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Global Market Report - 23 March

Lex Hall  |  23 Mar 2020Text size  Decrease  Increase  |  
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The Australian stock market is set for another slide as the battle against the coronavirus shuts down global economies.

The SPI200 futures contract was down 87 points, or 1.81 per cent, at 4708 points at 8am Sydney time on Monday, suggesting an almost 2 per cent fall for local shares when trade begins.

On Wall Street, the Dow Jones Industrial Average fell 913.21 points, or 4.55 per cent, to 19,173.98, the S&P 500 lost 4.34 per cent and the Nasdaq Composite dropped 3.79.

CommSec chief economist Craig James says the futures only give a sense of where investor sentiment was at on Saturday morning before that market closed.

"What happens from there, unfortunately, you'd have to say, is anyone's guess, because there is so much volatility in the markets," James told AAP.

"There's no signs of that volatility ending any time soon. The ride continues and the battle continues against Covid-19."

State and territory leaders and Prime Minister Scott Morrison have recommended against all non-essential domestic travel, following the unprecedented ban on international travel.

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Most businesses are shutting down temporarily as state and territory borders close.

A multibillion-dollar package of support for business and households impacted by the coronavirus pandemic will be on the agenda for federal parliament on Monday.

The Morrison government will work with Labor to ensure laws to put cash in Australians' pockets and prop up businesses pass within days.

Bills will roll out two massive economic stimulus and safety net packages worth $17.6 billion and $66 billion respectively to stem the damage from a likely recession as a result of Covid-19.

The share market ended last week, its worst week since October 2008, with a modest daily gain.

The S&P/ASX200 ended up 0.7 per cent at 4816.6, while the All Ordinaries index gained 0.93 per cent to 4854.3.

One Australian dollar was buying 57.97 US cents at 7am on Monday, down from 58.82 on Friday as the share market closed.


China stocks rose on Friday, tracking a rebound in other Asian markets, though the country's blue-chip index still posted its steepest weekly loss in 17 months on persisting worries over the economic damage from the coronavirus outbreak.

The blue-chip CSI300 index rose 1.8 per cent, to 3,653.22, while the Shanghai Composite Index ended up 1.6 per cent to 2,745.62.

For the week, CSI300 was down 6.2 per cent, its biggest weekly decline since October 2018, while SSEC retreated 4.9 per cent, as countries came to a standstill and business activities shutdown due to the virus.

Hong Kong stocks staged a robust rally on Friday, encouraged by wider gains in other markets, though they still posted weekly losses as worries persisted over economic damage from the global coronavirus outbreak.

The Hang Seng index rose 5.1 per cent, to 22,805.07, its best daily rise since late 2011, while the China Enterprises Index gained 6.5 per cent, to 9,118.67 points.

For the week, the HSI lost 5.1 per cent, while the HSCE declined 5.5 per cent, following a brutal selloff the previous week, as worries lingered over the economic impact of the global virus outbreak.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 4.56 per cent, while Japan's Nikkei index closed down 1.04 per cent.


European shares ended higher for a second straight day on Friday but pared most of the session’s gains as fears over the economic shock from the coronavirus quashed initial optimism.

The pan-European STOXX 600 index ended up 1.8 per cent but closed its fifth straight week in the red. Investors had initially taken some heart from emergency measures by the Bank of England on Thursday, as well as news of further sovereign bond issuance in Europe.

However, in what is likely a recurring trend, gains made on the back of regional stimulus measures failed to hold, as seen with steps by the Bank of England and the European Central Bank last week, which did little to stem the equity rout.

“We think that it is too early to say with any degree of certainty that markets have found a bottom, to be honest. We remain of the view that markets will only stabilize when there are signs that the pandemic is being brought under control,” said Simona Gambarini, markets economist at Capital Economics in London.

“The ECB will eventually have to go further. We think that the ECB will commit to keep sovereign bond yields low for all governments at least for the duration of the coronavirus crisis.”

The outbreak showed little signs of stopping, as the death toll in Italy overtook that in China. The economic shock from the outbreak also looks primed to send the global economy into recession.

Italian stocks closed about 1.7 per cent higher.

The travel and leisure sector - the worst hit by the outbreak—led gains for the day, surging nearly 10 per cent after touching a near 19-year low earlier in the week.

The sector underperformed its peers for the week.

Energy stocks closed about 6 per cent higher, coming off a 24-year low touched earlier in the week.

Defensive sectors such as telecom and healthcare were among the best weekly performers, indicating that caution was still the preferred play.

The media sector dropped 1.9 per cent for the day, with Auto Trader Group bottoming out the sector after JP Morgan and Jefferies cut their price targets on the group.

Among individual movers, German electrical parts maker Osram Licht topped the STOXX 600, jumping nearly 40 per cent after Swiss semiconductor company AMS confirmed its public offer for the firm.

British retailer Marks & Spencer was the latest to warn about an impact in its clothing, homewares and international businesses, sending its shares down 7 per cent.

North America

Wall Street wrapped up its worst week since October 2008, with the Dow Jones Industrial Average and S&P 500 sliding more than 4 per cent on Friday as tough restrictions imposed by New York and California to try to limit the spread of the coronavirus fueled worries about damage to the US economy.

New York Governor Andrew Cuomo early on Friday ordered all non-essential workers to stay home. It followed on the heels of California’s statewide “stay at home” order issued late Thursday.

The moves by two of the most populous US states affects some 40 million people. Also, federal authorities this week moved to close the borders with Canada and Mexico, with more than 12,000 cases having been confirmed in the United States as of Friday.

In early trade, the market briefly attempted to build on Thursday’s gains as global policymakers turned on the taps to prop up financial markets reeling from weeks of heavy selling that ended Wall Street’s record 11-year bull run.

Coronavirus fears have wiped off almost 32 per cent, or roughly $9 trillion, from the value of the benchmark S&P index since its record closing high on Feb. 19.

The Dow Jones Industrial Average fell 913.21 points, or 4.55 per cent, to 19,173.98, the S&P 500 lost 104.47 points, or 4.34 per cent, to 2,304.92 and the Nasdaq Composite dropped 271.06 points, or 3.79 per cent, to 6,879.52.

Friday’s drop left the Dow down 3 per cent from when President Trump took office in January 2017.

All three major indexes registered their biggest weekly declines since October 2008, although the Cboe Volatility index - Wall Street’s fear gauge - ended the day down at 66.04, in what some investors saw as a sign that selling may subside.

Investors are now counting on further stimulus over the next few days, as the US Senate mulls a $1 trillion package that would include direct financial help for Americans.

A Reuters poll of economists suggested the global economy was already in recession, while analysts at US stock market index operator S&P Global said volatility across geographies and asset classes was at record highs.

“Quadruple witching” added to choppy trading on Friday, with investors unwinding positions in futures and options contracts before their expiration.

AT&T tumbled 8.7 per cent as the wireless carrier said the outbreak might have a material impact on financial results and cancelled a $4 billion share repurchase agreement.

The airlines sector rose 2.4 per cent after losing more than half its value since late February.

S&P 500 utilities fell 8.2 per cent on the day, leading sector declines.


is senior editor for Morningstar Australia

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