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Global Market Report - 19 October

Lex Hall  |  19 Oct 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following slight gains on Wall Street at the end of last week amid stronger retail sales and growing clarity over the timeline for a covid vaccine.

The Australian SPI 200 futures contract was up 39 points, or 0.63 per cent, to 6,203 points at 8.30am Sydney time on Monday, suggesting a positive start to trading.

The S&P 500 posted a nominal gain on Friday as further clarity regarding the timeline for the development of a coronavirus vaccine and much better-than-expected retail sales data brought buyers back to the market.

The Dow Jones Industrial Average rose 112.11 points, or 0.39 per cent, to 28,606.31, the S&P 500 gained 0.47 points, or 0.01 per cent, to 3,483.81 and the Nasdaq Composite dropped 42.32 points, or 0.36 per cent, to 11,671.56.

Locally, bootmaker and bush outfitter R.M. Williams is back in Australian hands after mining magnate Andrew Forrest snared the legendary brand from French fashion giant Louis Vuitton in a deal believed to be worth almost $200 million, The Australian reports.

Australia's share market closed lower on Friday after a negative US lead and concern rising coronavirus infections in Europe will lead to lockdowns. The S&P/ASX200 benchmark closed lower by 33.5 points, or 0.54 per cent, to 6,176.8 on Friday. The week was a good one for investors. The ASX200 finished 1.22 per cent higher. The All Ordinaries index finished the Friday session lower by 29.2 points, or 0.46 per cent, to 6,385.

Gold was down 0.5 per cent to $US1,899.29 an ounce; Brent oil was 0.5 per cent to $US42.93 a barrel; Iron ore was up 0.3 per cent to $US119.08 a tonne.

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Meanwhile, the Australian dollar was buying 70.74 US cents at 8.30am, slightly down from 70.75 US cents at Friday’s close.

Asia

China stocks were little changed on Friday but posted a weekly gain, buoyed by fresh policy support and upbeat data that pointed to an economic recovery from the covid-19 fallout.

The blue-chip CSI300 index fell 0.2 per cent to 4,791.68, while the Shanghai Composite Index added 0.1 per cent to 3,336.36.

The tech-heavy start-up board ChiNext slipped 0.5 per cent, while the STAR50 fell 1.1 per cent.

For the week, the CSI300 gained 2.4 per cent and logged its third straight weekly gain, while SSEC was up 2 per cent.

Hong Kong stocks ended higher on Friday to post their third weekly gain in a row, as investors cheered fresh policy support and upbeat data that pointed to China’s economic recovery from the coronavirus crisis.

The Hang Seng index rose 0.9 per cent to close at 24,386.79, while the China Enterprises Index, the index tracking mainland firms listed in Hong Kong, gained 1.6 per cent to 9,914.90.

Japan’s Nikkei share average fell on Friday as new coronavirus curbs in Europe dimmed hopes of a swift global economic recovery, although losses were limited after Fast Retailing forecast upbeat annual earnings.

The benchmark Nikkei share average dropped 0.41 per cent to 23,410.63. The broader Topix lost 0.86 per cent to 1,617.69. For the week, the Nikkei was down 0.89 per cent and the Topix lost 1.8 per cent, with the latter being the largest drop in more than two months.

Europe

European shares bounced from two-week lows on Friday but were still set for weekly losses after a sell-off that was marked by fears of a second wave of covid-19 infections, Brexit-related uncertainty and doubts about more US fiscal stimulus.

The pan-European STOXX 600 index was up 0.7 per cent after posting its worst session in more than three weeks on Thursday. Banks, insurers and energy stocks, which bore the brunt of the losses this week, were up between 0.3 per cent and 1.0 per cent.

A resurgence in coronavirus cases across Europe has stoked fears about more sweeping lockdowns, with London and Paris—Europe’s two richest cities—again living under the shadow of state-imposed restrictions.

Focus on Friday will be on signs of progress in Brexit negotiations, with Prime Minister Boris Johnson set to give Britain’s response to the European Union’s demand that he either gives more concessions to secure a trade deal or braces for a disorderly Brexit in three months.

London stocks rose about 1.0 per cent in early trading, but were still on course to snap a two-week gaining streak.

Shares of Thyssenkrupp surged 24.2 per cent as a report said privately-held Liberty Steel Group is set to bid for the ailing steel unit of the company as soon as Friday.

North America

The Dow also joined the S&P in positive territory, both indexes snapping a three-day losing streak driven by halted vaccine trials and continued wrangling in Washington over a new pandemic relief package. But the Nasdaq ended the session lower.

Even so, they all posted gains on the week.

Pfizer Inc announced it could apply for US authorization for the covid-19 vaccine it is developing with German partner BioNTech in November. Pfizer’s stock gained 3.8 per cent.

“The two highest-level market movers are the vaccine timeline and stimulus optimism,” said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky. “Sometimes the market gets a reality check that even if we get a vaccine early next year that’s an incredibly aggressive and optimistic timeline.”

Retail sales in September blew past analyst expectations and consumer sentiment for the current month surprised to the upside, according to two separate economic reports. But with previous stimulus having run its course, the outlook is uncertain unless Washington can reach an agreement on a fresh round of fiscal aid.

“It’s important from the retail sales data to see that the consumer is not just limping along but exceeding expectations,” Mayfield added. “I don’t know how long this can continue without stimulus but it’s heartening to see the consumer has held up pretty well despite some dire expectations.”

On the stimulus front, US Treasury Secretary Steven Mnuchin told House Speaker Nancy Pelosi that President Donald Trump would “weigh in” with Senate Majority Leader Mitch McConnell if an agreement is reached on a new pandemic relief package. House Republican leader Kevin McCarthy, however, said he does not expect an agreement to be reached ahead of the 3 November election as long as Pelosi is involved.

Of the 11 major sectors in the S&P 500, seven ended the session in the black. While utilities had the largest percentage gain, energy suffered the biggest loss.

Third-quarter reporting season burst from the starting gate this week, with 49 of the companies in the S&P 500 having reported. Of those, 86 per cent have cleared the low bar set by expectations, according to Refinitiv.

Oil services company Schlumberger NV posted its third straight quarterly loss due to falling crude prices and plunging demand. Its shares dropped 8.8 per cent.

Railroad operator Kansas City Southern shed 2.7 per cent and transportation and logistics company J.B. Hunt Transport Services Inc tumbled 9.7 per cent after the companies’ quarterly results were hit dropping shipping demand.

The Dow Jones Transport index, considered a barometer of economic health, fell 1.3 per cent.

Shares of fitness company Peloton Interactive Inc lost 3.7 per cent after announcing a recall of faulty pedals on its popular exercise bikes.

is senior editor for Morningstar Australia

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