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Global Market Report - 21 October

Lex Hall  |  21 Oct 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to follow Wall Street higher amid progress in the US over a covid stimulus package.

The Australian SPI 200 futures contract was up 20 points, or 0.3 per cent, to 6,189 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

Shares on Wall Street ended higher on Tuesday on growing optimism that talks among US lawmakers are progressing with respect to a US stimulus package aimed at cushioning the economic shock from the coronavirus pandemic.

The Dow Jones Industrial Average closed up 113.37 points, or 0.4 per cent, to 28,308.79, the S&P 500 ended 16.2 points higher, or 0.47 per cent, to 3,443.12 and the Nasdaq Composite closed 37.51 points higher, or 0.33 per cent, to 11,516.49.

Locally, Austrac has “serious concerns” around money laundering at Crown’s Melbourne casino that has led to a probe that could take up to two years, its chief executive Nicole Rose has told a Senate inquiry in Canberra, The Australian reports.

Australia's share market finished lower and the Aussie dollar edged down towards 70 US cents as the Reserve Bank gave more suggestions of a rate cut next month. The S&P/ASX200 benchmark index fell by 44.8 points, or 0.72 per cent, to 6,184.6 on Tuesday.

The index closed above 6,200 on Monday, which has been a level of resistance, but failed to reach new heights following a negative US lead. The All Ordinaries finished lower by 38.8 points, or 0.6 per cent, to 6,396.8.

Gold was up 0.4 per cent at $US1,911.00 an ounce; Brent oil was up 1.0 per cent to $US43.04 a barrel; Iron ore was up 0.1 per cent to $US119.61 a tonne.

Meanwhile, the Australian dollar was buying 70.66 US cents at 8.30am, up from 70.63 US cents at Tuesday's close.

Asia

China shares ended higher on Tuesday in a relatively tepid session, as optimism over recovering consumption lifted the benchmark index, though data showed a slowdown in new home price growth in the world's second-largest economy.

At the close, the Shanghai Composite index reclaimed lost ground to end 0.47 per cent higher at 3,328.10. The blue-chip CSI300 index was up 0.8 per cent.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.36 per cent, while Japan's Nikkei index closed down 0.44 per cent.

Europe

European stocks fell on Tuesday as worries about coronavirus curbs and Brexit countered optimism generated by strong earnings, including from Swiss bank UBS and consumer giant Reckitt Benckiser. Italy, Spain and Britain imposed curbs to limit the spread of new coronavirus cases that threaten to derail a budding economic recovery. The latest curbs in Ireland will see GDP fall by 3.5 per cent this year, Finance Minister Paschal Donohoe said.

The pan-region STOXX 600 has recovered about 35 per cent from a pandemic-panic plunge in March, but is struggling to reach pre-crisis levels, plateauing as the second-wave of the disease grips. On Tuesday, the index closed down 0.35 per cent.

Meanwhile, the European Union and Britain struggled to make progress on a trade deal to avoid a fast-approaching disruptive finale to the five-year drama of Britain’s departure from the EU.

“Both sides realistically have until the middle of November (to strike a deal). That means there is still time for things to go wrong, and the risk of there being no deal, or only a wafer-thin agreement, are uncomfortably high,” said Timme Spakman, economist, international trade analysis at ING.

"The economic impact of a no-deal Brexit on the EU economy will be significant... The automotive industry, agriculture and chemical sectors stand to be the most affected."

Earnings were a bright spot. UBS rose 2.7 per cent as it posted a 99 per cent jump in quarterly profit, while computer peripherals maker Logitech International gained 16 per cent after it raised its full-year forecast.

Robust demand in the US and China helped cognac maker Remy Cointreau post a broader recovery in second-quarter sales, but its shares slipped 2.4 per cent with some analysts saying it may have been priced in.

Swedish telecoms operator Tele2 fell 4.7 per cent after it stuck to its outlook for roughly unchanged operating profit in 2020.

“What most investors are looking at is how strong 2021 recovery will be,” said Nick Peters, multi-asset portfolio manager at Fidelity International.

Third-quarter profits for companies on STOXX 600 are expected to drop 36.7 per cent, Refinitiv data shows, improving from a 51 per cent plunge in the previous quarter when economic losses from the pandemic peaked.

London's FTSE rose as much as 0.7 per cent before ending flat. Bank of England policymaker Gertjan Vlieghe said the central bank could need to add more stimulus.

North America

Shares on Wall Street ended higher on Tuesday on growing optimism that talks among US lawmakers are progressing with respect to a US stimulus package aimed at cushioning the economic shock from the coronavirus pandemic.

House of Representatives Speaker Nancy Pelosi said she was optimistic Democrats could reach a deal with the White House that could get aid out by early next month. She added there should be an indication of a possible agreement later on Tuesday.

“I think no matter who gets elected, we will get the stimulus,” said Brian Reynolds, chief market strategist, at Reynolds Strategy.

“The current headlines are short term in nature. Eventually, they would get together and produce more stimulus for the economy because all the sectors that are lagging need it badly,” he added.

Uncertainty over the coronavirus aid package weighed on Wall Street’s main indexes on Monday and analysts expect market turbulence to increase with only two weeks left until Election Day.

The Dow Jones Industrial Average closed up 113.37 points, or 0.4 per cent, to 28,308.79, the S&P 500 ended 16.2 points higher, or 0.47 per cent, to 3,443.12 and the Nasdaq Composite closed 37.51 points higher, or 0.33 per cent, to 11,516.49.

A majority of the S&P sectors was up, with financials, industrials and consumer discretionary stocks underpinning gains.

The US Justice Department and 11 states, meanwhile, filed an antitrust lawsuit against Alphabet Inc's Google for allegedly breaking the law in using its market power to fend off rivals. Alphabet's shares closed up 1.4 per cent.

“It’s like locking the proverbial door after the horse has bolted,” said Neil Campling, head of TMT research at Mirabaud Securities in London.

“Google has already got the monopolistic position, has invested billions in infrastructure, AI, technologies, software, engineering and talent. You can’t simply unwind a decade of significant progress, or create new alternative powerhouses or tech ecosystems out of thin air.”

Meanwhile, the third-quarter earnings season has gathered momentum. Of the 66 S&P 500 companies that have reported results, 86.4 per cent have topped expectations for earnings, according to Refinitiv IBES data.

Property and casualty insurer Travelers Cos Inc gained 5.6 per cent as it beat quarterly profit expectations, while consumer products giant Procter & Gamble Co advanced 0.4 per cent as it raised its full-year sales and earnings forecasts.

Netflix Inc was down 1 per cent after it missed expectations for paid subscriber additions in the third quarter, hit by rising streaming competition and the return of live sports to television.

International Business Machines Corp edged past estimates for quarterly revenue on Monday, bolstered by higher demand for its cloud services. The company's shares, however, fell after it stayed away from issuing a current-quarter outlook, citing economic uncertainty related to the pandemic.

is content editor for Morningstar Australia

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