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Global Market Report - 21 January

Lex Hall  |  21 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise as the inauguration of Democrat Joe Biden as US president pushes Wall Street to a record high.

The Australian SPI 200 futures contract was up 30 points, or 0.5 per cent, at 6,743 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

US stocks closed at record highs on Wednesday as Joe Biden was sworn in as the 46th US president, while solid results from Netflix sparked a rally in shares of “stay-at-home” beneficiaries.

The Dow Jones Industrial Average rose 257.86 points, or 0.83 per cent, to 31,188.38, the S&P 500 gained 52.94 points, or 1.39 per cent, to 3,851.85 and the Nasdaq Composite added 260.07 points, or 1.97 per cent, to 13,457.25.

Locally, IFM Investors, the $158 billion money manager owned by the industry superannuation sector, sin-binned Westpac over the Austrac money-laundering scandal and is continuing to restrict its exposure to the bank’s bonds, The Australian reports.

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.

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 up 1.5 per cent at $US1,867.84 an ounce; Oil was up 0.5 per cent to $US56.20 a barrel; Iron ore was down 0.5 per cent to $US170.55 a tonne.

Meanwhile, the Australian dollar was buying 77.40 US cents at 8.30am, up from 77.29 US cents at Wednesday's close.

Asia

China's main Shanghai Composite index closed up 0.47 per cent at 3,583.09 points, while the blue-chip CSI300 index ended up 0.72 per cent.

Hong Kong shares ended at their highest level in more than 20 months on Wednesday, extending gains for the fifth straight session boosted by gains in tech stocks.

The Hang Seng index ended up 320.19 points or 1.08 per cent at 29,962.47, its highest closing since May 3, 2019. The Hang Seng China Enterprises index closed 1.83 per cent higher at 11,949.35.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 2.03 per cent, while Japan's Nikkei index closed down 0.38 per cent.

Europe

European stocks rose on Wednesday after Dutch chip equipment maker ASML and Swiss luxury group Richemont gave encouraging earnings updates, while investors hoped for a large US stimulus plan as Joe Biden was sworn in as president.

The pan-European STOXX 600 index closed 0.7 per cent higher, getting an extra boost as Wall Street marked record highs.

All eyes were on Biden’s inauguration, with traders betting on a bigger pandemic relief plan and higher infrastructure spending under the new administration to boost the pandemic-stricken economy.

Tech stocks rallied to a two-decade peak in Europe after ASML Holding NV rose 3.0 per cent to all-time highs on better-than-expected quarterly sales and a strong order intake for 2021.

Meanwhile, Richemont rose 2.8 per cent, after posting a 5 per cent increase in quarterly sales as Chinese splashed out on Cartier, its flagship jewellery brand.

Britain’s Burberry jumped 3.9 per cent after it stuck to its full-year goals, saying higher full-price sales would boost annual margins, while Asian demand remained strong.

The pair boosted European luxury goods makers that are heavily reliant on China, with LVMH and Kering gaining between 1 per cent and 3 per cent.

“Any sign that retail spending is picking up in China is going to be a boost to the Western markets and those heavily exposed to it,” said Connor Campbell, financial analyst at SpreadEx.

The European Central Bank is set to meet on Thursday. While no policy changes are expected, the bank could face more questions about an increasingly challenging outlook only a month after it unleashed fresh stimulus to bolster the euro zone economy.

“With the new round of easing measures fully in place and no new forecasts to be presented tomorrow, it should be a fairly uneventful day for the euro,” ING analysts said in a note.

Italy’s FTSE MIB gained 0.9 per cent and lenders rose 1.6 per cent after Prime Minister Giuseppe Conte won a confidence vote in the upper house Senate and averted a government collapse.

Conte narrowly secured the vote on Tuesday, allowing him to remain in office after a junior partner quit his coalition last week in the midst of the covid-19 pandemic.

Daimler AG jumped 4.2 per cent after its Mercedes-Benz brand unveiled a new electric compact SUV, the EQA, as part of plans to take on rival Tesla Inc.

Germany’s Hugo Boss added 4.4 per cent after Mike Ashley-led Frasers said it boosted its stake in the company.

North America

US stocks closed at record highs on Wednesday as Joe Biden was sworn in as the 46th US president, while solid results from Netflix sparked a rally in shares of “stay-at-home” beneficiaries.

Shares of the world’s largest streaming service Netflix surged after it said it would no longer need to borrow billions of dollars to finance its TV shows and movies.

The rest of the FAANG group all jumped with earnings results due in the coming weeks. The NYSE FANG+TM index went up as well.

“It’s a tech outperformance day which is pretty rare over the past two or three months as the cyclical rotation has kind of gotten underway,” said Ross Mayfield, investment strategy analyst at Baird, in Milwaukee, Wisconsin. He added a lot of the move can be traced to Netflix.

“(Today was) just a reminder that the tech run had gotten extended... the FAANG names and some of the other S&P 500 tech names are still incredible operators and are going to be putting out incredible earnings quarters for the foreseeable future.”

Biden will waste little time turning the page on the Trump era, aides said, signing 15 executive actions in the afternoon on issues ranging from the covid-19 pandemic to the economy to climate change.

“I’m not sure that the politics of inauguration day did much but certainly the expectation for a trillion plus in stimulus,” Mayfield added.

The Dow has gained about 57 per cent and the S&P 500 advanced about 68 per cent since Donald Trump assumed office on 20 January 2017, which compares with a 65 per cent jump in the Dow and 75 per cent gain in the S&P during the first term of the Obama administration.

Wall Street’s main indexes scaled record highs in the past few months, with the blue-chip Dow jumping about 13 per cent since the presidential elections in November, as investors bet on a strong economic recovery in 2021 on the back of covid-19 vaccine rollout and a bigger pandemic relief plan.

Nearly all of the 11 major S&P sectors advanced in afternoon trading, with communication services, consumer discretionary and technology among the biggest gainers.

Wrapping up results from major US lenders, Morgan Stanley slipped despite posting quarterly profit that blew past estimates driven by strength in its trading business.

The broader banks index declined for the third day.

With stock market valuations sitting near a 20-year high, investors are hoping corporate results and profit outlooks will help them determine to what degree the valuations are justified.

The Dow Jones Industrial Average rose 257.86 points, or 0.83 per cent, to 31,188.38, the S&P 500 gained 52.94 points, or 1.39 per cent, to 3,851.85 and the Nasdaq Composite added 260.07 points, or 1.97 per cent, to 13,457.25.

Procter & Gamble Co raised its full-year sales forecast for a second time as it benefited from sustained coronavirus-driven demand for cleaning products. Its shares, however, fell after it warned that the pace of sales might slow as vaccines roll out.

UnitedHealth Group Inc dipped after the health insurer’s quarterly profit slumped nearly 38 per cent, weighed down by costs related to its programs to make covid-19 testing and treatment more accessible for its customers

With Reuters

is content editor for Morningstar Australia

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