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Global Market Report - 20 August

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

Australian shares are set for a subdued start following negative leads from Wall Street, which fell on fears over the uncertainty shrouding the US recovery.

The Australian SPI 200 futures contract was down 0.15 points, or 0.25 per cent, to 6,102 points at 8.30am Sydney time on Thursday, suggesting a negative start to trading.

Wall Street finished lower on Wednesday after the Federal Reserve raised concerns that the US economic recovery from the devastating effects of the pandemic faced a highly uncertain path.

The Dow Jones Industrial Average closed 85.19 points lower, or 0.31 per cent, to 27,692.88, the S&P 500 lost 14.93 points, or 0.44 per cent, to 3,374.85 and the Nasdaq Composite dropped 64.38 points, or 0.57 per cent, to 11,146.46.

Locally, Qantas has posted a $2.7 billion loss before tax after recording a $1.4 billion write down of assets including its A380 fleet and $642 million in one-off redundancy and other costs as part of restructuring the business for recovery.

The S&P/ASX200 benchmark index rose by 44.2 points, or 0.72 per cent, to 6,167.6 points on Wednesday. The All Ordinaries index finished up by 45.4 points, or 0.72 per cent, at 6,314.1.

Gold was down 3.2 per cent to $US1,938.65 an ounce; Brent oil was down 0.6 per cent to $US45.17 a barrel; iron ore was up 0.4 per cent to $US129.09 a tonne

Meanwhile, the Australian dollar was buying 72.49 US cents at 8.30am, up from 72.30 US cents at Wednesday’s close.

Asia

Shanghai stocks ended lower on Wednesday after three consecutive sessions of gains, as investors took profits in healthcare and technology stocks with hefty valuations while a trade talk delay with the US also dampened sentiment.

At the close, the Shanghai Composite index was down 1.24 per cent at 3,408.13.

Hong Kong shares ended lower as investors booked gains in energy and technology stocks after a recent rally, while a delay in Sino-US trade talks weighed on sentiment.

At the close of trade, the Hang Seng index was down 188.47 points, or 0.74 per cent, at 25,178.91. The Hang Seng China Enterprises index fell 1.08 per cent to 10,313.31.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.42 per cent, while Japan's Nikkei index closed up 0.26 per cent.

Europe

European stocks closed higher on Wednesday following new record highs for Wall Street’s main indexes, while UK airlines rallied on hopes of a shorter quarantine period for travelers.

After a feeble start, the pan-European STOXX 600 climbed 0.7 per cent, with stock markets in Germany, London and France all gaining ground.

British Airways-owner IAG surged 7.6 per cent and easyJet  rose 3.3 per cent on news that Britain’s government was working with Heathrow Airport on a plan to use covid-19 testing to help shorten quarantine times.

The travel sector has come under pressure as several countries in Europe have imposed new travel curbs because of a pick-up in coronavirus cases.

Danish shipping group Maersk, a bellwether for global trade, issued forecast-beating full-year earnings and said it expected demand for moving containers at sea to return to pre-covid levels in the first half of next year. Its shares jumped 5.0 per cent.

Trillions of dollars in stimulus and a rally in technology stocks drove the S&P 500 to new record highs, with Apple becoming the first publicly listed US company to record US$2 trillion ($2.78 trillion) in market capitalisation.

The US Federal Reserve’s minutes from its latest policy meeting are due later on Wednesday, with investors looking for clues on further action that the US central bank could take in September.

Investors were unfazed by data that showed a measure of euro zone inflation surged in July, surprising many economists who interpreted the figure as “almost certainly more noise than signal.”

Brewery Royal Unibrew jumped 9.8 per cent to the top of STOXX 600 after it raised its 2020 earnings forecast.

Utilities took a hit as RWE fell 4.6 per cent as the German company launched a share issue to finance its purchase of wind turbine maker Nordex’s project development pipeline.

Finland’s biggest utility Fortum slid 4.9 per cent as it reported an 11 per cent fall in its underlying second-quarter operating profit.

The biggest decliner on the STOXX 600 was Belgian biotech company Galapagos, which slumped 24.4 per cent after US health regulators rejected its lead product filgotinib to treat rheumatoid arthritis.

North America

In the minutes of the July Fed meeting, the policy committee said that the swift rebound in employment seen in May and June had likely slowed and that additional “substantial improvement” in the labor market would hinge on a “broad and sustained” reopening of business activity.

The Fed also ruled out for now more dovish monetary policy measures such as yield-curve control.

Earlier in the session, the S&P 500 hit an intraday record of 3,399.54 and Nasdaq of 11,257.422.

Losses on Wall Street came after Apple Inc became the first publicly listed US company to cross US$2 trillion in market capitalisation. Already the most valuable listed company in the world, the iPhone maker provided the biggest support to the three main indexes.

The company’s stock was boosted by expectations of long-term success from the country’s biggest tech names in a post-coronavirus world.

Strong results from retailers Target and Lowe’s also lifted sentiment earlier in the session.

The S&P 500 closed at a record on Tuesday in what has been its fastest recovery ever from a bear market. The Nasdaq recouped its losses from the pandemic sell-off two months ago, but the Dow is still nearly 5 per cent below February’s record closing high.

is content editor for Morningstar Australia

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