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Global Market Report - 20 April

Lex Hall  |  20 Apr 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is tipped for a subdued start to the week as investors brace for an insight to just how hard the coronavirus has hit the local economy.

The ASX 200 futures was last trading just 1.0 point higher, or 0.02 per cent, having already absorbed gains from Wall Street stocks boosted by coronavirus treatment hopes and signs US president Donald Trump would reopen the world's largest economy.

This points to a flat open for the local benchmark as the market prepares to learn more about the economic impacts of COVID-19 restrictions.

Results of a new Australian Bureau of Statistics survey on the household impacts of COVID-19 will be released on Monday while weekly payroll and wages data on Tuesday will give some guidance on how employment and wages are tracking.

The ABS will also bring forward the release of March retail figures when it publishes preliminary numbers on Wednesday.

The ASX200 closed up 5.2 per cent for the holiday-shortened week, which was its fourth straight week of gains, and the best week since a 6.3 per cent gain in January 2016.

After plunging 38.8 per cent between 20 February and 23 March, the market has risen 24.6 per cent.

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The Australian dollar is worth 63.63 US cents, up from 63.40 US cents at Friday's close.

Asia

China stocks ended higher on Friday as investors looked past the country’s first quarterly economic contraction in at least 28 years, pinning their hopes on a state-supported recovery as the impact of the coronavirus pandemic recedes.

At the close, the Shanghai Composite index was up 0.66 per cent at 2,838.49.

The blue-chip CSI300 index was up 0.98 per cent, with its financial sector sub-index adding 1 per cent, the consumer staples sector up 1.67 per cent, the real estate index up 0.57 per cent and the healthcare sub-index down 0.72 per cent.

In Hong Kong, the Hang Seng index ended 373.55 points higher, or 1.56 per cent at 24,380.00.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 2.07 per cent, while Japan’s Nikkei index closed up 3.15 per cent. 

Europe

European shares closed higher on Friday, as President Donald Trump’s plans to reopen the US economy, following similar steps announced in Europe, supported hopes of a resumption of activity after weeks of lockdown.

Investors also drew comfort from reports of a potential drug to treat COVID-19 made by US drugmaker Gilead Sciences.

The pan-European STOXX 600 index was up 2.6 per cent, staying positive for a second straight week, gaining in seven of the past eight sessions on tentative signs the pandemic was peaking in the worst hit parts of the continent.

All the major European sub-sectors were higher, with mining stocks on track for their best day in more than three weeks, driven by higher commodity prices.

The benchmark STOXX 600 has recovered 24 per cent since hitting an eight-year low in March, powered by a raft of global stimulus, but gains were subdued in the past week with economic data and quarterly earnings underlining the business impact of lockdown measures.

The economic landscape in two of the world’s biggest economies gave cause for concern. Data from China showed its worst economic contraction in almost three decades, while weekly US jobless claims pushed the total for the past month above 20 million, yet there was no sign of weakness on Wall Street or in Asia.

Late on Thursday, Trump laid out guidelines to reopen US states in a staggered, three-stage approach, but his plan was thin on detail and left decisions largely up to individual states.

It followed announcements on easing restrictions in Germany, Italy, Spain and some other parts of Europe.

Lifting the mood further on Friday, a report gave encouraging data from trials of Gilead Sciences’ experimental drug remdesivir in severe COVID-19 patients.

Airbus jumped 6.8 per cent and was on course for its best day in three weeks as US rival Boeing said it would resume commercial airplane production next week in Washington state after suspending operations last month.

The global aerospace industry has been hammered this year by the suspension of global travel, forcing large-scale production halts and mass furloughs. Airbus and Boeing have lost more than half their value since January.

Nokia rose 1.2 per cent on a report it was working with an investment bank to defend itself from a hostile takeover.

North America

US stocks rose on Friday and also posted gains for the week, boosted by a surge in Boeing shares, President Donald Trump’s plan to reopen the coronavirus-battered economy and hopes of a potential drug by Gilead to treat COVID-19.

The Nasdaq added 6.1 per cent for the week and registered its biggest two-week percentage gain since 2001.

Boeing shares soared nearly 15 per cent on plans to restart commercial jet production in Washington state after halting operations last month due to the COVID-19 pandemic.

Gilead Sciences Inc surged almost 10 per cent following a report that patients with severe symptoms of COVID-19, the respiratory disease caused by the coronavirus, had responded positively to its experimental drug remdesivir. The report cited partial data from a University of Chicago hospital, one of 152 locations participating in the trial.

With no treatments or vaccines currently approved for the coronavirus, the news helped lift global equity markets. But Gilead said the totality of the data from the trial needed to be analysed, and it expected to report results from a study testing the drug in severe COVID-19 patients at the end of April.

The S&P 500 is up nearly 30 per cent from its March trough following a raft of global stimulus and hopes that the spread of the virus was nearing a peak in the US.

However, the S&P remains about 15 per cent off its all-time high, and strategists have warned of a deep economic slump from the halt in business activity and layoffs.

Some US states are expected to begin announcing timetables for lifting restrictions. On Thursday, Trump unveiled guidelines for a staggered, three-stage process by states to lift restrictions on business and social life to curb the pandemic.

The Dow Jones Industrial Average rose 704.81 points, or 2.99 per cent, to 24,242.49, the S&P 500 gained 75.01 points, or 2.68 per cent, to 2,874.56 and the Nasdaq Composite added 117.78 points, or 1.38 per cent, to 8650.14.

For the week, the Dow added 2.2 per cent and the S&P 500 rose 3 per cent.

The reopening guidelines “provide some hope and optimism for folks and the market and the whole economy. It’s a start,” said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.

Bradshaw, who owns Boeing shares, said the planemaker’s news was positive as well. “I certainly haven’t given up on it,” he said.

Bank stocks recovered after four straight days of losses triggered by lenders’ reporting several billion dollars in reserves to cover potential loan defaults. The S&P 500 financial index ended up 5.6 per cent, while the S&P energy index jumped 10.4 per cent.

Apple Inc fell 1.4 per cent as Goldman Sachs downgraded the stock on expectations of a 36 per cent drop in iPhone shipments during the company’s fiscal third quarter due to coronavirus-related lockdowns.

is senior editor for Morningstar Australia

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