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Global Market Report - 20 March

Lex Hall  |  20 Mar 2020Text size  Decrease  Increase  |  
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The rollercoaster Australian stock market looks set to rise after oil prices jumped and central banks moved to ease liquidity concerns.

The SPI200 futures contract was up 119 points, or 2.47 per cent, at 4944 points at 8am Sydney time on Friday, suggesting a bounce at the open of trading.

David de Garis of NAB's morning call podcast says some of the optimism is coming from a flood of coronavirus management policy announcements and as central banks ease liquidity concerns.

US stocks managed to post gains on Thursday after recent steep losses as policymakers around the world took further emergency actions to try to help financial markets cope with deep coronavirus-driven economic damage.

The Dow Jones Industrial Average rose 189.63 points, or 0.95 per cent, to 20,088.55, the S&P 500 gained 0.48 per cent and the Nasdaq Composite added 2.3 per cent.

US oil prices surged 35 per cent overnight after a three-day sell off and the global benchmark Brent also lifted as financial markets assessed the impact of massive central bank stimulus measures.

The local bourse shrugged off an RBA rate cut on Thursday to close in negative territory.

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The ASX200 has lost 33.5 per cent in the past four weeks.

The Australian dollar plunged to a low of 55.08 US cents at one point on Thursday, a level last seen in October 2002.

One Aussie dollar was buying 57.52 US cents at 8am on Friday down from 56.89 US cents


China stocks ended lower on Thursday, but losses were limited as investors expected further stimulus measures from policymakers to shield the world’s second-largest economy from the impact of the coronavirus.

The blue-chip CSI300 index fell 1.3 per cent, to 3,589.09, while the Shanghai Composite Index shed 1 per cent to 2,702.13 points.

Hong Kong stocks ended lower on Thursday, though losses were contained on hopes of further stimulus to underpin China’s economy.

The Hang Seng Index dropped 2.6 per cent to 21,709.13, while the HSCE lost 2.7 per cent to 8559.64 per cent.

Japan’s share benchmark Nikkei fell to a 3½ -year low on Thursday, reversing early gains as panic selling over the coronavirus pandemic overshadowed a massive shot of stimulus from the world’s major central banks.

The Nikkei average rose as much as 2.6 per cent at one point but closed down 1.04 per cent at 16,552.83, its lowest close since November 2016. It has fallen about 30 per cent in the past four weeks.


European shares ended higher on Thursday after more emergency stimulus from the Bank of England, although questions remained over whether it would suffice to dampen the economic shock from the coronaries outbreak.

London stocks closed slightly up after the BoE cut interest rates to 0.1 per cent and ramped up its bond-buying. The move followed emergency measures from the European Central Bank earlier on Thursday.

The pan-European STOXX 600 index ended 2.9 per cent higher, although the day’s gains were a fraction of the losses incurred over a month-long selling spree. The index has lost more than a third of its value since a record peak hit last month.

“Ultimately none of this will, unfortunately, stop a UK recession, which like most of the developed world, now looks inevitable,” wrote James Smith, developed markets economist at ING, and Petra Krpata, chief EMEA FX and IR strategist at ING, referring to the BoE’s move and the stimulus package.

“But the hope is that many of these measures can help limit the increase in unemployment, and foster a swifter and smoother recovery when the virus-shutdowns have passed.”

Telecom stocks were among the best performing sectors for the day, rising about 4.7 per cent with Jefferies saying that certain facets of the sector could benefit from the outbreak.

Energy stocks jumped more than 3 per cent from a 24-year low, tracking gains in oil prices. However, a price war between major producers and weakening demand due to strain from the outbreak has seen prices wallowing at multi-year lows.

The STOXX 600 had dropped earlier in the day, as the ECB’s measures received a lukewarm reception from markets.

The resources sector was among the few sectors in the red for the day, as heavyweight London-listed miners were slightly pressured by strength in the pound.

The UK’s mid-cap FTSE 250 index dropped 1.4 per cent as London braced for a virtual shutdown because of the rapid spread of the virus.

Among individual movers, German pharmaceutical maker Bayer ended 3.6 per cent higher as it collaborated with the US government on the coronaries outbreak.

Irish lender AI Group bottomed out the STOXX 600, dropping about 24 per cent as Ireland’s five retail banks agreed to implement a loan repayment break of up to three months for those affected by the spread of coronaries.

North America

US stocks managed to post gains on Thursday after recent steep losses as policymakers around the world took further emergency actions to try to help financial markets cope with deep coronavirus-driven economic damage.

Nasdaq outperformed other major indexes, ending 2.3 per cent higher, fuelled by gains in Amazon.com, Microsoft and Facebook.

The Federal Reserve opened swap lines with central banks in nine new countries to ensure the world’s dollar-dependent financial system continued to function.

It was the latest in a host of steps taken by the US central bank over the last two weeks, including cutting borrowing costs to near zero and providing billions of dollars more for cheap credit.

The European Central Bank pledged late on Wednesday to buy 750 billion euros ($820 billion) in sovereign debt through 2020.

President Donald Trump, in another now-regular update for Americans hunkered down in their homes, called on US health regulators to expedite potential therapies aimed at treating Covid-19, the respiratory disease caused by the virus, while the White House sounded upbeat on the chances of passage of hundreds of billions of dollars of aid in Congress.

Policymakers will need to keep providing support in order to provide liquidity to the financial system, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.

“It is not just about the Fed,” Krosby said. “It is about the fiscal side of the equation. The question for the market is, how much do we actually need, and the severity of the crisis is suggesting we’re going to need amounts we never initially thought of.”

Even with the emergency moves, analysts in a Reuters poll gave a median 80 per cent chance of a US recession this year.

The recent sharp market volatility continued, with the S&P 500 index falling as much as 3.3 per cent during the session.

And Thursday’s gains did little to restore the markets after the pounding stocks have suffered in the past month. The Dow Jones Industrial Average erased virtually the last of its gains under Trump’s presidency on Wednesday.

The Dow Jones Industrial Average rose 188.27 points, or 0.95 per cent, to 20,087.19, the S&P 500 gained 11.29 points, or 0.47 per cent, to 2,409.39 and the Nasdaq Composite added 160.73 points, or 2.3 per cent, to 7150.58.

Helping the day’s sentiment, US crude oil prices spiked by 25 per cent in their largest single-day gain on record, while the S&P 500 energy index rose 6.8 per cent, leading gains among S&P 500 sectors.

“Active investors are using this as an opportunity to maybe pick up what might be perceived as bargains because nobody’s really sure how to value stocks right now,” said Robert Pavlik, chief investment strategist and senior portfolio manager at SlateStone Wealth LLC in New York.

Ford Motor Co was the latest major US corporation to bolster its cash reserves to ride out the virus impact, drawing down more than $15 billion from existing credit lines. Ford shares ended down 0.7 per cent.

The virus’ impact on jobs was also in focus as official data showed the number of Americans filing for unemployment benefits surged to a 2½-year high last week as companies in the services sector laid off workers because of the pandemic.

Late on Wednesday, New York Stock Exchange owner Intercontinental Exchange said the market would temporarily close its trading floors and move fully to electronic trading starting next week.

The S&P 500 posted three new 52-week highs and 94 new lows; the Nasdaq Composite recorded 13 new highs and 569 new lows.

Volume on US exchanges was 17.08 billion shares, compared to the 15 billion average for the full session over the last 20 trading days.


is senior editor for Morningstar Australia

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