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Global Market Report - 2 June

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

Australia's share market is poised for a flat start, although investors may be encouraged by Wall Street's belief in economic recovery and its playing down of violent social unrest.

The SPI 200 futures contract was higher by 9.0 points, or 0.15 per cent, to 5,837.0 at 8am Sydney time on Tuesday, indicating a flat start.

The Dow Jones, Nasdaq and S&P 500 in the US finished higher by less than 1.0 per cent overnight after a strong May rally.

The White House called for law and order after six nights of widespread, violent demonstrations triggered by the death of civilian George Floyd at the hands of police, even as the country reels from the economic effects of coronavirus pandemic-related lockdowns.

Kingsview Asset Management portfolio manager Paul Nolte said: "Most investors are saying (the protests) aren't going to destroy the economy. It's a roadblock but it's not as big as a pandemic."

In Australia, the Reserve Bank board will meet on Tuesday to consider the cash rate but economists do not expect the rate to change from its record low 0.25 per cent.

RBA governor Philip Lowe has said Australians can expect low rates for some time.

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The ABS will publish balance of payments data on financial transactions and business profits data for the March quarter.

The benchmark S&P/ASX200 index closed Monday up 63.5 points, or 1.1 per cent, at 5,819.2 points.

The All Ordinaries closed up 66.2 points, or 1.13 per cent, at 5,938.4 points.

The Aussie dollar has surged this week following a rise in iron ore prices and the release of better-than-expected Chinese manufacturing data.

The dollar continued climbing this morning and was buying 68.01 US cents at 8am, up from 67.46 US cents at the close of trade on Monday.

Asia

Chinese shares ended sharply higher on Monday, on stronger manufacturing data in May and after US President Donald Trump’s mild reaction to China’s security legislation for Hong Kong.

At the close, the Shanghai Composite index was up 2.21 per cent at 2,915.43. It was the biggest one-day percentage gain for the index since 24 March.

In Hong Kong, the Hang Seng index was up 3.36 per cent, its biggest one-day percentage gain since 25 March.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 2.47 per cent, while Japan’s Nikkei index closed up 0.84 per cent.

Europe

European shares rose on Monday, as signs of recovery for the continent’s manufacturers prompted investors to continue snapping up cyclical stocks.

The pan-European STOXX 600 index finished up 1.1 per cent, holding at its highest level since 9 March even as trading activity was dulled by market holidays for Germany, Switzerland, Denmark and Norway.

Growth-sensitive sectors beaten up by the coronavirus crisis led the gains, with travel & leisure jumping 3 per cent, while banks, miners and oil & gas companies rose between 2 per cent and 2.6 per cent.

While factory activity still contracted sharply across Europe in May, purchasing managers said April lows had passed as governments began to ease the tough coronavirus-led lockdown measures.

After crashing to its lowest reading in the survey’s nearly 22-year history in April, IHS Markit’s Manufacturing Purchasing Managers’ Index (PMI) for the euro zone rose to 39.4 from 33.4.

Investors also took relief as US President Donald Trump left the Phase One trade deal intact even as he began the process of ending special treatment for Hong Kong in response to China’s plans to impose new security legislation in the territory.

China has told state-owned firms to halt purchases of soybeans and pork from the United States, sources told Reuters.

Global markets kicked off June on a positive note, with the STOXX 600 recovering nearly 32 per cent since March lows as hopes of a COVID-19 vaccine, easing lockdowns and expectations of more stimulus from the European Central Bank, set to meet on Thursday, helped improve risk appetite.

MasMovil Ibercom surged 23.8 per cent as buyout funds KKR, Cinven and Providence said they had made a 2.96 billion euro ($4.85 billion) board-backed bid for the Spanish telecoms operator.

Italy’s Mediobanca jumped 8.1 per cent after billionaire Leonardo Del Vecchio confirmed he had asked for green light from the European Central Bank to increase his stake in the company.

Primark-owner Associated British Foods gained 8 per cent as it announced it was working to re-open all the fashion retailer’s 153 stores in England on 15 June.

UK fashion brand Ted Baker reversed course to trade 4.1 per cent higher as it rolled out plans to raise 95 million pounds ($173 million) through a stock issue to help it ride out the COVID-19 crisis.

North America

US stocks posted gains on Monday as signs of US economic recovery helped offset jitters over increasingly violent social unrest amid an ongoing pandemic and rising US-China tensions.

All three major stock indexes began the month with gains of less than 1 per cent on the heels of a strong May rally.

Market leaders Facebook, Apple and Amazon.com provided the biggest lift to the S&P 500 and the Nasdaq, while Boeing Co gave the Dow its biggest boost.

The White House called for “law and order” after six nights of widespread, violent demonstrations triggered by the death of George Floyd at the hands of police, even as the country reels from the economic effects of pandemic-related lockdowns.

The unrest has prompted retailers such as Target Corp and Walmart Inc to shutter a portion of their stores, while Amazon.com has scaled back deliveries.

Further weighing on sentiment, China ordered state-owned firms to halt purchases of US soybeans and pork, in retaliation for President Donald Trump’s announcement that he would end special treatment for Hong Kong following China’s move to tighten security measures in the territory.

But economic data boosted investor sentiment, with the Institute for Supply Management’s purchasing managers’ index showing the contraction of factory activity was slowing.

A fuller picture of the economic damage wrought by pandemic-related lockdowns is expected on Friday, when the Labor Department’s jobs report is expected to show unemployment skyrocketing to 19.7 per cent.

The Dow Jones Industrial Average rose 91.91 points, or 0.36 per cent, to 25,475.02, the S&P 500 gained 11.42 points, or 0.38 per cent, to 3,055.73 and the Nasdaq Composite added 62.18 points, or 0.66 per cent, to 9,552.05.

Of the 11 major sectors in the S&P 500, all but healthcare ended the session in positive territory.

Pfizer Inc fell 7.1 per cent after the drugmaker’s breast cancer treatment was deemed unlikely to meet the main goal of a late-stage study.

Gilead Sciences Inc slid 3.4 per cent following mixed results in a late-stage study of its COVID-19 drug candidate, remdesivir.

Meanwhile, rival firms CTI Biopharma Corp and Proteostasis Therapeutics Inc advanced 16.7 per cent and 8.4 per cent respectively, following reports that their potential COVID-19 treatments showed promise.

Shares in cosmetics company Coty jumped 20.9 per cent after the appointment of Chairman Peter Harf as its new chief executive officer.

is senior editor for Morningstar Australia

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