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Global Market Report - 18 March

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

Australian shares are set to open flat despite another record on Wall St as investors welcomed the Fed's optimism on the recovery and vow to keep rates near zero.

The Australian SPI 200 futures contract was down 8 points, or 0.1 per cent, at 6,753 points at 8.30am Sydney time on Thursday, suggesting a negative start to trading.

The S&P 500 and Dow Jones Industrial Average closed at record highs on Wednesday after the Fed predicted a fast economic recovery from the coronavirus pandemic and said it would maintain its interest rate at close to zero.

The Dow Jones Industrial Average rose 0.58 per cent to end at 33,015.37 points—the first time it has closed above 33,000 points, while the S&P 500 gained 0.29 per cent to 3,974.12. The Nasdaq Composite climbed 0.4 per cent to 13,525.20. The Nasdaq remains down about 4 per cent from its 12 February record-high close.

Locally, the stage-three income tax cuts loom as a flashpoint at the next federal election with Labor considering options ranging from dumping the cuts altogether, paring them back, or possibly keeping them, the Australian Financial Review reports.

Australia's share market closed lower on Wednesday after the commodity-based sectors of materials and energy lost more than one per cent each.

The S&P/ASX200 benchmark index closed down 31.9 points, or 0.47 per cent, to 6,795.2 on Wednesday.

The index reached a session low of 6,761.4 shortly after 1230 AEDT.

The All Ordinaries closed dropped 31 points, or 0.44 per cent, at 7,048.

The heavyweight materials sector fell 1.46 per cent, while energy lost 1.19 per cent.

Gold was up 1.0 per cent at $US1,748.11 an ounce; Brent oil was down 0.4 per cent to $US68.10 a barrel; Iron ore was down 0.1 per cent to $US166.19 a tonne.

Meanwhile, the Australian dollar was buying 77.87 US cents at 8.30am, up from 77.30 US cents at Wednesday’s close.

Asia

China stocks ended flat on Wednesday as investors shifted focus to the outcome of a US Federal Reserve policy meeting, to see if the central bank could start raising interest rates sooner than expected.

Fed policymakers are expected this week to forecast that the US economy will grow in 2021 at the fastest rate in decades as the COVID-19 vaccination campaign gathers pace and a US$1.9 trillion ($2.5 trillion) relief package washes through to households.

At the close, the Shanghai Composite index was down 0.03 per cent at 3,445.55, while the blue-chip CSI300 index was up 0.42 per cent to 5,100.86.

In Hong Kong, the Hang Seng Index rose less than 0.1 per cent to 29,034.12 at the close after changing directions at least 10 times during the day.

Japanese stocks ended flat on Wednesday as profit-taking in the tech sector offset gains in healthcare, though the overall mood remained cautious in the run-up to key meetings by the US Federal Reserve and the Bank of Japan.

The Nikkei 225 Index ended down 0.02 per cent at 29,914.33, but the broader Topix edged up 0.13 per cent to 1,984.03.

Europe

European stocks dropped on Wednesday, with most investors on the sidelines ahead of the US Federal Reserve’s policy decision, while BMW shares jumped after the German carmaker forecast significant profit growth in 2021.

The pan-European STOXX 600 index fell 0.5 per cent, trading below a one-year peak, with the utilities and basic resources sectors leading declines.

A move into some cheaply valued sectors such as banks and energy has pushed European stocks closer to record levels hit last year, with investors counting on vaccination drives and stimulus measures to spur a strong global rebound this year.

BMW rose 6.2 per cent after it forecast a significant annual increase in pre-tax profit in 2021 with strong performance in all segments.

Europe’s automobiles & parts index gained 3.3 per cent to hit a 2018 high, with Volkswagen jumping 11.0 per cent after it forecast 2021 deliveries, sales and earnings to exceed the previous year’s level.

German airport operator Fraport added 0.6 per cent after HSBC upgraded the stock to “buy”, saying the pandemic has forced the company to become “better”.

Austrian hydropower producer Verbund slid 7.9 per cent as it expects 2021 profit to fall after a 14 per cent rise in 2020, thanks to lower electricity prices.

North America

The S&P 500 and Dow Jones Industrial Average closed at record highs on Wednesday after the Fed predicted a fast economic recovery from the coronavirus pandemic and said it would maintain its interest rate at close to zero.

It was the first time the Dow closed above 33,000 points.

In its statement following its two-day policy meeting, the Federal Reserve projected a rapid jump in US economic growth and inflation this year as the COVID-19 crisis winds down, and repeated its pledge to keep its target interest rate near zero for years to come.

Wall Street extended gains after Fed Chair Jerome Powell said during a news conference that it is too early to discuss tapering-off measures to support the struggling economy.

“The Fed statement today was more optimistic than some expected, they raised their outlook for both economic growth and the labour market. The market’s view of the statement is that it was fairly optimistic,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York.

A US$1.9 trillion spending stimulus and the rollout of vaccines have fuelled a rotation into so-called value stocks that are viewed as likely to outperform as the economy recovers from the coronavirus pandemic.

At the same time, worries that the stimulus could overheat the economy and lead to higher inflation rates have triggered a strong rise in long-duration Treasury yields and made technology and other growth stocks less attractive.

Following the Fed’s statement, the yield on 10-year Treasuries ticked lower to 1.6374 per cent.

The Dow Jones Industrial Average rose 0.58 per cent to end at 33,015.37 points, while the S&P 500 gained 0.29 per cent to 3,974.12. The Nasdaq Composite climbed 0.4 per cent to 13,525.20. The Nasdaq remains down about 4 per cent from its Feb. 12 record-high close.

Amazon.com Inc rose 1.4 per cent and Tesla Inc added 3.7 per cent, with the two companies giving the greatest lift to the S&P 500.

Six out of 11 S&P 500 sector indexes rose, with industrials and consumer discretionary the strongest performers and both up over 1 per cent.

Fast-food retailer McDonald’s Corp gained 1.9 per cent after Deutsche Bank raised its target price on the stock and also upgraded its recommendation to “buy” from “hold.”

With Reuters

is content editor for Morningstar Australia

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