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Global Market Report - 2 July

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

The Australian market is expected to rise at the open after news of a potential COVID-19 vaccine lifted US markets.

The Australian SPI 200 futures contract was higher by 42.0 points, or 0.71 per cent, to 5,945.0 points at 8am Sydney time on Thursday.

In the US, the S&P 500 and Nasdaq indices closed higher after drug maker Pfizer said a vaccine being developed with German firm BioNTech showed promise and was found to be tolerated in early-stage human trials.

The report came as the US Centres for Disease Control and Prevention reported an increase of 43,644 new cases of the coronavirus. The high rate of infection is hampering economic recovery.

However, investors were encouraged by upbeat economic data as coronavirus-induced lockdowns have eased. A report on Wednesday showed a slump in global manufacturing had ebbed in June, with US figures hitting their highest level in more than a year.

The Dow Jones Industrial Average fell 77.91 points, or 0.3 per cent, to 25,734.97, the S&P 500 gained 15.57 points, or 0.50 per cent, to 3,115.86 and the Nasdaq Composite added 95.86 points, or 0.95 per cent, to 10,154.63.

In Australia on Thursday, payments and business indicators data are due to be published and will give some insight into how the economy tracked in the first quarter.

Also, the Reserve Bank board will meet to discuss monetary policy.

Retailer Kathmandu has announced good sales results for the past six weeks.

It said sales at Kathmandu stores were higher by 12.5 per cent compared with the same period last year.

Sales at Rip Curl stores were 21 per cent higher.

However, the data has been adjusted as some stores remain closed due to COVID-19.

The Australian dollar was buying 69.13 US cents at 8am, higher from 68.98 US cents at the close of trade on Wednesday.

Asia

China’s benchmark index closed at its highest level in nearly four months on Wednesday, as the central bank’s move on rate cuts and the country’s improved June factory data continued to fuel hopes for a quicker economic recovery.

At the close, the Shanghai Composite index was up 1.38 per cent at 3,025.98, the highest since 6 March. The blue-chip CSI300 index was up 2.01 per cent, with its financial sector sub-index higher by 2.66 per cent, the consumer staples sector was up 3.36 per cent, the real estate index up 7.04 per cent and the healthcare sub-index down 1.18 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.35 per cent, while Japan’s Nikkei index closed down 0.75 per cent. 

Europe

Hopes of a COVID-19 vaccine pulled European stocks from losses earlier on Wednesday, after fears of a no-deal Brexit and anxieties relating to the European Union’s recovery fund had weighed on sentiment.

Ending a choppy session, the pan-European STOXX 600 index rose 0.2 per cent, with blue-chip indexes in Paris, Milan and London down about 0.2 per cent

Markets on both sides of the Atlantic got a boost as a COVID-19 vaccine developed by Pfizer and German biotech firm BioNTech showed promise and was found to be well tolerated in early-stage human trials.

A series of business surveys released earlier showed broad improvements in manufacturing across Europe and Asia as economies opened up, with IHS Markit’s final euro zone Manufacturing Purchasing Managers’ Index moving closer to the 50-mark separating growth from contraction in June.

Improving economic data out of the US also buoyed sentiment.

The STOXX 600 shed more than 1 per cent in afternoon trading as German Chancellor Angela Merkel warned that there was a possibility that no deal would be agreed between the European Union and Britain, with “very limited” progress made in negotiations about their future relationship.

This comes as rating agency S&P Global cut its UK forecasts for the year again and warned of a possible “perfect storm” formed by a second wave of coronavirus infections and a no-deal Brexit.

Investors were also anxious about the European Union member states approving a 750 billion euro recovery fund at a summit later this month.

Morning trading in some European markets, including Germany's DAX and Austria, was hit by a "technical issue" with the Frankfurt-based cash market system Xetra, exchange operator Deutsche Boerse said.

After a nearly three-hour outage, the DAX was down 0.4 per cent and the Austrian index rose 0.3 per cent.

Among individual stocks, Swiss speciality chemicals maker Clariant jumped 7 per cent as it completed the $1.6 billion sale of its masterbatches unit to PolyOne Corp, allowing the payment of a special dividend amounting to $3 per share.

Energy firms such as BP and Royal Dutch Shell rebounded from losses in the previous session as oil prices rose after a report showed US crude stockpiles posted a bigger drop than expected.

Travel & leisure stocks were the top gainers.

North America

The S&P 500 and Nasdaq indexes closed higher on Wednesday to kick off the third quarter as increasing optimism for a safe and effective COVID-19 vaccine eased concerns that another round of business lockdowns was likely.

Pfizer Inc’s shares rose more than 3 per cent after the drugmaker said a COVID-19 vaccine being developed with German biotech firm BioNTech showed promise and was found to be well-tolerated in early-stage human trials.

The gains put Pfizer among the top boosts to both the S&P 500 and Dow Industrials while helping improve the mood on Wall Street even as the US Centers for Disease Control and Prevention reported an increase of 43,644 new cases of the coronavirus. US-listed shares of BioNTech rose as much as 18.9 per cent before fading into the close, ending down 3.9 per cent.

Investors were also encouraged by some upbeat economic data as coronavirus-induced lockdowns have eased. A report on Wednesday showed a slump in global manufacturing had ebbed in June, with US figures hitting their highest level in more than a year.

On Thursday, all eyes will be on the Labor Department’s nonfarm payrolls report.

The Dow Jones Industrial Average fell 77.91 points, or 0.3 per cent, to 25,734.97, the S&P 500 gained 15.57 points, or 0.50 per cent, to 3,115.86 and the Nasdaq Composite added 95.86 points, or 0.95 per cent, to 10,154.63.

The Dow was held in check partly by a 1.6 per cent fall in Boeing Co shares, which lost ground for a second straight day following a 14 per cent surge on Monday.

Updates on the progress in various COVID-19 vaccine programs are being closely watched by investors, and have been partly responsible for Wall Street’s recent rally.

The S&P 500 closed its best quarter since 1998 on Tuesday, fuelled also by unprecedented levels of fiscal and monetary stimulus. Minutes from the Federal Reserve’s June policy meeting showed policymakers broadly agreed to make full use of the tools at the central bank’s disposal to support a recovery from the recession triggered by the coronavirus pandemic.

The Institute for Supply Management said its index of national factory activity jumped to a reading of 52.6 last month from 43.1 in May, ending three straight months of contraction, or readings below 50.

The ADP National Employment Report on Wednesday showed US private payrolls increased by 2.369 million jobs, but still less than expected in June.

FedEx Corp jumped 11.7 per cent after posting better-than-expected quarterly profit and revenue, helped by a surge in pandemic-fuelled home deliveries.

Drugmaker Amgen Inc climbed 8.2 per cent after a federal appeals court upheld two patents for the drugmaker’s multibillion-dollar rheumatoid arthritis drug Enbrel.

is content editor for Morningstar Australia

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