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Global Market Report - 22 July

Lex Hall  |  22 Jul 2020Text size  Decrease  Increase  |  
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Shares are expected to fall early on the Australian market after US markets lost momentum late in the session.

The Australian SPI 200 futures contract was lower by 65.0 points, or 1.06 per cent, to 6,073.0 points at 8am Sydney time on Wednesday.

Overnight, US markets rallied on news of the European Union reaching agreement on a massive $US857 billion coronavirus recovery fund, which boosted hopes for similar stimulus measures in Washington to sustain economic recovery.

But the march upward lost steam late in the session, amid a drop in technology shares.

The Dow Jones Industrial Average ended 0.6 per cent higher to 26,840.4, the S&P 500 gained 0.17 per cent, to 3,257.3 while the Nasdaq Composite dropped 0.81 per cent, to 10,680.36.

Oil prices rose about $US1 a barrel after the European deal, with Brent crude futures settling at $US44.32 barrel.

In Australia today, preliminary retail sales figures for June will be released.

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Local investors may be inclined to book some profits after the share market on Tuesday closed at its best level since before the pandemic.

The benchmark S&P/ASX200 index closed up 154.7 points, or 2.58 per cent, at 6,156.3 points, while the All Ordinaries index gained 156.5 points, or 2.56 per cent, at 6,268.8.

The Australian dollar surged as risk appetite returned on stimulus hopes globally. It was trading at 71.33 US cents at 8am, sharply higher from 70.38 US cents at Tuesday's close.


China shares ended higher on Tuesday, lifted by healthcare stocks as global hopes for a coronavirus vaccine firmed, but profit-taking following the previous session’s rally checked gains.

At the close, the Shanghai Composite index was up 0.2 per cent at 3,320.89, after flirting with small losses in the afternoon session. The index jumped 3.1 per cent a day earlier.

Hong Kong stocks ended higher on Tuesday, tracking wider gains in other Asian markets, as investors cheered European Union’s stimulus plan to revive the coronavirus-hit economies, while hopes for a vaccine also boosted risk appetite.

At the close of trade, the Hang Seng index was up 577.67 points or 2.31 per cent at 25,635.66. The Hang Seng China Enterprises index rose 1.46 per cent to 10,445.42.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 2.05 per cent, while Japan’s Nikkei index closed up 0.73 per cent.


European shares closed above four-month highs on Tuesday, with Germany’s blue-chip DAX erasing almost all its losses for the year, after EU leaders agreed on a landmark stimulus package to revive the bloc’s economies from a coronavirus-induced slump.

The pan-European STOXX 600 jumped as much as 1.3 per cent before ending 0.3 per cent higher at its highest since early March, as did an index of euro zone blue-chip stocks  which rose 0.5 per cent.

Oil stocks were the biggest boost, also marking their best session since early March, as crude prices surged.

The global mood also brightened on growing optimism about a covid-19 treatment after promising early data from trials of three potential vaccines.

European Union leaders clinched a “historic” deal in the early hours of Tuesday on a 750-billion-euro ($1.2 trillion) recovery fund and its related 1.1-trillion-euro budget for 2017–2021 that they hope will help repair the continent’s deepest recession since World War Two.

Germany's DAX gained 1 per cent finishing at five-month highs, boosted by tech major SAP SE.

A gauge of European stock market volatility sank to its lowest since 25 February.

Spain and Italy, among the south European countries set to benefit from the EU deal, saw their main indexes gain 0.2 per cent and 0.5 per cent respectively.

Eyes are now on likely US aid legislation aimed at supporting its economy.

Topping the STOXX 600 index was Adevinta which soared 26 per cent after US firm Ebay agreed to sell its classified ads business to the Norwegian group in a deal worth $US9.2 billion ($12.9 billion).

In earnings-driven moves, Randstad Holding jumped almost 9 per cent after the staffing company reported a smaller-than-expected drop in quarterly core earnings.

The biggest drag on the STOXX 600 was Novartis, down 1.9 per cent after the drugmaker trimmed its 2020 sales forecast as coronavirus related disruptions hit its quarterly revenue.

Europe’s healthcare index .SXDP was the worst sectoral performer, down 1 per cent with AstraZeneca also declining after a University of Oxford researcher flagged uncertainty about rolling out its possible covid-19 vaccine—licensed to AstraZeneca—by the end of the year.

London's FTSE 100 ended flat with shares of mining giant BHP also sliding 2.6 per cent after it warned of risk to demand.

North America

The S&P 500 edged higher on Tuesday, as investors rotated into economically sensitive cyclical stocks, optimistic that Washington will deliver a new round of stimulus to sustain the US economic recovery from a pandemic-induced recession.

Financial, industrial and energy stocks gave the biggest boosts to the bellwether S&P 500 and blue-chip Dow as investors pivoted back to cyclicals. The march upward lost steam late in the session, and a drop in tech shares pulled the Nasdaq lower.

The S&P 500 has moved into positive territory year-to-date, up 0.8 per cent. The Nasdaq has gained 19 per cent since 1 January, while the Dow remains down 6 per cent.

The S&P 500 is now within 4 per cent of its record closing high reached late in February.

As new infections of covid-19 surged in the US, lawmakers on Capitol Hill wrestled to craft a new stimulus package with less than two weeks until the expiry of extended unemployment aid for millions of Americans.

Elsewhere, the 27-member European Union reached an agreement on a massive $US857 billion ($1.2 trillion) pandemic recovery plan at the conclusion of a rocky, five-day summit.

The Dow Jones Industrial Average rose 159.53 points, or 0.6 per cent, to 26,840.4, the S&P 500  gained 5.46 points, or 0.17 per cent, to 3,257.3 and the Nasdaq Composite dropped 86.73 points, or 0.81 per cent, to 10,680.36.

Of the 11 major sectors in the S&P 500, seven ended the session in the black. Energy companies rose 6.2 per cent, the largest daily jump since June 5, as crude prices climbed amid signs of rebounding demand.

Second-quarter reporting season rolled on, with 58 constituents of the S&P 500 having reported. Of those, 77.6 per cent have come in above consensus, according to Refinitiv data.

But expectations have set a low bar. Analysts now see aggregate S&P 500 earnings for the April to June period having declined by 41.8 per cent year-on-year, per Refinitiv.

Coca-Cola Co shares gained 2.3 per cent after the beverage maker beat earnings estimates and said demand is improving.

Defence industrial Lockheed Martin Corp topped quarterly consensus estimates and raised its full-year profit and revenue estimates, sending its shares up 2.6 per cent.

Tesla fell 4.5 per cent, retreating from Monday’s record closing high after JPMorgan Chase downgraded the electric car maker’s stock to “market perform.”

is senior editor for Morningstar Australia

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