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Global Market Report - 18 September

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

Australian shares are set to edge up despite a fall on Wall Street overnight as tech stocks extended their slide.

The Australian SPI 200 futures contract was up 17 points, or 0.3 per cent, to 5,880 points at 8.30am Sydney time on Friday, suggesting a positive start to trading.

US stocks dropped on Thursday as technology-related shares extended a recent slide and as data showed high levels of weekly jobless claims.

The Dow Jones Industrial Average fell 129.94 points, or 0.46 per cent, to 27,902.44, the S&P 500 lost 28.42 points, or 0.84 per cent, to 3,357.07 and the Nasdaq Composite dropped 140.19 points, or 1.27 per cent, to 10,910.28.

The S&P/ASX200 benchmark index closed down 72.9 points, or 1.2 per cent, to 5,883.2 points on Thursday. The All Ordinaries index finished 77.7 points lower, or 1.3 per cent, at 6,069.2.

In company news, Facebook is moving to curb internal debate around divisive political and social topics, CEO Mark Zuckerberg said, in the wake of a spate of disputes and criticism that has fuelled discord among staff.

Gold was down 0.6 per cent to $US1,947.33 an ounce; Brent oil was up 2.7 per cent to $US43.35 a barrel; Iron ore was down 1.5 per cent to $US122.36 a tonne.

Meanwhile, the Australian dollar was buying 73.13 US cents at 8.30am, down from 72.65 US cents at Thursday’s close.

Asia

China shares ended weaker on Thursday, with healthcare and consumer firms leading the losses amid sell-off pressure after a wave of new listings, while weakness in hog-farming companies dragged agricultural stocks lower.

At the close, the Shanghai Composite index was down 0.41 per cent at 3,270.44, while the blue-chip CSI300 index lost 0.53 per cent to 4,632.71.

Healthcare and consumer sector shares fell with the consumer staples sector losing 2.38 per cent and the healthcare sub-index down 2.12 per cent.

Hong Kong shares ended lower on, tracking weakness in other Asian markets. At the close of trade, the Hang Seng index was down 384.78 points, or 1.56 per cent, to close at 24,340.85. The Hang Seng China Enterprises index fell 1.15 per cent to 9,732.15.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.58 per cent, while Japan’s Nikkei index closed down 0.67 per cent.

Europe

European shares broke a four-day winning run on Thursday, with banks reeling from the prospect of near-zero interest rates for a prolonged period, while a technology stock sell-off continued on Wall Street, piling pressure on European tech shares.

The pan-European STOXX 600 finished 0.5 per cent lower, easing from a one-month closing high hit in the previous session, while the German DAX slipped 0.4 per cent and France's CAC 40 dropped 0.7 per cent.

UK's FTSE 100, dominated by global companies that bring offshore revenue home, took comfort as the pound slumped after the Bank of England said it was looking more closely at how it might cut interest rates below zero.

The blue-chip index, however, closed 0.5 per cent lower, with major banks like HSBC, Barclays and Standard Chartered falling about 2 per cent.

The broader European banking index—the worst performing sector with a 38 per cent decline this year—dropped 1.6 per cent.

BoE’s policy decision followed the US Federal Reserve, which pledged to keep borrowing costs lower for as long as the US economy needs to recover from the coronavirus crisis.

However, investors were unsettled by the lack of new stimulus measures, and Fed Chair Jerome Powell said an economic recovery is expected to slow, requiring continued support from further government spending.

The World Bank’s chief economist Carmen Reinhart said the global economic recovery from a pandemic-induced recession may take as much as five years.

Tech stocks continued to weigh on Wall Street, while in Europe, they shed 1.0 per cent.

Property group Unibail-Rodamco-Westfield slumped 10 per cent to the bottom of the STOXX 600 after announcing plans to raise 3.5 billion euros ($5.6 billion).

Among the bright spots, Delivery Hero rose 2.4 per cent after the food delivery group said it would buy the Latin American operations of Glovo for up to 230 million euros. It also launched operations in Japan.

Britain's Next rose 4.1 per cent after it raised its profit outlook for the second time in two months, becoming the latest retailer to report strong results this week.

Despite Thursday’s declines, the encouraging updates from fashion retailers, buoyant M&A activity and increasing hopes for a coronavirus vaccine kept the STOXX 600 on course for weekly gains.

North America

Apple and Amazon.com Inc were among the biggest drags on the S&P 500 and Nasdaq, which entered correction territory this month.

From the March market lows, “this has been an amazing recovery represented by a few good tech names,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

“They had an incredible last week of August, and I think this is a rational profit-taking scenario at the moment.”

He expects tech-related names to bounce back before the end of the year.

While the S&P 500 technology index weighed the most on the benchmark index, the S&P 500 real estate sector and financials also sold off sharply.

Adding to concerns around a stalling recovery, the Labor Department’s report showed the number of Americans filing new claims for unemployment benefits fell last week, but remained perched at extremely high levels.

On Wednesday, the Federal Reserve pledged to keep interest rates low for a prolonged period to lift the world’s biggest economy out of a pandemic-induced recession.

Fed Chair Jerome Powell laid out a menu of factors—including wage growth, workforce participation and disparities in minority joblessness relative to whites—that must be satisfied before the Fed would view the economy at maximum employment, and thus even consider raising interest rates.

General Electric Co rose after chief executive officer Larry Culp said on Wednesday the company's free cash flow would turn positive in the second half.

Ford Motor Co gained as it said it had begun production of the new generation F-150 pickup truck at its Michigan facility.

is content editor for Morningstar Australia

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