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Global Market Report - 2 September

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

Australian shares are set to open higher as tech stocks helped record gains on Wall Street and stimulus talks boosted sentiment.

The Australian SPI 200 futures contract was up 10 points, or 0.2 per cent, to 5,937 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

The S&P 500 and Nasdaq boasted record closing highs on Tuesday with technology leading the charge as Apple and Zoom Video soared while economic data and moves toward stimulus talks in Washington helped fuel optimism.

The Dow Jones Industrial Average rose 215.61 points, or 0.76 per cent, to close at 28,645.66, the S&P 500 gained 26.34 points, or 0.75 per cent, to 3,526.65 and the Nasdaq Composite added 164.21 points, or 1.39 per cent, to 11,939.67. 

The S&P/ASX200 benchmark index finished down 107.1 points, or 1.77 per cent, to 5,953.4 points on Tuesday. The loss was the steepest since the drop of 2.04 per cent on 31 July.

The All Ordinaries index closed lower by 102.7 points, or 1.64 per cent, to 6,143.2.

Locally, the June quarter national accounts are expected to reveal two consecutive quarters of negative growth, the accepted definition of a recession. 

Gold is up 0.1 per cent to $US1,970.23 an ounce; Brent oil is up 0.9 per cent to $US45.69 a barrel: iron ore is up 0.2 per cent to $US124.66 a tonne.

Meanwhile, the Australian dollar was buying 73.69 US cents at 8.30am, down from 74.06 US cents at Tuesday’s close.

Asia

China stocks closed higher on Tuesday, led by new energy vehicle-related and mining shares, as strong factory data reflecting a bounce-back in its economy from the coronavirus crisis lifted sentiment.

The Shanghai Composite index ended 0.44 per cent higher at 3,410.61.

The blue-chip CSI300 index was up 0.54 per cent, with the financial sector sub-index gaining 0.08 per cent, the consumer staples sector rising 0.21 per cent, the real estate index falling 0.25 per cent and the healthcare sub-index sliding 0.36 per cent.

Hong Kong shares finished higher on Tuesday, led by shares of tech firms, as sentiment was lifted by strong readings on China’s manufacturing sector that reflected a bounce-back in the world’s second-largest economy from the coronavirus crisis.

The Hang Seng index closed up 7.80 points or 0.03 per cent at 25,184.85. The Hang Seng China Enterprises index rose 0.22 per cent to 10,013.32. 

The sub-index of the Hang Seng tracking energy shares dipped 0.7 per cent, while the IT sector rose 2.11 per cent, the financial sector ended 0.12 per cent lower and the property sector dipped 1 per cent.

Europe

European shares fell for a fourth straight session on Tuesday due to losses in British blue chips and weak euro zone inflation data, while the technology sector outperformed on gains in major Apple suppliers.

Apple suppliers in the region rose after the iPhone maker was reported to have asked suppliers to make at least 75 million 5G phones for later this year, propping up the technology index.

STMicroelectronics, Dialog Semiconductor, Infineon Technologies and ASML were up between 1 per cent and 4 per cent.

The pan-European STOXX 600 index ended 0.4 per cent lower after swinging in a range of 0.8 per cent to negative 1 per cent. The benchmark index has fallen behind its Wall Street peers this year, sticking to a tight trading range since June amid signs of a stalling euro zone economic recovery.

The European volatility index rose as much as 1 point to 27.8950 during the session.

Inflation in the bloc turned negative last month for the first time since May 2016, putting further pressure on the European Central Bank to inject yet more stimulus to generate price growth, which has undershot its target for over seven years.

A recovery in local manufacturing activity continued through August, a survey showed.

Travel and leisure stocks were the worst performing European sector for the day, as spiking covid-19 cases in popular tourist destination Portugal spurred concerns about the country being quarantined.

British blue-chip stocks fell in catch-up trade after a holiday on Monday, touching a more than three-month closing low.

Financial stocks, particularly EU banks, marked a second straight day of losses. Rabobank’s Mevissen said recent selling in financials was driven by expectations of an increased amount of bankruptcies in the second half of the year, due to the impact of the novel coronavirus.

China-sensitive sectors such as basic resources rose after robust manufacturing data from the country pushed up base metal prices.

Telecom Italia fell 2.1 per cent after its board approved a sale of a minority stake in its last-mile grid to US investment firm KKR, while endorsing a government plan to create a single ultra-fast network with rival Open Fiber.

North America

Tuesday’s rally added to Wall Street’s fifth straight monthly gain and the S&P 500’s strongest August advance in more than three decades, which was also mostly thanks to technology stocks and central bank support.

Apple Inc rose just under 4 per cent on Tuesday, a day after its stock split and after a report said the company had asked suppliers to make at least 75 million 5G iPhones for later this year.

Zoom Video Communications Inc surged 40.8 per cent after the videoconferencing company raised its annual revenue forecast by more than 30 per cent as it converted more of its huge free user base to paid subscriptions. Along with Amazon.com Inc, it provided Nasdaq’s biggest boost for the day.

Investors cited technology momentum as the primary reason for Tuesday’s gains, with some help from data and politics.

Tech companies have benefited from the pandemic-induced work-from-home trends and lower interest rates, said Greg Boutle, US head of equity & derivative strategy at BNP Paribas in New York.

US Treasury Secretary Steven Mnuchin said he would telephone House Speaker Nancy Pelosi about stalled coronavirus aid negotiations later on Tuesday and White House chief of staff Mark Meadows said he expects Senate Republicans to bring up a targeted covid-19 relief bill next week.

Earlier in the day ISM data showed US factory activity expanded for the third straight month to a reading of 56.0 in August, the highest since November 2018. The figures follow encouraging manufacturing surveys from China and Europe earlier in the day.

However, employment continued to lag, according to ISM data, supporting views that the labor market recovery was losing momentum. Investors will keep a close eye on the monthly US jobs report due on Friday.

The S&P ended the session more than 4 per cent above its pre-crisis record, reached in February, while the Nasdaq finished 21.7 per cent above its February peak in its 42nd closing high for 2020. The blue-chip Dow, meanwhile, was still 3 per cent under its record.

Of the S&P’s 11 major sectors the biggest percentage gainers were materials, information technology and consumer discretionary

But some strategists cautioned there could be more market volatility ahead as US politics will take center stage in the coming weeks. Republican President Donald Trump, who is running for re-election against Democratic presidential nominee Joe Biden, has seen his polling gap with the former vice president narrow recently.

Tesla Inc fell 4.7 per cent after the electric-car maker announced plans to raise up to $5 billion through a share sale program a day after its 5-for-1 stock split.

is content editor for Morningstar Australia

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