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Global Market Report - 23 October

Lex Hall  |  23 Oct 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to edge up as Wall Street rose overnight on positive jobs data and more pandemic stimulus.

The Australian SPI 200 futures contract was up 2 points, or 0.03 per cent, to 6,171 points at 8.30am Sydney time on Friday, suggesting a slightly positive start to trading.

Shares on Wall Street ended higher on Thursday in choppy trading, as investors cheered the prospect of more fiscal stimulus to support a pandemic-damaged US economy, with more data pointing to a slowing labor market recovery.

The Dow Jones Industrial Average rose 149.85 points, or 0.53 per cent, to 28,360.67, the S&P 500 gained 16.74 points, or 0.49 per cent, to 3,452.3 and the Nasdaq Composite added 13.58 points, or 0.12 per cent, to 11,498.27.

Elsewhere, the US Food and Drug Administration granted full approval to the antiviral drug Remdesivir as a treatment for patients hospitalised with covid-19, its manufacturer Gilead said, following conditional authorisation granted in May.

The S&P/ASX200 benchmark index was lower by 18 points, or 0.29 per cent, to 6,173.8 on Thursday. The All Ordinaries was down by 19.4 points, or 0.3 per cent, to 6,383.7.

Gold was down 1.0 per cent at $US1,904.41 an ounce; Brent oil was up 1.8 per cent to $US42.47 a barrel; Iron ore was down 0.5 per cent to $US119.91 a tonne.

Meanwhile, the Australian dollar was buying 71.14 US cents at 8.30am, up from 70.96 US cents at Thursday’s close.

Asia

Broad-based losses pulled China stocks lower on Thursday, with healthcare and industrials firms falling the most, even as policymakers vowed to balance the need for stable economic growth and preventing financial risks.

The CSI300 index fell 0.8 per cent, to 4,753.74 points by the end of the morning session, while the Shanghai Composite Index lost 0.8 per cent, to 3,297.32 points.

In Hong Kong, the Hang Seng index dropped 0.2 per cent, to 24,699.11 points, while the Hong Kong China Enterprises Index lost 0.3 per cent, to 10,047.16.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.42 per cent while Japan's Nikkei index was down 0.73 per cent.

Europe

European shares fell for a fourth straight day on Thursday, though they trimmed losses after Britain’s Finance Minister Rishi Sunak unveiled billions of pounds more of financial aid for pandemic-hit businesses.

London's FTSE 100 erased losses to end up 0.2 per cent, while the mid-caps index rose over half a percent. The pan-European STOXX 600 recovered from losses of up to 1.2 per cent to close down 0.1 per cent.

“(Sunak’s) announcement highlights the hope that other nations will also remain suitably supportive to avoid economic collapse,” said Joshua Mahony, senior market analyst at online trader IG.

Europe's travel and leisure sector, the pandemic's worst casualty, jumped 1.6 per cent, with London's Trainline, bookmaker GVC Holdings and British Airways owner International Consolidated Airlines leading gains.

The German DAX fell 0.1 per cent as a survey showed consumer morale in Europe's largest economy dropped heading into November.

With covid-19 cases climbing in Europe, all eyes next week will be on the European Central Bank’s next move.

Spain became the first Western European nation to exceed 1 million infections on Wednesday, while Italy saw a record rise in daily cases. The number of confirmed cases in Germany jumped by more than 10,000 for the first time in a single day.

Analysts at Rabobank say that while an immediate ECB intervention isn’t warranted given the stimulus already being provided, there is now a substantial possibility of an announcement next week.

The broader selloff took a toll on tech stocks, the worst-performing sector so far this week. Investors have also remained nervous about the slow pace of US stimulus and the Brexit negotiations.

Data showed fund flows into European stocks have surged in recent months as global investors looked away from US equities ahead of the presidential election, and on concerns over high valuations.

Third-quarter earnings continue to be largely better than expected.

French electrical equipment group Schneider Electric rose 2.1 per cent, giving the biggest boost to STOXX 600, after it raised its 2020 revenue and margin forecasts.

Unilever rose 0.4 per cent after the Anglo-Dutch consumer group reported a stronger-than-expected return to quarterly sales growth, led by emerging markets.

Swedish hygiene products group Essity and British price comparison website Moneysupermarket.com fell as quarterly revenue suffered from the stay-at-home trend.

North America

Shares on Wall Street ended higher on Thursday in choppy trading, as investors cheered the prospect of more fiscal stimulus to support a pandemic-damaged US economy, with more data pointing to a slowing labor market recovery.

Trading on Wall Street this week has been driven by a flurry of reports related to developments in the stimulus talks.

US House of Representatives Speaker Nancy Pelosi reported progress in talks with the Trump administration for another round of financial aid and said legislation could be hammered out “pretty soon”.

However, White House economic adviser Larry Kudlow cautioned “significant policy differences” remained, which were unlikely to be resolved before the 3 November election.

“These stimulus rumours continue to swirl,” said Mike Zigmont, head of trading at Harvest Volatility Management. “But I think the market is getting accustomed to these rumours and each new rumour has less of an impact than it used to.”

He was also not confident that another stimulus deal would pave the way for another bullish trend in stocks.

“The second stimulus as a topic has been kicking around for so long. The bulk of the economic consequences has already been baked into stock prices,” Zigmont said.

“And now it is strictly an emotional issue, a perception-in-the market type of issue.”

Pelosi and Treasury Secretary Steven Mnuchin have been negotiating a relief bill near the $2 trillion mark, a sum opposed by Senate Republicans who have expressed concern about the federal deficit.

Also on Thursday, data showed the number of Americans filing for state unemployment benefits last week dropped more than expected to 787,000, but remained stubbornly high as support from fiscal stimulus faded.

The Dow Jones Industrial Average rose 149.85 points, or 0.53 per cent, to 28,360.67, the S&P 500 gained 16.74 points, or 0.49 per cent, to 3,452.3 and the Nasdaq Composite added 13.58 points, or 0.12 per cent, to 11,498.27.

Energy and financials rose, posting the steepest gains among the major S&P sectors.

Investors will monitor the final presidential debate on Thursday night between Trump and Democratic challenger Joe Biden who is ahead in national polls.

Meanwhile, about a fifth of S&P 500 companies have reported third-quarter results, of which 84.1 per cent beat earnings estimates, according to IBES Refinitiv data.

Tesla climbed after the electric-car maker reported its fifth consecutive quarterly profit on record revenue of $8.8 billion.

Chipotle Mexican Grill fell as it posted a drop in quarterly profit, hurt by higher beef prices, delivery costs and coronavirus-related expenses.

Among blue-chip companies, Coca-Cola Co gained as it beat quarterly results expectations, while chemicals maker Dow fell 0.6 per cent even as it surpassed quarterly profit estimates.

is content editor for Morningstar Australia

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