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Global Market Report - 20 January

Lex Hall  |  20 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to edge up following gains on Wall St as investors welcomed Janet Yellen's push for more robust stimulus relief.

The Australian SPI 200 futures contract was up 12 points, or 0.2 per cent, at 6,689 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

Wall Street’s main indexes rose on Tuesday as US Treasury Secretary nominee Janet Yellen advocated for a hefty fiscal relief package before lawmakers to help the world’s largest economy ride out a pandemic-driven slump.

The Dow Jones Industrial Average rose 117.84 points, or 0.38 per cent, to 30,932.1, the S&P 500 gained 30.63 points, or 0.81 per cent, to 3,798.88 and the Nasdaq Composite added 196.10 points, or 1.51 per cent, to 13,194.60.

Republican Senate leader Mitch McConnell has launched a stinging attack on Donald Trump on his last day as president, blaming him for lying to his supporters and provoking them ahead of the Capitol riots.

The S&P/ASX200 benchmark index closed higher by 79.6 points, or 1.19 per cent, to 6,742.6 on Tuesday.

The index is at its highest closing level since late February last year, when investors rapidly sold stock due to the coronavirus.

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The All Ordinaries closed higher by 79.6 points, or 1.15 per cent, at 7,015.0.

Major sectors financials, materials and health all had gains of more than one per cent.

Gold was flat at $US1,840.58 an ounce; Oil was up 2.2 per cent to $US55.96 a barrel; Iron ore was down 1.6 per cent to $US171.33 a tonne.

Meanwhile, the Australian dollar was buying 76.91 US cents at 8.30am, down from 77.17 US cents at Tuesday's close.

Asia

Covid-19 cases hit market sentiment, with consumer discretionary and materials stocks leading the retreat.

The blue-chip CSI300 index fell 1.5 per cent to 5,437.52, while the Shanghai Composite Index slipped 0.8 per cent to 3,566.38.

Hong Kong stocks closed at a 20-month high on Tuesday, helped by steady and robust demand from investors in mainland China for shares in the Asian financial hub.

The Hang Seng index rose 2.7 per cent, to 29,642.28, the highest closing level since May 3, 2019, while the China Enterprises Index gained 2.4 per cent, to 11,734.33.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.24 per cent, while Japan’s Nikkei index closed up 1.39 per cent.

Europe

European stocks slipped on Tuesday, dragged down by retailers, travel and banking stocks, as the possible extension of Germany’s coronavirus lockdown raised concerns about the damage to earnings and economic growth.

After gaining almost half a percent at the open, the pan-European STOXX 600 index inched lower as the session wore on and closed down 0.2 per cent.

Germany’s DAX also fell 0.2 per cent even as the ZEW economic research institute’s survey showed investor sentiment in Europe’s largest economy rose by more than expected in January.

France’s CAC 40 declined 0.3 per cent and London’s FTSE 100 slipped 0.1 per cent.

European bourses started the day in an optimistic mood over China’s economic strength after data confirmed the world’s second-largest economy was one of the few to grow over 2020.

However, the prospect of longer lockdowns kept investors on edge as German Chancellor Angela Merkel and state premiers agreed to extend a lockdown for most shops and schools until 14 February, sources told Reuters.

Defensive sectors that tend to be less affected by economic cycles such as healthcare and utilities gained, while retail, mining and travel and leisure took the biggest hits.

Among the companies that reported quarterly results, Switzerland’s Logitech fell 6.4 per cent after hitting an all-time high earlier in the wake of raising its 2021 sales growth and profit outlook.

Miner Rio Tinto slipped despite reporting a 2.4 per cent rise in fourth-quarter iron ore shipments, helped by industrial activity in top consumer China.

As European earnings gather pace, analysts are predicting a 26.2 per cent decline in fourth-quarter profit for companies listed on the STOXX 600, as per Refinitiv IBES data.

However, the main worry for investors is that an expected 43.5 per cent and 81.1 per cent rebound in first and second quarter earnings could be called into question as the European economy reels from the impact of stringent covid-19 lockdowns.

“Going in to the Q4 earnings season investors are more likely to be concerned with the outlook than historic performance given that the situation with the virus is changing so quickly,” said Edward Stanford, head of European equity strategy at HSBC.

“With the prospects for economic growth potentially coming under pressure, we see a little bit of downward pressure on consensus earnings for Europe for 2021.”

Danone rose 2.7 per cent after an activist investor called on the French food group’s chief executive to step down after it took a stake in the company late last year.

Weighing on the FTSE 100, Ladbrokes owner Entain tumbled 11.9 per cent after US casino operator MGM Resorts ditched plans to buy the British company after it rejected an $11 billion takeover approach this month.

North America

Wall Street’s main indexes rose on Tuesday as US Treasury Secretary nominee Janet Yellen advocated for a hefty fiscal relief package before lawmakers to help the world’s largest economy ride out a pandemic-driven slump.

At her confirmation hearing, Yellen said the benefits of a big package outweigh the costs of a higher debt burden.

President-elect Joe Biden, who will be sworn into office on Wednesday, outlined a US$1.9 trillion ($2.5 trillion) stimulus package proposal last week to jump-start the economy and accelerate the distribution of vaccines.

“Today it’s really all about Janet Yellen, and the push that she is taking for stimulus,” said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta, adding that the focus on stimulus “sets an underpinning for the markets to continue to move higher.”

With earnings season under way, Bank of America initially rose as it also topped fourth-quarter profit estimates and joined JPMorgan, Citigroup Inc and Wells Fargo & Co in releasing some cash reserves to cover for coronavirus-driven loan losses, underscoring its confidence in the economy. The stock pared gains however and was last about flat.

Big US bank Goldman Sachs Group Inc’s fourth-quarter profit more than doubled, dwarfing estimates after another blowout performance at its trading and underwriting business, but its shares also gave up early gains.

Wall Street’s main indexes rallied to record highs recently on hopes of a speedy economic recovery fueled by a hefty fiscal stimulus package and vaccine distribution.

Eight of 11 S&P sectors advanced, with economy-linked energy , leading the way higher.

The defensive utilities, consumer staples and real estate were the only ones in the red.

The Dow Jones Industrial Average rose 117.84 points, or 0.38 per cent, to 30,932.1, the S&P 500 gained 30.63 points, or 0.81 per cent, to 3,798.88 and the Nasdaq Composite added 196.10 points, or 1.51 per cent, to 13,194.60.

General Motors shares jumped as one of the best performers on the S&P 500 after self-driving car marker Cruise, which the automaker is a majority shareholder, said it would partner with Microsoft to accelerate the commercialization of self-driving vehicles.

Tesla Inc shares rose after Jefferies raised its earnings estimates ahead of the electric-car maker’s fourth-quarter results next week.

Boeing Co shares climbed as Canada said it would lift a near two-year flight ban on its 737 MAX following two fatal crashes involving the model while a final clearance from Europe to resume flying the jet is expected next week.

With Reuters

is content editor for Morningstar Australia

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