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Global Market Report - 24 March

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

Australian shares are set to rise despite falls on Wall Street as investors feared infrastructure costs and a mooted rise in tax to fund the Biden relief bill.

The Australian SPI 200 futures contract was up 18 points, or 0.3 per cent, at 6,735 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

US stocks tumbled on Tuesday as concerns about the cost of infrastructure spending and potential tax hikes to pay for President Joe Biden’s US$1.9 trillion ($.25 trillion) relief bill weighed on investors who also fear further downside in the market.

The Dow Jones Industrial Average fell 308.05 points, or 0.94 per cent, to 32,423.15 and the S&P 500 lost 30.07 points, or 0.76 per cent, to 3,910.52. The Nasdaq Composite dropped 149.85 points, or 1.12 per cent, to 13,227.70.

Locally, thermal coal prices have jumped to their highest level since 2018 after devastating floods in NSW halted rail supplies to Newcastle and saw vessels unable to dock, sparking forecasts of a tight market as port, rail and mine disruptions persist, The Australian reports.

Australia's share market had its fourth loss in the past five sessions, albeit by a marginal amount.

The S&P/ASX200 benchmark index closed lower by 7.1 points, or 0.11 per cent, to 6,745.4 on Tuesday.

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The All Ordinaries closed down by 8.4 points, or 0.12 per cent, at 6,986.6.

In the major sectors, financials declined by 0.52 per cent while materials gained 0.22 per cent.

Telecommunications proved the top sector, up 1.03 per cent, while the worst was energy, which dropped 1.04 per cent.

The Australian dollar was buying 76.92 US cents at 1620 AEDT, lower from 77.24 US cents at Monday's close.

Gold was down 0.7 per cent at $US1,727.54 an ounce; Brent oil was down 6.0 per cent to $US60.77 a barrel; Iron ore was up 3.1 per cent to $US161.80 a tonne.

Meanwhile, the Australian dollar was buying 77.55 US cents at 8.30am, up from 77.24 US cents at Tuesday’s close.

Asia

China and Hong Kong stocks retreated on Tuesday, as western sanctions against China dampened risk appetite, while lingering worries over policy tightening continued to weigh on the market.

The CSI300 index fell 1.4 per cent to 4,984.50 points at the end of the morning session, while the Shanghai Composite Index lost 1.2 per cent to 3,402.56 points.

The Hang Seng index dropped 1.2 per cent to 28,545.71 points, while the Hong Kong China Enterprises Index fell 1.6 per cent to 11,129.73 points.

In Japan, the Nikkei 225 finished down 0.61 per cent at 28,995.92.

Europe

European stocks eased from a one-year peak on Tuesday, as a new wave of coronavirus infection and a fresh lockdown in Germany raised fears of a slow economic recovery from the pandemic.

The pan-European STOXX 600 index fell 0.2 per cent after a new round of sanctions aimed at China hit Asian markets.

Germany’s DAX was flat after Chancellor Angela Merkel decided to extend a lockdown until April 18 and called on citizens to stay at home for five days over the Easter holidays.

Swedish truckmaker Volvo slumped 7.0 per cent after it warned a shortage of semiconductors would have a substantial impact on production in the second quarter.

Its stock weighed on Europe’s industrial goods and services sector, while automakers slid 2.7 per cent to give back some of their recent gains.

“Now fears of another wave of the virus in mainland Europe have sparked worries that several countries in the region will have to reopen their economies later than anticipated,” said David Madden, market analyst at CMC Markets.

“The mood isn’t awful, traders aren’t running for the hills, but there is a sense of fatigue that the restrictive climate will drag on a bit longer.”

The STOXX 600 last week climbed to its highest since February, recouping most of the pandemic-driven losses on hopes that vaccination drives and stimulus measures will spur a strong economic rebound.

The gains have slowed this week amid worries about a surge in COVID-19 cases. The tally of new cases in France accelerated despite the start of a third lockdown, while Austria postponed the reopening of cafes and restaurants.

Travel & leisure stocks fell again, with British Airways-owner IAG, easyJet and travel company TUI down between 2.6 per cent and 6 per cent.

British health minister Matt Hancock said fines of 5,000 pounds ($6,900) would be introduced for people from England who try to travel abroad before the end of June.

Swiss drugmaker Roche fell 1.7 per cent after it dropped a late-stage trial of its Huntington’s disease treatment hope, tominersen.

Swiss online pharmacy chain Zur Rose surged to the top of STOXX 600 after Morgan Stanley started coverage with an “overweight” rating.

North America

US stocks tumbled on Tuesday as concerns about the cost of infrastructure spending and potential tax hikes to pay for President Joe Biden’s US$1.9 trillion relief bill weighed on investors who also fear further downside in the market.

Remarks by Treasury Secretary Janet Yellen that the US economy remains in crisis from the pandemic as she defended developing plans for future tax increases to pay for the new public investments put investors on alert.

Yellen spoke at a hearing of the House Financial Services Committee where Federal Reserve Chair Jerome Powell also addressed the committee.

Talk of the government’s infrastructure plans unnerved investors who are concerned the stock market is trading at elevated valuations, said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

“There’s a little bit of concern of getting out ahead of a potential selloff that could be on the horizon,” Meckler said. “Any feeling that it could be on the horizon is causing people to pull the trigger pretty quick on these down moves.”

Stocks had been trading near break-even in seesaw trade before turning sharply lower about 45 minutes before the close.

Powell told US lawmakers that a coming round of post-pandemic price hikes will not fuel a destructive breakout of persistent inflation - fears that had sparked a recent rise in yields and caused technology shares to sell off.

Oil prices that slumped more than 3 per cent on worries that new pandemic curbs and slow vaccine rollouts in Europe will slow a recovery in demand helped push the energy sector lower. 

Falling yields on 10-year US Treasury notes from a 14-month highs last week have deflated this year’s outperformance in the financial and energy sectors.

Conversely, technology-related shares that had recently declined sharply on the rising rate environment had recuperated a bit as yields eased, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

“A lot of these (tech) stocks have seen 10 per cent to 20 per cent corrections and interest rates have backed off a bit,” Tuz said. “The money seems to be going back into them and out of the groups that did extremely well the last three months, specifically financials and energy.”

The benchmark S&P 500 and the blue-chip Dow have rallied about 80 per cent from their pandemic lows of a year ago, while the tech-heavy Nasdaq more than doubled in value.

Small cap stocks, which had outperformed this year, along with financials, energy and international stocks, fell 3.5 per cent in the biggest single-day decline since Feb. 25.

The CBOE volatility index eased to its lowest level in 13 months before jumping about 11 per cent on the day. Wall Street’s so-called fear gauge still hovers near pandemic lows.

The Dow Jones Industrial Average fell 308.05 points, or 0.94 per cent, to 32,423.15 and the S&P 500 lost 30.07 points, or 0.76 per cent, to 3,910.52. The Nasdaq Composite dropped 149.85 points, or 1.12 per cent, to 13,227.70.

Volume on US exchanges was 12.10 billion shares, compared with the 14.04 billion average for the full session over the last 20 trading days.

Shares of GameStop Corp dropped 6.5 per cent ahead of the company’s fourth-quarter results due later on Tuesday. The videogame retailer announced the exit of its chief customer officer in the latest sign of a broader overhaul into an e-commerce firm.

ViacomCBS Inc tumbled 9.1 per cent after the media firm launched US$3 billion stock deals to raise capital for investments in streaming.

US-listed shares of Chinese internet search provider Baidu Inc slid 1.7 per cent following a flat Hong Kong debut as investors were wary of a fundraising flurry in the city and questioned the company’s growth plans.

With Reuters

is senior editor for Morningstar Australia

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