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Global Market Report - 2 March

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

Australian shares are set to follow Wall Street higher as the US’s main index staged its strongest rise in more than six months amid a new vaccine approval and fiscal stimulus.

The Australian SPI 200 futures contract was up 54 points, or 0.8 per cent, at 6,811 points at 8.30am Sydney time on Tuesday, suggesting a positive start to trading.

The S&P 500 surged on Monday in its strongest one-day gain since June as bond markets calmed after a month-long selloff, while another covid-19 vaccine getting US approval and fiscal stimulus bolstered expectations of a swift economic recovery.

The Dow Jones Industrial Average surged 1.95 per cent to end at 31,535.51 points, while the S&P 500 gained 2.38 per cent to 3,901.82. The Nasdaq Composite jumped 3.01 per cent to 13,588.83.

Locally, former Reserve Bank governor Bernie Fraser has warned that If house prices continue to surge, ultra-low interest rates designed to fire up the economy could be undermined by inflation, The Australian reports.

On Monday, Australia's share market had its best day since November after investors saw bargains following Friday's big losses.

The S&P/ASX200 benchmark index closed higher by 116.3 points, or 1.74 per cent, to 6789.6.

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The rise follows a loss of 2.35 per cent on Friday.

The All Ordinaries on Monday closed higher by 102.1 points, or 1.47 per cent, at 7,042.7.

All sectors were higher, and the biggest gains were in property, 3.27 per cent.

Gold was down 0.5 per cent at $US1,725.38 an ounce; Brent oil was down 1.3 per cent to $US63.59 a barrel; Iron ore was down 0.7 per cent to $US174.55 a tonne.

Meanwhile, the Australian dollar was buying 77.75 US cents at 8.30am, up from 77.55 US cents at Monday’s close.

Asia

China's main Shanghai Composite index closed up 1.21 per cent at 3,551.40, while the blue-chip CSI300 index ended up 1.54 per cent.

Some analysts expect to see continued volatility in China's domestic markets as investors reprice policy normalisation.

Hong Kong shares rose on Monday, rebounding from the previous week's slump, as a semblance of calm in bond markets and optimism over progress in the US stimulus package helped global equities to rally.

At the close of trade, the Hang Seng index was up 472.36 points, or 1.63 per cent, at 29,452.57. It had dropped 3.64 per cent on Friday.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 1.34 per cent, while Japan's Nikkei index closed up 2.41 per cent.

Europe

European stocks ended higher on Monday after bond markets stabilized from a sharp selloff last week, with travel and leisure stocks leading gains on optimism over covid-19 vaccination programmes and a large US stimulus package.

The pan-regional STOXX 600 index rose 1.8 per cent, its best day since early November, after losing more than 2 per cent last week. Travel and leisure stocks added more than 3 per cent.

Data also showed manufacturing activity picked up pace in major euro zone economies in February, inspiring some confidence about an economic recovery this year, while a separate reading showed German inflation held steady in the month.

European stocks had retreated from one-year highs last week as the possibility of rising inflation and higher bond yields fuelled concerns over monetary policy tightening by central banks.

Accommodative policies and bumper stimulus measures have enabled stocks to recover from pandemic-driven lows last year.

Global stocks rallied on Monday tracking a pullback in yields, while the rollout of a third covid-19 vaccine in the US, along with progress towards a US$1.9 trillion ($2.56 trillion) stimulus package, also boosted sentiment.

“Equities should prove resilient, but the recent pick-up in real yields deserves to be watched. It is more toxic for highly valued risk assets, including growth stocks,” analysts at Generali Investments wrote in a note.

Overall, the analysts said they maintained “a moderate pro-risk tilt”, with potential pullback in stocks providing buying opportunities as economies look to re-open.

British stocks rose in anticipation of Finance Minister Rishi Sunak announcing more borrowing on top of his almost 300 billion pounds ($537 billion) of covid-19 spending and tax cuts in a budget statement on Wednesday.

Homebuilders such as Persimmon, Taylor Wimpey and Barratt Developments were the top gainers on the FTSE 100.

Among other movers, Spanish travel booking group Amadeus topped the STOXX 600 as expectations of a 2021 recovery in travel demand drove a slew of price target hikes by major brokerages.

British Airways-owner IAG also jumped 7 per cent on similar upgrades.

French food group Danone rose 1.4 per cent after it said it was taking a first step toward selling its stake in its Chinese dairy partner Mengniu Dairy, and would use the gains to buy back its own shares.

Swiss-listed shares of computer goods maker Logitech International rose 1.6 per cent after it raised its sales growth forecast to about 63 per cent for fiscal 2021, up from the 57–60 per cent range it previously expected.

North America

The S&P 500 surged on Monday in its strongest one-day gain since June as bond markets calmed after a month-long selloff, while another covid-19 vaccine getting US approval and fiscal stimulus bolstered expectations of a swift economic recovery.

Johnson & Johnson ended up 0.5 per cent, but off earlier highs, after it began shipping its single-dose vaccine after it became the third authorized covid-19 vaccine in the US over the weekend.

President Joe Biden scored his first legislative win as the House of Representatives passed his US$1.9 trillion coronavirus relief package early Saturday. The bill now moves to the Senate.

US bond yields eased after a swift rise last month on expectations of accelerated inflation due to bets on an economic rebound. The US 10-year treasury yield dipped to 1.449 per cent after hitting a one-year high of 1.614 per cent.

“The sentiment is risk-on with more investors showing interest towards cyclical stocks while a positive vaccination drive and better macro numbers are hinting towards a better growth environment,” said Keith Buchanan, portfolio manager at Globalt in Atlanta.

Data showed US manufacturing activity increased to a three-year high in February amid an acceleration in new orders.

All 11 S&P 500 sectors rallied, led by financials and technology.

Apple Inc, Microsoft Corp, Facebook Inc and Amazon.com Inc bounced back after a selloff last week in tech stocks. Apple rose over 5 per cent and was the strongest contributor to the S&P 500’s gains.

In extended trade, Zoom Video Communications jumped 10 per cent following its quarterly report.

The S&P 500’s rebound from its 50-day moving average, touched after Friday’s decline, is a bullish sign that is adding to investors’ enthusiasm, said CFRA Research Chief Investment Strategist Sam Stovall.

“It’s a positive signal, at least in the near term, that the recent weakness has dissipated,” Stovall said.

The Dow Jones Industrial Average surged 1.95 per cent to end at 31,535.51 points, while the S&P 500 gained 2.38 per cent to 3,901.82. The Nasdaq Composite jumped 3.01 per cent to 13,588.83.

The Russell 2000 index of smaller companies surged 3.37 per cent, putting its gain in 2021 at over 15 per cent, compared with the S&P 500’s gain of about 4 per cent in the same period.

Boeing Co jumped 5.8 per cent after United Airlines Holdings Inc ordered 25 new 737 MAX aircraft and moved up the delivery of others as it prepares to replace aging jets and meet expected post-pandemic growth in demand.

Warren Buffett’s enthusiasm for the future of the US and his company Berkshire Hathaway Inc has not been dimmed by the coronavirus pandemic, according to his annual letter to investors. Berkshire’s shares rallied 3.6 per cent.

Perrigo Co Plc jumped 4.7 per cent as the consumer healthcare products company said it would sell its underperforming generic drugs business for US$1.55 billion.

With Reuters

is senior editor for Morningstar Australia

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