broader retail sector rose 1.3 per cent.

Madrid-listed stocks jumped 1 per cent, also getting a boost from news that Caixabank and Bankia are set to approve a deal on Thursday that will create Spain's biggest domestic lender. The banks' shares rose 1.3 per cent and 4.3 per cent, respectively.

Despite a subdued session in UK markets, shares in e-commerce firm The Hut Group surged 25 per cent in the first major British initial public offering in seven years.

Signs of compromise emerged on the Brexit front, with Reuters reporting that Britain offered tentative concessions on fisheries in trade talks with the European Union last week, just as London was threatening to breach the terms of its divorce deal with the bloc.

German logistics group Deutsche Post rose 1.9 per cent and Britain's Royal Mail gained 5.3 per cent after strong earnings from US delivery firm FedEx Corp.

Sweden's Handelsbanken rose 2.4 per cent after revealing plans to close almost half of its branches and cut about 1,000 jobs over the next two years.

North America

The S&P 500 initially extended gains and the Dow briefly rose more than 1 per cent after the Fed kept rates near zero and promised in its policy statement to keep them near there until inflation is on track to “moderately exceed” the US central bank’s 2 per cent target “for some time.”

New economic projections showed most policymakers see interest rates on hold through at least 2023.

But the market reversed direction heading into the close, with technology shares leading the way down on the S&P 500. The tech sector, which had been recovering from a sharp sell-off, fell 1.6 per cent on the day, the biggest drag on the benchmark index.

The statement and comments by Fed Chair Jerome Powell were “even more dovish than the market expected,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. “It telegraphed to the market that the Fed intends to remain accommodative.”

Late losses likely followed declines in technology shares, she said. “What you’re seeing is some profit-taking in the tech sector. That’s where the selling is.”

The central bank’s two-day meeting was its first under a newly adopted framework that promises to shoot for inflation above 2 per cent to make up for periods where it runs below that target.

On the plus side, FedEx Corp shares rose 5.8 per cent after the package deliverer reported a bigger-than-expected quarterly profit, helped by price hikes and lower fuel costs.

The Dow Jones transportation average, often seen as a barometer of economic health, rose 0.7 per cent.

Spotify Technology fell 1.3 per cent after Apple announced a bundled plan for all its services that lowered the cost of Apple Music subscriptions.

is senior editor for Morningstar Australia

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