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Global Market Report - 18 December

Lex Hall  |  18 Dec 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to open flat despite records on Wall St as mounting confidence over a stimulus bill buoyed investors.

The Australian SPI 200 futures contract was flat at 6,692 points at 8.30am Sydney time on Friday, suggesting a flat start to trading.

Technology shares lifted the S&P 500 and the Nasdaq to record highs on Thursday as investors grew more optimistic about a coronavirus stimulus bill, helping markets look past signs of economic strain brought on by the covid-19 pandemic.

The Dow Jones Industrial Average was up 0.44 per cent at 30,285.97 points, while the S&P 500 gained 0.53 per cent to 3,720.69. The Nasdaq Composite added 0.68 per cent to 12,744.90.

Locally, Rio Tinto has surprised investors by promoting finance boss Jakob Stausholm to chief executive, replacing Jean-Sebastien Jacques who was forced to quit amid outrage over the destruction of 46,000-year-old heritage sites at West Australia’s Juukan Gorge, The Australian reports.

The S&P/ASX200 benchmark index closed higher by 77.5 points, or 1.16 per cent, to 6,756.7 on Thursday, after mixed results in US trade.

It is the highest closing position for the ASX200 since February 25.

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The All Ordinaries closed better by 83.4 points, or 1.21 per cent, to 7,000.1.

Gold was up 1.1 per cent to $US1884.33/oz; Brent oil was up 0.4 per cent to $US51.29 a barrel; Iron ore was up 1.3 per cent to $US158.49 a tonne.

Meanwhile, the Australian dollar was buying 76.21 US cents at 8.30am, up from 75.58 US cents at Thursday’s close.

Asia

China's blue-chip index ended higher for the fourth straight session on Thursday, powered by healthcare, consumer staples and financials sectors, on investor optimism over swift recovery in the world's second-largest economy.

At the close, the Shanghai Composite index was up 1.13 per cent at 3,404.87.

The blue-chip CSI300 index was up 1.28 per cent, with its financial sector sub-index higher by 1.46 per cent, the consumer staples sector closed 1.43 per cent firmer and the real estate index ended 0.67 per cent higher.

In Hong Kong, the hang Seng finished up 0.82 per cent at 26,678.38.

Around the region, MSCI's Asia ex-Japan stock index was up 1.14 per cent, while Japan's Nikkei index closed 0.18 per cent higher. 

Europe

European shares remained at 10-month highs on Thursday, as hopes of more stimulus in the US and potential covid-19 vaccine rollouts in Europe strengthened the case for a global economic recovery.

Germany’s DAX climbed 1 per cent to hit its highest since February, while the pan-European STOXX 600 index rose 0.5 per cent, both extending gains to a fourth straight session.

Germany and France said they were set to begin inoculating their citizens with the Pfizer-BioNtech vaccine in the last week of December, once it is approved by the European Medicines Agency.

“The vaccines are underpinning this entire rally and without the vaccines, I don’t think we’ll be doing as well as we are,” said Craig Erlam, senior market analyst at OANDA Europe.

“Each and every regulatory approval effectively aids any economic recovery.”

Meanwhile, US lawmakers are inching closer to a $900 billion stimulus package, while the Federal Reserve promised to keep funnelling cash into markets until the US economic recovery is secure.

This comes after the European Central Bank rolled out more stimulus measures last week.

Aggressive monetary support has helped the STOXX 600 come closer to pre-pandemic levels, but it still remains about 8 per cent below its high this year.

A resurgence in covid-19 cases leading to more curbs had dented the recovery path in October, but vaccine optimism put it back on track until Brexit concerns slowed the pace.

London’s FTSE 100 was up 0.3 per cent with eyes on a Bank of England meeting later in the day. The bank is expected to keep policy unchanged, awaiting the fate of a trade deal ahead of Britain’s exit from the bloc by the year-end.

“There’s just optimism around a deal both in the United States and Brexit. These are the two major issues that are still outstanding for the year and both of them appear to be on a positive trajectory and could be wrapped up over the next few days,” Erlam said.

Shares of WPP jumped 2.9 per cent as the world’s biggest advertising firm said it expects to return to its 2019 level of net sales by 2022.

As iron ore and copper prices rose, the basic materials index jumped 1.6 per cent. Rio Tinto was up 1.7 per cent after the miner appointed chief financial officer Jakob Stausholm as its next chief executive.

Novartis rose 0.8 per cent, after the drugmaker said it would acquire US-based neuroscience company Cadent for up to US$770 million ($1.1 billion).

North America

Technology shares lifted the S&P 500 and the Nasdaq to record highs on Thursday as investors grew more optimistic about a coronavirus stimulus bill, helping markets look past signs of economic strain brought on by the covid-19 pandemic.

The S&P 500 technology and consumer discretionary indexes also hit record highs, up 0.6 per cent and 0.4 per cent, respectively.

A surge in technology outsourcing firm Accenture gave the S&P 500 its strongest lift.

Top Republicans and Democrats grew closer to agreeing on a fresh round of aid in response to a crisis that has killed more than 304,000 Americans and thrown millions out of work.

Many investors saw the passing of new measures to support the economy as imminent after data showed the number of Americans filing first-time claims for jobless benefits unexpectedly rose last week.

That followed a reading on Wednesday that showed US retail sales falling more than expected in November, as consumer spending remained constrained.

“It’s all about stimulus today and expectations of a pathway to the deal,” said Ryan Giannotto, director of research at GraniteShares in New York City.

Developments on the vaccine front were also lifting the market, with Moderna Inc awaiting US approval for deploying what would be the nation’s second covid-19 vaccine. Moderna’s stock jumped 4 per cent.

The S&P 500 has climbed 15 per cent in 2020, despite the economic destruction caused by the coronavirus.

The Dow Jones Industrial Average was up 0.44 per cent at 30,285.97 points, while the S&P 500 gained 0.53 per cent to 3,720.69. The Nasdaq Composite added 0.68 per cent to 12,744.90.

The Russell 2000 index of smaller companies rose 1 per cent and also hit a record high, now up 18 per cent year to date.

“In the very short term, I think we are a little bit over bought here,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

He noted that best-performing sectors like technology were most at risk of a pull back, while some of the “more unloved sectors” like financials and energy were getting fresh attention as investors looked for bargains.

Google-parent Alphabet dipped 1 per cent after a group of 38 US states and territories filed an antitrust complaint accusing Google of trying to extend its search monopoly to dominate smart speakers, televisions and cars.

Accenture jumped 8 per cent after it raised its annual sales forecast and beat quarterly revenue estimates as an extended work-from-home period boosted its digital, cloud and security services.

General Mills Inc rose 1 per cent after it beat second-quarter profit estimates, boosted by sales of its pet foods and baking products.

is senior editor for Morningstar Australia

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