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Global Market Report - 22 September

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

Australian shares are set to follow Wall Street lower as lockdown fears and a likely delay in stimulus hurt sentiment.

The Australian SPI 200 futures contract was down 66 points, or 1.1 per cent, to 5,745 points at 8.30am Sydney time on Tuesday, suggesting a negative start to trading.

Wall Street’s main indexes tumbled on Monday as concerns about new lockdowns in Europe and possible delays in fresh stimulus from Congress raised fears the US economy faces a longer road to recovery than previously hoped for.

The Dow Jones Industrial Average fell 2 per cent to end at 27,102.99 points, while the S&P 500 lost 1.28 per cent to 3,276.87. The Nasdaq Composite dropped 0.22 per cent, to 10,769.20.

The S&P/ASX200 benchmark index ended down 41.9 points, or 0.7 per cent, to 5,822,6 points on Monday. It earlier touched a low of 5808.2, its lowest level since end June, on souring technical selling against the backdrop of weak US markets. The All Ordinaries index fell 44.1 points, or 0.7 per cent, to 6,013.5.

Gold was down 2.1 per cent to $US1,910.70 an ounce; Brent oil was down 3.5 per cent to $US41.66 a barrel; Iron ore was down 4.1 per cent to $US119.82 a tonne.

Meanwhile, the Australian dollar was buying 72.20 US cents at 8.30am, down from 73.14 US cents at Monday’s close.

Asia

China stocks ended lower on Monday, dragged by consumer staples and financial stocks after the central bank left its benchmark lending rate unchanged, with investors taking profits after expectations of further stimulus lifted shares in the previous session.

At the close, the Shanghai Composite index was down 0.63 per cent at 3,316.94. The blue-chip CSI300 index shed 0.96 per cent, with its financial sector sub-index falling 0.95 per cent and the consumer staples sector down 1.61 per cent. Both sub-indexes had posted strong gains on Friday.

Hong Kong shares fell on Monday, dragged by financials after reports said HSBC and Standard Chartered were among banks moving allegedly illicit funds over the past two decades and as Sino-US tensions hit index heavyweight Tencent.

At the close of trade, the Hang Seng index was down 504.72 points, or 2.06 per cent, at 23,950.69, its biggest daily percentage drop since 24 July. All but three index constituents fell on the day.

Europe

European stocks posted their worst fall in three months on Monday as fears of a second wave of COVID-19 infections hit travel and leisure shares, while banks tumbled on a report about US$2 trillion ($2.8 trillion) worth of suspect transfers by leading lenders.

There could be up to 50,000 new coronavirus cases per day in Britain by the middle of October if the pandemic continues at its current pace, the country’s chief scientist adviser warned. On Sunday, health minister Matt Hancock said a second national lockdown was possible.

“We suspect equities would fall sharply and indiscriminately, similar to what happened in Feburary-March or in June ... if the rise in new cases in Europe seriously undermined the global economic recovery,” said Simona Gambarini, markets economist at Capital Economics.

London’s FTSE 100 was the worst-hit blue chip index in Europe, falling about 3.4 per cent in its worst day in more than three months. UK-focused midcaps in the FTSE 250 dropped 4.0 per cent.

The pan-European STOXX 600 was down 3.2 per cent, a fall not matched since early June.

Europe's travel and leisure index fell 5.2 per cent, its worst two-day drop since April, with airlines such as British Airway-owner IAG plummeting 12.1 per cent and Lufthansa 9.5 per cent.

European banks slumped 5.7 per cent to hover near record lows after lenders including HSBC and Standard Chartered were named in a cache of leaked documents which said they had transferred large sums of suspect funds over the past two decades.

HSBC's shares in Hong Kong and Standard Chartered's in London fell on Monday to their lowest since at least 1998. Barclays and Deutsche Bank, which were also mentioned in the report, slipped 5.4 per cent and 8.8 per cent, respectively.

On Wall Street, the banking sector fell 4.2 per cent amid a broader market selloff.

Among other individual stocks, Britain's Rolls-Royce Holdings shed 10.8 per cent after the aero-engine maker said it was looking to raise up to 2.5 billion pounds ($4.4 billion) in an effort to strengthen its balance sheet.

German telecom 1&1 Drillisch plunged 27.8 per cent after warning that an increase in the cost of its network access deal with Telefonica Deutschland would hit profits this year. Its parent United Internet fell 26.1 per cent.

In the latest string of M&A activity, Play Communications soared 36.7 per cent after French telecoms group Iliad said it plans to acquire the Polish mobile phone operator in a 3.5 billion euro ($5.7 billion) deal. Iliad slipped 3.0 per cent.

Lufthansa sank 9.5 per cent as it further cut its fleet and workforce due to the coronavirus crisis.

North America

The death of US Supreme Court Justice Ruth Bader Ginsburg also appeared to make the passage of another stimulus package in Congress less likely before the 3 November presidential election, sparking large declines in the healthcare sector.

The Dow shed as much as 900 points and the CBOE Market Volatility index, Wall Street's fear gauge, shot up to its highest level in nearly two weeks. The S&P 500 ended down about 9 per cent from its record close on 2 September.

Economic concerns are weighing most heavily on stocks, said David Joy, chief market strategist at Ameriprise.

“Although nothing is being spared, the economically sensitive groups are getting hit the hardest,” said Joy, adding that “Washington appears to be no closer to a possible fourth stimulus package.”

Congress has for weeks remained deadlocked over the size and shape of another coronavirus-response bill, on top of the roughly US$3 trillion already enacted into law.

Healthcare providers came under pressure on uncertainty over the fate of the Affordable Care Act, better known as Obamacare, with shares of Universal Health Services falling hard.

Ginsburg’s death could lead to a tie vote when the Supreme Court hears a challenge to the constitutionality of ACA in November, Mizuho, Stephens Inc and other financial services firms said.

Wall Street has tumbled in the past three weeks as investors dumped heavyweight technology-related stocks following a stunning rally that lifted the S&P 500 and the Nasdaq to new highs after plunging in March as economies entered recession.

A new round of business restrictions would threaten a nascent recovery and further pressure equity markets. The first lockdowns in March led the S&P 500 to suffer its worst monthly decline since the global financial crisis.

In contrast to last week's downturn, declines were led by value-oriented sectors such as industrials, energy and financials as opposed to technology stocks.

Airline, hotel and cruise companies tracked declines in their European peers as Britain signalled the possibility of a second national lockdown. Europe's travel and leisure index marked its worst two-day drop since April.

Among the largest gainers on the Nasdaq 100 was Zoom Video Communications Inc, which rose on the prospect that fresh lockdowns would spur greater use of the product.

JPMorgan Chase & Co and Bank of New York Mellon Corp fell on reports that several global banks moved large sums of allegedly illicit funds over nearly two decades despite red flags about the origins of the money.

Nikola Corp plunged after its founder, Trevor Milton, stepped down as executive chairman following a public squabble with a short-seller over allegations of nepotism and fraud.

General Motors Co, which recently said it would take an 11 per cent stake in the electric truck maker, also slipped.

is content editor for Morningstar Australia

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