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Global Market Report - 2 April

Lex Hall  |  02 Apr 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is poised to lurch back into the red after US stocks were hammered overnight on warnings of a mounting coronavirus death toll.

The SPI200 futures contract was down 169 points, or 3.24 per cent, at 5,055.0 points at 8am Sydney time on Thursday, suggesting heavy early losses for local stocks.

Wall Street continues to suffer as US health officials warn the death toll from the COVID-19 pandemic will surge.

The Dow Jones and S&P 500 indexes fell more than 4 per cent after suffering their worst first quarter as President Donald Trump warned of a "painful" two weeks ahead for Americans.

Weak US payroll data also stoked concerns of an economic downturn as lockdown measures intensify in a bid to combat the spread of the virus.

The Australian share market rallied on Wednesday with a 3.58 per cent rise for the S&P/ASX200 benchmark index, even as the Reserve Bank released minutes from a meeting a fortnight ago showing members were worried about the likelihood of a recession.

IG Markets analyst Kyle Rodda said judging by the overnight moves, heightened volatility looks as though it'll remain the norm.

"Any technical push higher in the stocks driven by end of month flows and rebalancing looks to have run its course, with market participants clearly back focusing on deteriorating fundamentals," Mr Rodda said in a note.

The Australian dollar is buying 60.74 US cents, down from 61.80 US cents as the market closed on Wednesday.

Asia

China stocks finished the first session of the second quarter lower on Wednesday, in line with broader Asia, though losses were capped by hopes Beijing would unveil more measures to bolster the economy hit by the coronavirus pandemic.

At the close, the Shanghai Composite index was down 0.57 per cent at 2,734.52.

The blue-chip CSI300 index was down 0.3 per cent, with its financial sector sub-index higher by 0.04 per cent, the consumer staples sector down 0.93 per cent, the real estate index up 1.12 per cent and the healthcare sub-index down 1.51 per cent.

Hong Kong stocks dropped on Wednesday, in line with broader Asia, as worries persisted over the economic damage from the global coronavirus outbreak.

At the close of trade, the Hang Seng index was down 517.69 points or 2.19 per cent at 23,085.79. The Hang Seng China Enterprises index fell 1.98 per cent to 9,404.98.

Japanese shares plummeted on Wednesday on the first day of the new fiscal year, as investors braced for a potential lockdown of Tokyo, a global recession, and sharp cuts in corporate earnings and dividend payouts due to the coronavirus pandemic.

The benchmark Nikkei average fell 4.5 per cent to a one-week closing low of 18,065.41. However, overall trading was subdued, with the volume of shares traded on the main board valued at 2.72 trillion yen, its lowest level in a month.

Europe

European shares tumbled on Wednesday in their first trading session of the quarter, with growing evidence of the economic damage from the still rapidly spreading coronavirus fanning fears of a deep global recession.

The pan-European STOXX 600 index was down 2.9 per cent, with Tuesday’s session rounding off its worst quarter in 18 years during which it lost about $2.8 trillion in market value.

HSBC, Santander and Lloyds of London were among the biggest drags on the benchmark index after joining European peers in suspending dividend payments to shore up liquidity.

The wider banking index fell back near record lows following a rebound last week that was powered by aggressive fiscal and monetary stimulus from around the world.

“The optimism that we saw is very very early days and it’s way too early to call a turning point in this crisis,” said Bert Colijn, senior economist at ING in Amsterdam.

“In Europe, we see cautious signs that the containment measures may be having an impact, but things in the US continue to develop quite quickly. Investors are swinging between the two and that’s dominating markets at the moment.”

US President Donald Trump warned Americans of a “painful” two weeks ahead, with signs the US death toll could stretch into the hundreds of thousands even with strict social distancing measures.

Adding to dismal economic figures from Asia, data from the euro zone showed a collapse in manufacturing activity in March, with analysts predicting a prolonged halt in supply chains could deepen the decline in the next few months.

“It would be naive to assume that the virus saga is already priced in,” said Charalambos Pissouros, senior market analyst at JFD Group.

“We see decent chances for equities to trade south and for safe-havens to shine again.”

The risk-off sentiment on Wednesday drove investors to the perceived safety of gold, while in European equities, telecoms, health care .SXDP and utilities, commonly considered defensives, posted the smallest declines.

Profit for companies listed on the STOXX 600 is now expected to slide by a fifth in the second quarter, deepening a European corporate recession, while dividends paid by those firms are forecast to fall by about 40 per cent.

Commodities miner Glencore fell 3.9 per cent after becoming the latest high-profile firm to defer a decision on its dividend pay out for this year, warning of material disruption to production.

North America

The US benchmark S&P 500 stock index fell more than 4 per cent on Wednesday after a dire warning on the US death toll from the coronavirus sent investors running from even the most defensive equities.

Economic data showed US manufacturing activity contracted less than expected in March, but disruptions caused by the coronavirus pandemic pushed new orders received by factories to an 11-year low, reinforcing economists’ views that the economy was in recession.

Also, business closures as authorities tried to contain the coronavirus pushed private payrolls down by 27,000 jobs last month, the first decline since September 2017, the ADP National Employment Report showed separately on Wednesday.

The blue-chip Dow Jones Industrial Average and benchmark S&P 500 indexes extended losses after suffering their worst first quarter as President Donald Trump warned Americans of a “painful” two weeks ahead and health officials highlighted research predictions of an enormous jump in virus-related deaths.

Roughly two weeks before the first-quarter earnings season is due to start in earnest, investors are “very sensitive to the latest headlines” about the virus due to a lack of fundamental information,” said John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio.

S&P 500 firms are expected to enter an earnings recession in 2020, falling 4.3 per cent in the first quarter and 10.9 per cent in the second, according to the latest estimates gathered by Refinitiv.

The Dow Jones Industrial Average fell 973.65 points, or 4.44 per cent, to 20,943.51, the S&P 500 lost 114.09 points, or 4.41 per cent, to 2470.5 and the Nasdaq Composite dropped 339.52 points, or 4.41 per cent, to 7360.58.

 

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