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Global Market Report - 2 February

Lex Hall  |  02 Feb 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to follow Wall Street higher as US tech shares rise and retail traders switch focus to silver miners.

The Australian SPI 200 futures contract was up 33 points, or 0.5 per cent, at 6,620 points at 8.30am Sydney time on Tuesday, suggesting a positive start to trading.

US stocks ended sharply higher on Monday, led by gains in technology shares after last week’s steep market sell-off, while mining shares rose as the retail trading frenzy shifted to silver.

The Dow Jones Industrial Average rose 229.92 points, or 0.77 per cent, to 30,212.54, the S&P 500 gained 60.19 points, or 1.62 per cent, to 3,774.43 and the Nasdaq Composite added 330.94 points, or 2.53 per cent, to 13,401.64.

Locally, a blistering short squeeze in shares of Unibail Rodamco Westfield has been linked to a wrong-footed bet by $US20 billion ($26 billion) hedge fund, D1 Capital, which found itself in the thick of the Reddit army’s assault on Wall Street, the AFR reports.

Australia's share market turned around mid-session on Monday to record its biggest gain in almost two weeks.

The S&P/ASX200 benchmark index closed higher by 55.6 points, or 0.84 per cent, to 6,663.0.

The All Ordinaries closed higher by 51.9 points, or 0.76 per cent, at 6,922.8.

The indices were lower for the first few hours of the session, but improved.

Gold was up 0.7 per cent at $US1,859.76 an ounce; Oil was up 2.2 per cent at $US56.26 a barrel; Iron ore was down 0.9 per cent to $US157.07 a tonne.

Meanwhile, the Australian dollar was buying 76.33 US cents at 8.30am, down from 76.51 US cents at Monday's close.

Asia

China shares closed higher on Monday, rebounding from the previous week's fall, after growing factory activity in January showed a continued recovery in the world's second-largest economy, although domestic lockdowns hit the pace of growth.

At the close, the Shanghai Composite index was up 0.64 per cent at 3,505.28.

The blue-chip CSI300 index rose 1.23 per cent after falling more than 3.9 per cent last week, with its financial sector sub-index 1.25 per cent higher and the real estate index up 0.89 per cent.

Hong Kong shares ended higher on Monday, lifted by high-tech and consumer firms, as mainland investors continued to purchase shares through the Stock Connect programme.

The Hang Seng index ended 609.15 points or 2.15 per cent higher at 28,892.86. The Hang Seng China Enterprises index rose 2.19 per cent to 11,454.18.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 1.37 per cent, while Japan's Nikkei index closed up 1.55 per cent.

Europe

European shares jumped on Monday, bouncing from their worst weekly decline since October powered by a rise in shares of miners after an ongoing retail frenzy shifted its attention to silver.

The pan-European STOXX 600 index rose 1.1 per cent, with shares of miners including Fresnillo, Polymetal International and Boliden AB jumping between 5 per cent and 20 per cent.

Silver has become the latest focus of a frenzied online movement by retail investors to push up values of assets that big fund managers had bet against. Silver prices surged to an eight-year high on Monday.

The European basic resources index jumped 2.4 per cent, on track for its best day since early January.

“What we are seeing is an aggressive move higher on silver, which has obviously propped up the mining sector,” said David Madden, market analyst at CMC Markets UK.

“Financial markets and regulators are also a lot more comfortable with the rise in a commodity like silver, whose price is a lot harder to influence as opposed to a stock,” said Madden.

All major European regional indexes were higher in early trading, with Britain’s FTSE 100 up 0.9 per cent and German shares adding 1.4 per cent.

Data showed German retail sales plunged far more than expected in December as a decision to tighten lockdown measures during the covid-19 pandemic choked consumer spending in Europe’s largest economy.

The STOXX 600 had logged declines of over 3 per cent in the previous week, on concerns around the slow roll-out of covid-19 vaccines and as a retail trading frenzy led to a rise in volatility.

Among other stocks, Ryanair shed 2 per cent after saying it expects to lose close to 1 billion euros in its current financial year, by far its worst ever performance.

JD Sports Fashion jumped 6 per cent as it said it would buy Baltimore-based DTLR Villa LLC for US$495 million.

Concerns around the potential economic damage from a new strain of the coronavirus in Europe and delays to vaccine roll-outs have hurt sentiment in the past few sessions as Europe urgently needs more shots to speed up its inoculation programme.

AstraZeneca, Pfizer Inc and Moderna Inc have been facing difficulties in delivering the shipments to the bloc.

“While the number of new covid-19 cases has stabilised somewhat, the focus is now increasingly shifting towards the race to get people vaccinated ... and the campaign is making slow progress in Europe,” said Milan Cutkovic, market analyst at Axi.

North America

US stocks ended sharply higher on Monday, led by gains in technology shares after last week’s steep market sell-off, while mining shares rose as the retail trading frenzy shifted to silver.

Investors also watched talks over the latest US covid-19 relief package.

The iShares Silver Trust ETF, the largest silver-backed ETF, jumped as silver broke above US$30 an ounce for the first time since 2013, with retail traders jumping into the metal after betting billions of dollars on stocks last week.

Miners Hecla Mining Co, Coeur Mining Inc and Wheaton Precious Metals Corp surged.

“The retail trader focus today seems to be on silver, and it’s considered to be a small pocket of the market,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

But even though the recent trading frenzy may have changed course, it has likely not gone away, she said. “The fact of the matter is this is a powerful move in the markets, and it’s not just going to dissipate.”

The S&P 500 technology sector gave the S&P 500 its biggest boost in the broad rally. Microsoft and Apple were among the biggest positive influences.

The Dow Jones Industrial Average rose 229.92 points, or 0.77 per cent, to 30,212.54, the S&P 500 gained 60.19 points, or 1.62 per cent, to 3,774.43 and the Nasdaq Composite added 330.94 points, or 2.53 per cent, to 13,401.64.

US President Joe Biden will meet 10 moderate Republican senators on Monday to discuss their proposal to shrink his sweeping US$1.9 trillion US covid-19 relief package, even as Democrats prepare to push legislation through Congress without Republican support.

Wall Street’s main indexes last week logged their steepest weekly fall since October, as investors digested efficacy data from Johnson & Johnson’s covid-19 vaccine trial results, and a battle between Wall Street hedge funds and retail investors added to volatility.

The CBOE volatility index eased on Monday from three-month highs that were fuelled by a surge in shares of GameStop Corp, AMC Entertainment Holdings and others that burned hedge funds that had bet against the companies.

Robinhood, the US online broker that has emerged as a gateway for amateur traders challenging Wall Street hedge funds, has held talks with banks about raising US$1 billion in debt so it can continue to fulfil orders for heavily shorted stocks, according to a Reuters report, citing people familiar with the matter.

Focus also will be on more quarterly earnings reports this week.

The latest ISM survey was mixed as US manufacturing activity slowed slightly in January, while a measure of prices paid by factories for raw materials and other inputs jumped to its highest level in nearly 10 years.

With Reuters

is content editor for Morningstar Australia

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