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Global Market Report - 18 January

Lex Hall  |  18 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to fall as losses among US banks and energy stocks forced Wall Street lower at the end of last week.

The Australian SPI 200 futures contract was down 16 points, or 0.24 per cent, at 6,625 points at 8.30am Sydney time on Monday, suggesting a negative start to trading.

Wall Street’s main indexes finished lower on Friday, weighed down by big US banks after their earnings reports, while the energy sector fell sharply due to a regulatory probe into Exxon Mobil Corp.

The Dow Jones Industrial Average fell 177.26 points, or 0.57 per cent, to 30,814.26, the S&P 500 lost 27.29 points, or 0.72 per cent, to 3,768.25 and the Nasdaq Composite dropped 114.14 points, or 0.87 per cent, to 12,998.50.

Locally, confidential analysis by the Reserve Bank of Australia suggests house values could jump 30 per cent over three years if borrowers believe the cut in interest rates is permanent, the AFR reports.

The S&P/ASX200 benchmark index closed higher by 0.1 points, or 0 per cent, to 6,715.4 on Friday.

The index lost 0.63 per cent for the week.

The All Ordinaries closed higher by 4.1 points, or 0.06 per cent, at 6,986.8.

There was a muted reaction on the ASX to details of the US economic stimulus plan, revealed on Friday.

The plan includes $US415 billion ($539 billion) to bolster the nation's response to the virus and the rollout of COVID-19 vaccines, some $US1 trillion in direct relief to households, and roughly $US440 billion for small businesses and communities hard hit by the pandemic.

Gold was down 1.0 per cent at $US1,828.45 an ounce; Oil was down 2.3 per cent to $US55.10 a barrel; Iron ore was up 0.8 per cent to $US173.69 a tonne.

Meanwhile, the Australian dollar was buying 77.05 US cents at 8.30am, down from 77.61 US cents at Friday's close.

Asia

China shares fell on Friday, on track to snap four consecutive weekly gains, as consumer and liquor stocks retreated on worries over lofty valuations, while Sino-US tensions also weighed on market sentiment.

The CSI300 index fell 0.23 per cent to 5,458.08 while the Shanghai Composite Index lost 0.1 per cent to 3,56.38.

In Hong Kong, the Hang Seng index gained 0.27 per cent to 28,573.86, while the Hong Kong China Enterprises Index lost 0.1 per cent to 11,287.27.

In Japan, the Nikkei 225 lost 0.62 per cent to close at 28,519.18.

Europe

European stocks snapped four weeks of gains on Friday, as the prospect of tighter lockdowns, slow vaccine shipments to the continent and resurgent coronavirus cases in China dampened hopes of a speedy economic recovery.

The pan-European STOXX 600 index closed down 1 per cent in its worst session since 21 December, with losses accelerating after Wall Street stocks tumbled following big bank earnings.

The STOXX 600 logged a 0.8 per cent weekly decline, its first weekly decline since mid-December.

Adding to worries, some EU nations are receiving fewer than expected doses of coronavirus vaccines as US pharmaceutical firm Pfizer slowed shipments of the vaccine developed with German partner BioNTech. BioNTech shares dropped 2.2 per cent.

German Chancellor Angela Merkel called for “very fast action” to counter the spread of coronavirus as the country saw a record number of virus-related deaths, while France said it would strengthen its border controls from Monday.

The German DAX dropped 1.4 per cent and France’s CAC 40 fell 1.2 per cent. UK’s FTSE 100 declined 1 per cent despite data showing that Britain’s economy recorded a smaller-than-expected contraction in November.

Mining and oil & gas sectors slumped 3.1 per cent and 2.6 per cent, respectively, after Chinese authorities put more than 28 million people under new lockdowns, raising concerns about demand from the major consumer of commodities.

Hopes of a large US fiscal stimulus sent the STOXX 600 to a 11-month peak earlier this week, but markets retreated after US president-elect Joe Biden outlined a $1.9 trillion proposal that raised worries of a tax hike.

“Market positioning had been quite aggressive, so I suppose it is a pause for breath,” said Roger Jones, head of equities at London & Capital.

“The rollout and the speed of vaccination is becoming increasingly important and the market is willing to look through a period of extended lockdown if it’s a relatively short period.”

German business software group SAP closed down 0.7 per cent, reversing early gains after it released preliminary annual results that came at the high end of guidance.

Siemens Energy AG fell 6.3 per cent after General Electric Co accused a subsidiary of the power distribution company of using stolen trade secrets to rig bids for lucrative contracts.

French grocer Carrefour fell almost 3 per cent after the French government all but killed off a possible $20 billion takeover by Canada’s Alimentation Couche-Tard.

North America

Wall Street’s main indexes finished lower on Friday, weighed down by big US banks after their earnings reports, while the energy fell sharply due to a regulatory probe into Exxon Mobil Corp.

The S&P 500 banks index lost ground as shares of Wells Fargo & Co, JPMorgan Chase & Co and Citigroup Inc tumbled even though they had posted better-than-expected fourth-quarter profits. The bank sector had rallied sharply in recent days.

Wells Fargo, down 7.8 per cent, was among the biggest drags on the S&P 500, along with Exxon Mobil, down 4.8 per cent.

“Financials and energy have been disappointing ... that’s bringing down the whole market,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

“This year is the year for financials, energy, materials, industrials. So if there is a day when they’re not leading, it’s not good news for the market.”

Wall Street’s major indexes had recently hit record highs on hopes for a hefty fiscal stimulus package.

Incoming US President Joe Biden late on Thursday unveiled a $1.9 trillion stimulus proposal, which included some US$1 trillion in direct relief to households.

Meanwhile, data showed a further decline in US retail sales in December in the latest sign the economy lost considerable speed at the end of 2020.

“The weaker-than-expected economic data, and especially in parts of the economy like retail sales, is a big driver,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.

“We are seeing sentiment through last week in extreme speculative frothy euphoric optimistic territory,” she said.

“Sometimes it doesn’t need a catalyst before it begins to fall on its own weight.”

The Dow Jones Industrial Average fell 177.26 points, or 0.57 per cent, to 30,814.26, the S&P 500 lost 27.29 points, or 0.72 per cent, to 3,768.25 and the Nasdaq Composite dropped 114.14 points, or 0.87 per cent, to 12,998.50.

For the week the S&P 500 and the Nasdaq fell around 1.5 per cent while the Dow lost 0.91 per cent.

Earnings for S&P 500 companies are expected to decline 9.5 per cent in the final quarter of 2020 from a year ago, but are expected to rebound in 2021, with a gain of 16.4 per cent projected for the first quarter, according to IBES data from Refinitiv.

Exxon shares fell after a report said that the US Securities and Exchange Commission launched an investigation of the oil major, following a whistleblower’s complaint that it overvalued a key asset in the prolific Permian shale oil basin.

With Reuters

is content editor for Morningstar Australia

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