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Global Market Report - 23 March

Lex Hall  |  23 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to weaken despite gains on Wall Street as tech stocks rallied, including a jump in Tesla following a bullish forecast.

The Australian SPI 200 futures contract was down 7 points, or 0.1 per cent, at 6,718 points at 8.30am Sydney time on Tuesday, suggesting a negative start to trading.

Wall Street rallied on Monday as technology stocks rebounded from a recent selloff sparked by surging bond yields and Tesla jumped after a fund run by an influential investor in the electric-car maker said its shares could approach US$3000 by 2025.

The Dow Jones Industrial Average closed up 103.23 points, or 0.32 per cent, at 32,731.2. The S&P 500 gained 27.49 points, or 0.70 per cent, to 3,940.59 and the Nasdaq Composite added 162.31 points, or 1.23 per cent, to 13,377.54.

Locally, James Packer is set to make the biggest bet of his life: whether to cash in his Crown Resorts chips now for $3 billion or hold out for a higher offer for his casino. Yet if a royal commission called by Victorian Premier Daniel Andrews that starts in Melbourne on Wednesday finds Crown is unfit to hold a gaming ­licence, Mr Packer could be a forced seller at an even deeper discount, The Australian reports.

Australia's share market has closed higher and ended a run of three consecutive days of losses.

The S&P/ASX200 benchmark index closed up by 44.3 points, or 0.66 per cent, to 6,752.5 on Monday.

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The All Ordinaries closed higher by 35.4 points, or 0.51 per cent, at 6,995.

The results were the market's biggest gain in more than a week.

There were gains of more than two per cent in the energy, utilities and health sectors.

Gold was down 0.3 per cent at $US1,740.34 an ounce; Brent oil was up 0.1 per cent to $US64.58 a barrel; Iron ore was down 2.7 per cent to $US157.01 a tonne.

Meanwhile, the Australian dollar was buying 77.55 US cents at 8.30am, up from 77.44 US cents at Monday’s close.

Asia

China stocks ended higher on Monday, underpinned by banking and infrastructure shares, as the country’s central bank kept its key lending rate for corporate and household loans unchanged.

The CSI300 index rose 0.7 per cent to 5,042.82 points at the end of the morning session, while the Shanghai Composite Index climbed 0.9 per cent to 3,435.41 points.

Japanese shares tumbled on Monday as car makers took a hit after a fire at a plant owned by semiconductor supplier Renesas Electronics fanned worries about more chip supply shortfalls hitting vehicle production.

The Nikkei continued to underperform the broader market, after the Bank of Japan said on Friday it would no longer purchase Nikkei-linked exchange-traded funds.

The Nikkei share average fell 2.07 per cent to close at 29,174.15, its biggest decline since 4 March.

Europe

European stocks eked out gains by the closing bell on Monday after automakers resumed their rally, while banks fell after a slump in Turkey’s currency and worries lingered about more restrictions due to rising coronavirus cases on the continent.

The pan-European STOXX 600 rose 0.2 per cent, reversing declines from earlier in the session, with automobile stocks rising for a fifth day in the past six sessions.

Porsche jumped 8.9 per cent on contagion from a buying frenzy that has been lifting Volkswagen shares after the German car maker unveiled plans to challenge Tesla in the e-car market.

Deutsche Bank raised its target prices on Porsche, which holds the majority of Volkswagen ordinary shares, following a target rise for VW.

“Volkswagen is doing a good job on cost cuts which, together with a re-acceleration of the cycle and visibility on electric vehicles, make current valuations interesting in the medium to long term,” said Michele Pedroni, fund manager at Decalia.

“A possible spin-off, especially of Porsche, could only generate additional value,” he added.

The Turkish lira plunged to a near record low after President Tayyip Erdogan replaced a hawkish central bank governor with a critic of high interest rates over the weekend.

Euro zone banks exposed to the country such as Spain’s BBVA, Italy’s UniCredit, France’s BNP Paribas and Dutch bank ING fell between 0.8 per cent and 7 per cent.

However, the mood had improved by the end of the day.

“Thankfully the situation is not yet comparable with 2018, when the European Central Bank even warned about the potential risk to those banks which had exposure to the country and the danger that Turkey’s woes could lead to ripple effects throughout the financial system,” said Russ Mould, investment director at AJ Bell.

“Europe’s lenders have cut their loan books to Turkey since 2018 and HSBC has even contemplated withdrawing altogether.”

European stocks had seen sharp falls on Friday, easing from a one-year peak as renewed lockdowns in France and concerns over the pace of vaccination drives hit sentiment, with the European Union threatening to block exports of covid-19 vaccines to Britain.

A British minister warned on Monday that Britons should wait before booking summer holidays abroad, pointing to rising covid-19 infection rates in Europe.

British Airways-owner IAG, Lufthansa and Ryanair Holdings and travel company TUI fell between 2.2 per cent and 4.5 per cent.

The wider travel & leisure sector fell 0.7 per cent, with Germany set to extend a lockdown to contain the covid-19 pandemic into its fifth month.

North America

Wall Street rallied on Monday as technology stocks rebounded from a recent selloff sparked by surging bond yields and Tesla jumped after a fund run by an influential investor in the electric-car maker said its shares could approach US$3000 by 2025.

Tesla Inc’s 2.31 per cent gain to US$670 was the fourth-largest boost to the S&P 500 after Ark Invest, founded by star stockpicker Cathie Wood, raised the company’s price target on Friday using 34 inputs in a Monte Carlo model.

Tesla traded more than 6 per cent higher during the session before trimming gains.

Growth stocks rose more than 1.43 per cent while value shares slid 0.07 per cent in a reversal of this year’s big rotation in investment portfolios.

A sharp run-up in Treasury yields since mid-February has weighed on high-flying technology stocks that benefit from low yields as investors swarmed into underpriced value stocks from the mega-cap growth stocks that have fueled the past year’s rally.

An easing off of 14-month highs in the 10-year US Treasury note’s yield after it hit 1.754 per cent last week has allowed tech shares to bounce back, said Tom Hayes, chairman of hedge fund Great Hill Capital LLC in New York.

“It’s going to look like tech and growth is back but I think it will be much more moderate than people think,” Hayes said. “There’s a plethora of growth, growth across many sectors, and we’ve seen managers bidding those (shares) up in cyclicals and value. I think that persists over the next 18 months,” he said.

The tech-heavy Nasdaq outpaced the S&P 500 and the Dow, both of which posted all-time highs last week on bets that stimulus and vaccine rollouts will likely lead to the strongest US economic growth since 1983.

“The technology stocks are pretty beaten down and it’s not shocking to see those rebounding a little bit from their lows,” said Jake Wujastyk, chief market analyst and founding member of TrendSpider.

Kansas City Southern surged 11.1 per cent after Canadian Pacific Railway Ltd agreed to acquire the railroad operator in a US$25 billion cash-and-stock deal to create the first railway spanning the US, Mexico and Canada.

The Dow Jones Industrial Average closed up 103.23 points, or 0.32 per cent, at 32,731.2. The S&P 500 gained 27.49 points, or 0.70 per cent, to 3,940.59 and the Nasdaq Composite added 162.31 points, or 1.23 per cent, to 13,377.54.

Volume on US exchanges was 10.91 billion shares, compared with the 14.3 billion average over the last 20 trading days.

Bank stocks, which have enjoyed a rally on brightening economic prospects, dropped 2.27 per cent.

The S&P 500 tech index jumped 1.93 per cent, while energy and financials closed down 1.01 per cent and 1.30 per cent, respectively.

The iShares MSCI Turkey ETF sank 18.96 per cent after President Tayyip Erdogan’s decision to oust a hawkish central bank governor sparked fears of a reversal of recent rate hikes.

With Reuters

is senior editor for Morningstar Australia

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