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Global Market Report - 25 January

Lex Hall  |  25 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise ahead of the Australia Day public holiday. The ASX will trade four days this week with markets closed on Tuesday.

The Australian SPI 200 futures contract was up 15 points, or 0.2 per cent, at 6,748 points at 7:15am Sydney time on Monday, suggesting a positive start to trading.

The Dow and S&P 500 ended modestly lower on Friday, dragged down by losses in blue-chip technology stalwarts Intel and IBM following their quarterly results, as hopes for a full economic reopening in the coming months waned.

The Dow Jones Industrial Average fell 179.03 points, or 0.57 per cent, to 30,996.98, the S&P 500 lost 11.6 points, or 0.30 per cent, to 3,841.47 and the Nasdaq Composite added 12.15 points, or 0.09 per cent, to 13,543.06.

Locally, Australia's share market closed lower on Friday but provided gains for the week, with an analyst tipping that a good February earnings season could see the ASX return to the lofty 7000-points range.

The S&P/ASX200 benchmark index closed lower by 23.3 points, or 0.34 per cent, to 6,800.4 on Friday.

The All Ordinaries closed lower by 28.2 points, or 0.4 per cent, at 7,078.9.

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For the week, the ASX200 closed higher by 1.27 per cent.

The Australian economy appeared to continue recovering with the unemployment rate on Thursday falling to 6.6 per cent, based on December job figures.

Three gave upbeat earnings guidance this week ahead of first-half earnings reports in February—Ansell, JB Hi-Fi and Super Retail Group.

Meanwhile, the Australian dollar was buying 77.15 US cents at 7:15am, down from 77.43 US cents at Friday's close.

Spot gold fell -0.8 per cent to US$1,855.61/oz. Brent crude fell -1.2 per cent to $US55.41 a barrel. US oil was down -1.6 per cent to $US52.27 a barrel while iron ore was also down -0.9 per cent to $US169.97 a tonne.

Asia

China’s composite stock index edged lower on Friday, while the blue-chip average ended slightly higher, as investors locked in profits in other Asian markets after a recent rally boosted by a coronavirus stimulus plan by US President Joe Biden.

The blue-chip CSI300 index edged up 0.1 per cent to 5,569.78, while the Shanghai Composite Index slid 0.4 per cent to 3,606.75

Hong Kong stocks ended lower on Friday, the biggest daily percentage drop since 30 November, as investors locked in gains following recent strength and China’s composite stock index slipped amid a breather in the global rally.

At the close of trade, the Hang Seng index was down 1.6 per cent at 29,447.85. The Hang Seng China Enterprises index fell 1.8 per cent to 11,677.45.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.72 per cent, while Japan’s Nikkei index was down 0.4 per cent.

Europe

European stocks ended lower on Friday, closing out another lacklustre week as business activity in the euro zone shrank in January after stringent lockdowns to control the coronavirus pandemic shuttered many businesses.

The pan-European STOXX 600 index fell 0.6 per cent, but clung to a small 0.2 per cent rise for a week, dominated by hopes for massive US stimulus under President Joe Biden.

Travel and leisure stocks fell 2.5 per cent, leading declines among sectors amid concerns over fresh travel restrictions in Europe. Other economically sensitive sectors like banks, oil & gas and mining shed more than 1 per cent.

IHS Markit’s flash composite Purchasing Mangers’ Index (PMI) for the euro zone fell further below the 50 mark separating growth from contraction, hitting 47.5 in January from December’s 49.1.

The bloc’s dominant service industry was hit hard with hospitality and entertainment venues forced to remain closed, but manufacturing remained strong as factories largely stayed open.

The auto-heavy German DAX fell 0.2 per cent, France’s CAC 40 dropped 0.6 per cent, and euro zone stocks were down 0.6 per cent.

The sealing of a post-Brexit trade deal, unprecedented stimulus measures from central banks and governments, and hopes that covid-19 vaccines will spur a faster economic rebound drove the STOXX 600 to a near 11-month high this week.

“There is quite a big discussion in the market on whether the consensus is too bullish, or if we need to have a pullback,” said Graham Secker, chief European equity strategist at Morgan Stanley.

“I think this is more about the fact the markets had a strong run over the past few months. Maybe it gives people an excuse for some profit-taking.

“While the long-term narrative is intact, the market tends to give the benefit of doubt.”

A European Central Bank survey showed the euro zone economy is likely to rebound this year—but at a slower pace than expected only a few months ago—before making up the lost ground in 2022.

Germany’s Lufthansa, Air France and British Airways-owner IAG fell between 2.5 per cent and 3.4 per cent, while holiday group TUI tumbled 17.2 per cent after the European Union proposed to label hotspots of covid-19 infections as “dark red” zones.

Travellers from those areas will have to take a test before departure and undergo quarantine.

The UK’s FTSE 100 fell 0.3 per cent and midcap stocks slid 1.0 per cent after Britain’s retail sales marked a weak end to their worst year on record in December, while business activity contracted sharply in the latest month.

Italian stocks fell 1.5 per cent after the country’s main ruling parties flagged snap elections as the only way out of its political impasse if Prime Minister Giuseppe Conte fails to drum up a parliamentary majority after scraping through a confidence vote this week.

Helping limit losses in Germany’s DAX, engineering group Siemens AG jumped 7.3 per cent on stronger-than-expected preliminary results for its first quarter.

The world’s largest carmaker Volkswagen rose 1.9 per cent as a rebound in premium car sales in China and stronger fourth-quarter deliveries helped keep it in the black last year, though its profit almost halved due to the impact of the pandemic.

North America

The Dow and S&P 500 ended modestly lower on Friday, dragged down by losses in blue-chip technology stalwarts Intel and IBM following their quarterly results, as hopes for a full economic reopening in the coming months waned.

IBM Corp slumped 9.91 per cent and was the top drag on the Dow Jones Industrial Average after it missed estimates for quarterly revenue, hurt by a rare sales decline in its software unit.

Intel Corp slipped 9.29 per cent as new Chief Executive Officer Pat Gelsinger’s post-earnings comments suggested the lack of a strong embrace of outsourcing.

However, losses in the tech sector were offset by gains from Microsoft Corp Apple Inc, keeping the declines on the main US stock indexes in check and lifting the Nasdaq slightly.

Energy and financials were the worst performers among the 11 S&P sectors on Friday, while the defensive utilities and real estate groups advanced.

“Any delay or setback in the reopening theme is probably going to be a headwind for the energy sector,” said Andrew Mies, chief investment officer at 6 Meridien in Wichita, Kansas.

“(But) the market is telling you that its confidence in the cyclicals are diminished right now.”

The S&P 500 and the Nasdaq pared some losses shortly after the opening bell as data showed US manufacturing activity surprisingly surged to its highest level in more than 13½ years in early January, in contrast to a disappointing result in the purchasing manager data in Europe earlier.

The Dow Jones Industrial Average fell 179.03 points, or 0.57 per cent, to 30,996.98, the S&P 500 lost 11.6 points, or 0.30 per cent, to 3,841.47 and the Nasdaq Composite added 12.15 points, or 0.09 per cent, to 13,543.06.

Volume on US exchanges was 12.79 billion shares, compared with the 12.68 billion average for the full session over the last 20 trading days.

Despite the weakness, the three major indexes notched weekly gains, with the tech-heavy Nasdaq tracking for its best weekly performance since 6 November as investors piled into Alphabet Inc, Apple Inc and Amazon.com Inc in anticipation of their earnings reports in the coming weeks.

For the week, the S&P rose 1.94 per cent, the Dow added 0.59 per cent and the Nasdaq unofficially gained 4.19 per cent.

With stock valuations nearing levels not seen since the Dotcom era, some market participants said new covid-19 variants and hiccups in vaccine rollouts pose near-term risks.

President Joe Biden said on Friday the US economic crisis was deepening and that the government needs to take major action now to help struggling Americans.

“The absolute assurance that investors felt a week ago ... some of that is starting to fade out of the market.” Mies added, regarding the decline in the virus and the reopening of the economy.

The Senate Finance Committee unanimously approved Janet Yellen’s nomination as the first woman Treasury secretary, indicating that she will easily win full Senate approval.

With Reuters

is senior editor for Morningstar Australia

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