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Global Market Report - 24 February

Lex Hall  |  24 Feb 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to fall following a mixed night on Wall Street amid a tussle between "covid stocks" and reopening plays.

The Australian SPI 200 futures contract was down 29 points, or 0.4 per cent, at 6,762 points at 8.30am Sydney time on Wednesday, suggesting a negative start to trading.

Wall Street reversed course late Tuesday, with the S&P 500 and the Dow whipsawing to positive territory by the closing bell in a tug-of-war between stocks that thrived amid lockdowns and those that stand to benefit most from a reopening economy.

The Dow Jones Industrial Average rose 15.66 points, or 0.05 per cent, to 31,537.35, the S&P 500 gained 4.87 points, or 0.13 per cent, to 3,881.37 and the Nasdaq Composite dropped 67.85 points, or 0.5 per cent, to 13,465.20.

Locally, Facebook has overturned its ban on Australian news content, following breakthrough discussions between Josh Frydenberg and Mark Zuckerberg that have paved the way for the tech titan to strike commercial deals with media companies.

The S&P/ASX200 benchmark index closed higher by 58.3 points, or 0.86 per cent, to 6,839.2 on Tuesday.

The All Ordinaries closed higher by 49.2 points, or 0.7 per cent, at 7,110.8.

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Energy was the top sector, up 4.85 per cent, after oil prices rose nearly four per cent.

Spot gold was down 0.3 per cent to $US1,803.57 an ounce; Brent crude was up 0.5 per cent to $US65.58 a barrel; Iron ore was down 1.7 per cent to $US173.05 a tonne.

Meanwhile, the Australian dollar was buying 79.06 US cents at 8.30am, down from 79.13 US cents at Tuesday’s close.

Asia

China stocks closed lower in volatile trading on Tuesday, after a sharp correction the previous session, as worries over policy tightening weighed on sectors with lofty valuations, although losses were limited by gains in financials shares.

The blue-chip CSI300 index fell 0.3 per cent to 5,579.67, after logging the biggest daily drop in nearly seven months on Monday. The Shanghai Composite Index slid 0.2 per cent to 3,636.36.

The Hang Seng Index rose 1 per cent to 30,623.64 at the close, reversing an intraday loss of as much as 0.6 per cent.

Europe

European shares ended lower on Tuesday as high sovereign bond yields pressured heavyweight sectors such as technology, while a batch of mixed corporate earnings cast doubt over the pace of a post-covid-19 recovery.

The benchmark euro zone stock index was down 0.4 per cent, with tech stocks leading declines for a second straight session as they retreated further from 20-year highs.

A recent spike in sovereign bond yields also weighed on stocks, as higher returns in fixed income offered investors a safer alternative to relatively riskier equities.

Technology stocks in particular have also been viewed as expensive by investors after their outperformance through the covid-19 pandemic.

Still, bank stocks benefited from the rise in borrowing rates, with Spain’s bank-heavy index adding 1.7 per cent.

“Investors are cautiously optimistic about the rise in US bond yields and what that tells us about inflation trajectories, while German shares seem to be weighing on the wider European market as tech stocks weaken further with the DAX being a tech-focussed index,” said Michael Hewson, an analyst at CMC Markets.

Core European government bond yields rose despite indications of discomfort from European Central Bank President Christine Lagarde with the recent surge in yields.

But US yields retreated slightly after US Federal Reserve Chair Jerome Powell downplayed concerns over inflationary pressures and reiterated continued monetary support.

European stocks have rallied sharply off pandemic-driven lows hit last year, but have been unable to reach pre-covid highs on doubts over a euro zone economic recovery due to fresh lockdowns in major countries.

Among individual movers, HSBC Holdings dropped 0.8 per cent after its annual profits fell sharply due to the pandemic, while it unveiled a revised strategy focused mainly on wealth management in Asia.

Swiss packaging firm SIG Combibloc Group bottomed out the STOXX 600 after its annual core earnings missed estimates.

German health care group Fresenius slipped after it narrowed its 2021 sales growth forecast and said it would launch a cost-cutting program, while cement-maker HeidelbergCement dropped 2.3 per cent even after preliminary results showed core profit was up 6 per cent last year.

French energy group Total gained more than 2 per cent after it agreed to sell stakes in some wind and solar farms to Credit Agricole Assurances and Banque des Territoires.

North America

Wall Street reversed course late Tuesday, with the S&P 500 and the Dow whipsawing to positive territory by the closing bell in a tug-of-war between stocks that thrived amid lockdowns and those that stand to benefit most from a reopening economy.

The Nasdaq was the only major U.S. stock index to lose ground on the day.

Market-leading growth stocks, which thrived amid pandemic-related lockdowns, weighed on stocks for much of the day as investors favored shares that stand to gain most as ongoing vaccine deployment allows economic restrictions to be lifted.

“People are buying the dip, a move that’s been rewarded for months in a one-sided market,” said Dennis Dick, head of market structure and a proprietary trader at Bright Trading LLC.

“It’s tough to be a bear, it’s really tough. The only fear out there is the fear of missing out,” Dick said.

Fed Chairman Jerome Powell pushed back against concerns that the central bank’s economic support increased the risk of spiraling inflation, and insisted that the central bank’s accommodative monetary policy would remain in place for “some time.”

Testifying before the Senate Banking Committee, Powell said the economic recovery was “uneven and far from complete,” adding that investors are mostly responding to an anticipated rebound as vaccine deployment curbs the pandemic.

“People took his words to heart. It made them go back to their buying lists,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina. “For people with cash on the sidelines waiting to put it to work maybe his interview this morning gave people a little confidence to go back to the drawing board and put money to work this afternoon.”

The Dow Jones Industrial Average rose 15.66 points, or 0.05 per cent, to 31,537.35, the S&P 500 gained 4.87 points, or 0.13 per cent, to 3,881.37 and the Nasdaq Composite dropped 67.85 points, or 0.5 per cent, to 13,465.20.

Of the 11 major sectors in the S&P 500, seven closed in positive territory, but consumer discretionary and tech shares suffered the largest percentage losses.

Tesla Inc lost 2.2 per cent to close in negative territory for the year, pulled down amid the tech selloff and falling bitcoin, which lost 12.0 per cent. Tesla recently invested $1.5 billion in the cryptocurrency.

Cryptocurrency miners Riot Blockchain Inc and Marathon Patent Group Inc plunged 24.6 per cent and 23.0 per cent, respectively, while bitcoin bank Silvergate Capital Corp slid 20.1 per cent.

Home improvement retailer Home Depot Inc posted better-than-expected quarterly earnings. But it cast doubt on whether spiking sales, driven by homebound consumers taking on do-it-yourself projects amid COVID lockdowns, are sustainable going forward. Its shares were the heaviest drag on the Dow, falling 3.1 per cent.

Smaller rival Lowe’s Companies Inc, expected to report its results early Wednesday, also lost ground.

With Reuters

is senior editor for Morningstar Australia

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