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Global Market Report - 20 February

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

Australia's share market is set to follow global markets higher as coronavirus fears abate.

The SPI200 futures contract was up 15 points, or 0.21 per cent, at 7103 at 8am Sydney time on Thursday.

The Australian share market hit a record closing high on Wednesday then US, European and Asian markets closed on positive notes after stimulus plans from China.

On Wall St, the Dow Jones Industrial Average rose 115.5 points, or 0.4 per cent, to 29,347.69, the S&P gained 0.47 per cent, and the Nasdaq Composite added 0.87 per cent.

Companies to watch on Thursday include Qantas, Sydney Airports, Boral, Austal, Beacon Lighting, Bingo, Coca-Cola Amatil, Domain, Iluka, Integral Diagnostics, Lendlease, Medibank, Origin, Perpetual, Santos, The Star Group and Whitehaven Coal.

There will also be January's labour force report for investors to think about.

The Australian dollar was buying 66.77 US cent at 8am, down from 66.92 US cents s the market closed on Wednesday.

Asia

Shares in Shanghai ended a three-day winning streak on Wednesday as worries persisted over the spreading coronavirus epidemic, which has claimed more than 2000 lives and weighed on business activity in the country.

At the close, the Shanghai Composite index was down 0.3 per cent at 2975.40. The index rose in the previous three trading days. The blue-chip CSI300 index was down 0.2 per cent.

Hong Kong stocks ended higher on Wednesday. The Hang Seng index was up 0.5 per cent at 27,655.81, while the Hang Seng China Enterprises index rose nearly 1 per cent.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.5 per cent, while Japan’s Nikkei index closed up 0.9 per cent.

Europe

European shares notched a fresh record high on Wednesday, as a decline in the number of new coronavirus cases and hopes of more stimulus from Beijing helped a recovery from fears of a sustained hit to global supply and demand.

A broad-based rally saw the pan-European STOXX 600 index end up 0.8 per cent, led by chipmakers that were hit last session by a revenue warning from iPhone maker Apple due the outbreak.

Dialog Semiconductor, STMicroelectronics and AMS, were among the top performers on the day.

Lending weight to forecasts that the epidemic might ebb by April, data showed the number of new virus cases in China fell for a second straight day. Rising hopes that China will cut its benchmark lending rate on Thursday to curb damage from the outbreak also lent support.

But the number of companies that forecast a hit to business from the outbreak continued to increase.

Sportswear retailers Adidas and Puma, which make almost a third of their sales in Asia, said their business was being hurt by store closures in China and fewer Chinese tourists shopping in other markets due to the epidemic.

Still, European shares have gained more than 4 per cent since mid January when the outbreak started to squeeze markets. Analysts ascribe this partly to hopes that the damage might be temporary as pent-up demand might see a bumper second quarter should the outbreak be contained.

Puma’s strong fourth quarter saw it top the STOXX 600, despite the warning, and pull up Adidas. Other luxury stocks also rallied, with LVMH and Gucci-owner Kering rose 2.5 per cent and 3 per cent respectively.

Commodity-linked stocks and the auto sector - Tuesday’s biggest casualties - also recovered. China being the biggest consumer of iron ore, and the virus epicentre of Hubei being an auto manufacturing hub have seen both these sectors whipsaw since the outbreak.

London's FTSE rose 1 per cent as a weak pound spurred a rally in its internationally focused blue-chips. Data showing an unexpected surge in UK inflation in January had knocked the currency.

All eyes will now be on a flash reading of the Purchasing Managers’ Index (PMI) for the euro zone due Friday, to gain more insights into the economic fallout from the outbreak.

Italy's main index rose 1 per cent, adding to Tuesday's gains and ending at its highest since August 2008 on hopes of further consolidation among the country's banks after Intesa Sanpaolo's 4.86 billion euro bid for UBI Banca.

North America

The S&P 500 and Nasdaq rose to record closing highs on Wednesday as optimism that China would take more measures to prop up its economy eased concerns about the economic impact of the coronavirus epidemic.

Stocks held gains following the release of minutes from the US Federal Reserve’s last policy meeting, which showed policymakers were cautiously optimistic about their ability to hold interest rates steady this year while acknowledging new risks caused by the virus outbreak.

The number of new coronavirus cases dropped for a second straight day in China.

China is widely expected to cut its benchmark lending interest rate on Thursday, which would add to measures aimed at limiting the impact from business shutdowns and travel curbs on the world’s second-largest economy.

Apple rose 1.4 per cent, recouping most of the losses in the previous session after a surprise sales warning that highlighted concerns about the coronavirus’ impact on global supply chains.

The S&P 500 technology sector also rose, ending up 1.1 per cent. Among sectors, it was the second-biggest percentage gainer after energy, which rose 1.3 per cent.

Oil prices overall gained 2 per cent on the back of slowing coronavirus cases.

The Dow Jones Industrial Average rose 115.84 points, or 0.4 per cent, to 29,348.03, the S&P 500 gained 15.86 points, or 0.47 per cent, to 3386.15 and the Nasdaq Composite added 84.44 points, or 0.87 per cent, to 9817.18.

Also helping the technology sector was a 6.1 per cent gain in chipmaker Nvidia Corp after Bernstein raised its shares to “outperform.”

Among other stocks, Garmin jumped 6.7 per cent after the wearable fitness device maker forecast full-year revenue above analysts’ estimates.

is content editor for Morningstar Australia

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