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Global Market Report - 22 December

Lex Hall  |  22 Dec 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to fall following losses on Wall Street as investors baulked at news of a new strain of covid-19.

The Australian SPI 200 futures contract was down 22 points, or 0.3 per cent, at 6566 points at 8.30am Sydney time on Tuesday, suggesting a negative start to trading.

The S&P 500 closed lower on Monday, having clawed its way back from steep losses early in the session as investors juggled the outbreak of an ominous new strain of covid-19 with the passage of a long-anticipated stimulus package.

The Dow Jones Industrial Average rose 36.94 points, or 0.12 per cent, to 30,215.99, the S&P 500 lost 14.47 points, or 0.39 per cent, to 3,694.94 and the Nasdaq Composite dropped 13.12 points, or 0.1 per cent, to 12,742.52.

Locally, NSW Premier Gladys Berejiklian must decide on Wednesday whether to extend Sydney's northern beaches lockdown over Christmas, with growing fears the covid cluster has spread beyond the peninsula.

The S&P/ASX200 benchmark index closed lower by 5.6 points, or 0.08 per cent, to 6669.9 on Monday. The All Ordinaries lost 4.1 points, or 0.06 per cent, to 6920.0.

Gold was down 0.2 per cent to $US1878.20/oz; Brent oil was down 3 per cent to $US50.68 barrel; Iron ore was up 7.3 per cent to $US176.45 a tonne.

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Meanwhile, the Australian dollar was buying 75.84 US cents at 8.30am, up from 75.62 US cents at Monday’s close.

Asia

China stocks closed higher on Monday, as investors cheered Beijing's continued policy support to shore up its economy hurt by the coronavirus crisis.

The blue-chip CSI300 index rose 0.9 per cent to end at 5,046.84, while the Shanghai Composite Index gained 0.8 per cent to 3,420.57.

Hong Kong stocks ended lower on Monday on worries over China-US tensions, although losses were capped by policy support from Beijing.

The Hang Seng index fell 0.7 per cent to 26,306.68, while the China Enterprises Index lost 0.8 per cent to 10,401.83.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.48 per cent, while Japan's Nikkei index closed down 0.18 per cent.

Europe

European shares fell on Monday in their worst session in almost two months as the rapid spread of a new strain of the coronavirus forced more stringent curbs in Britain and travel bans from several countries.

Broad-based losses pushed the pan-European STOXX 600 index down 2.3 per cent, its lowest close since mid-November, after the UK imposed an effective lockdown and reversed plans to ease curbs over Christmas as the new strain is up to 70 per cent more transmissible than the original.

A long list of countries from around the world closed their borders to Britain, with European neighbour France’s ban also including freight carriers.

A plunge in the pound limited losses in London’s FTSE to 1.7 per cent, while main indexes in Germany, France, Spain and Italy all dived close to 3 per cent. Spain’s IBEX posted its worst day in six-months.

“Markets are reeling from the latest twist in the coronavirus crisis which has clouded the outlook for the remainder of 2020 and much of the first quarter of 2021,” said AJ Bell investment director Russ Mould.

“Restrictions on traffic between the UK and other countries, including in the case of France on freight, has raised the pressure on a supply chain already creaking under the weight of an online Christmas and Brexit uncertainty.”

Travel and leisure stocks had their worst day in three months, with British Airways owner IAG, Trainline and travel company TUI down between 1 per cent and 10.5 per cent. Cruise operator Carnival Corp shed 5.6 per cent.

As crude oil prices slid, energy companies BP, Total and Royal Dutch Shell lost almost 5 per cent, leading losses in Europe.

Shell was further weighed down by a US$3.5 billion to US$4.5 billion ($4.6 billion to $6 billion) writedown in the value of oil and gas assets.

Banks lost 3.6 per cent - their worst day since September, as risk aversion sent investors fleeing to the safety of bonds.

Uncertainty over Brexit trade deal negotiations added to pressure on the market. With less than two weeks before Britain leaves the European Union’s orbit, neither side has budged far enough for a breakthrough.

Worries about the new virus strain also reduced the impact of an agreement on a $900 billion fiscal aid package in the US that will be voted on Monday.

Vaccines should still be effective against the new strain, scientists said. Britain has already rolled out the Pfizer-BioNtech vaccine, while the European Medicines Agency approved the vaccine on Monday. A European Commission nod is expected later in the day for a European roll-out.

Frankfurt shares of BioNtech rose 1.7 per cent.

Among the few gainers were healthcare and consumer stocks such as Reckitt Benckiser and grocery retailer Ocado.

North America

The S&P 500 closed lower on Monday, having clawed its way back from steep losses early in the session as investors juggled the outbreak of an ominous new strain of covid-19 with the passage of a long-anticipated stimulus package.

The Nasdaq joined the S&P 500 in the red, but financials helped the blue-chip Dow reverse course for a modest gain.

“The ‘Santa rally’ will have to wait,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York. “Troubling news about covid in the UK has reminded markets that covid isn’t solved yet; the road ahead may be bumpy and uncertain.”

Congress hammered out a pandemic relief agreement on Sunday after months of partisan wrangling. The US$900 billion ($1.2 trillion) package, expected to pass on Monday, includes unemployment aid, small business relief, and vaccine distribution, but the dollar amount fell short of what many had hoped for.

“Fiscal stimulus plan appears big enough to hold off a recession, but not for long,” Carter added. “But while it’s not as large as many market participants hoped, it does include many meaningful actions that can support markets.”

But the emergence of a new, highly infectious strain of covid-19 in Britain has raised fears of additional shutdowns, and prompted countries around the world to shut their doors to travelers from the United Kingdom.

The news sent airline stocks sliding, even with the prospect of US$15 billion in payroll assistance for commercial carriers included in the stimulus deal.

Tesla became the most valuable company ever added to the S&P 500 and will account for about 1.69 per cent of the index. The electric car maker’s stock ended the session lower.

Banks bucked the trend. The US Federal Reserve released the results of its semiannual stress test late Friday and announced relaxed restrictions on buybacks and dividends.

The Dow Jones Industrial Average rose 36.94 points, or 0.12 per cent, to 30,215.99, the S&P 500 lost 14.47 points, or 0.39 per cent, to 3,694.94 and the Nasdaq Composite dropped 13.12 points, or 0.1 per cent, to 12,742.52.

Nike rose after the athletic apparel maker boosted its full-year revenue forecast, prompting multiple brokers to raise their price targets.

Shares of Lockheed Martin Corp slid after announcing it would buy US rocket engine maker Aerojet Rocketdyne Holdings Inc for US$4.4 billion.

International Business Machines Corp lost ground after saying it would acquire Finland-based startup Nordcloud, in its latest effort to bolster its cloud-computing business.

is senior editor for Morningstar Australia

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