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Global Market Report - 25 November

Lex Hall  |  25 Nov 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following record gains on Wall Street overnight as vaccine progress and signs of an economic recovery pushed the Dow to a new high.

The Australian SPI 200 futures contract was up 36 points, or 0.5 per cent, to 6,683 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

US stocks rallied on Tuesday and the Dow breached the 30,000 level for the first time, as investors anticipated a 2021 economic recovery, coronavirus vaccine progress and the formal clearance for President-elect Joe Biden’s transition to the White House.

The Dow Jones Industrial Average rose 454.57 points, or 1.54 per cent, to 30,045.84, the S&P 500 gained 57.82 points, or 1.62 per cent, to 3,635.41 and the Nasdaq Composite added 156.15 points, or 1.31 per cent, to 12,036.79.

Locally, Reserve Bank deputy governor Guy Debelle has warned it will take years to undo the damage from the covid-19 recession and cautioned the Morrison government against prematurely withdrawing support, The Australian reports.

The S&P/ASX200 benchmark index closed up 82.5 points, or 1.26 per cent, to 6,644.1 on Tuesday. The index remains at levels last reached in late February, before investors became nervous about the coronavirus.

The All Ordinaries closed higher by 83.5 points, or 1.23 per cent, to 6855.5.

Gold was down 1.6 per cent at $US1808.24 an ounce; Brent oil was up 3.9 per cent to $US47.85 a barrel; Iron ore was up 0.1 per cent to $US127.42 a tonne.

Meanwhile, the Australian dollar was buying 73.53 US cents at 8.30am, up from 73.20 US cents at Tuesday’s close.

Asia

China stocks ended lower on Tuesday, as investors locked in profit following a recent rally, while the market showed scant reaction to news that US President-elect Joe Biden was given the go-ahead to begin his White House transition.

Analysts said a Biden presidency, which could mean more negotiation room for Washington and Beijing, would not make a big difference for China’s equities market, as they expected little change in US policy towards China.

The blue-chip CSI300 index closed 0.6 per cent lower at 4,974.29, while the Shanghai Composite Index declined 0.3 per cent to 3,402.82.

Hong Kong stocks ended higher on Tuesday, tracking other Asian markets, as sentiment was lifted globally after a federal agency gave US President-elect Joe Biden the go-ahead to begin his White House transition and on progress on a covid-19 vaccine.

At the close of trade, the Hang Seng index was up 102.00 points or 0.39 per cent at 26,588.20. The Hang Seng China Enterprises index fell 0.51 per cent to 10,612.58.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.79 per cent, while Japan’s Nikkei index closed up 2.5 per cent.

Europe

European shares ended higher on Tuesday, as the potential easing of lockdowns in France combined with optimism around the deployment of a coronavirus vaccine as early as the beginning of next year to lift hopes of a swift economic recovery.

The pan-European STOXX 600 index rose 0.8 per cent to its strongest close since late February, supported by strong gains in oil & gas stocks, which were set for their best month on record as crude prices hit their highest levels since late March.

“Oil acts as an economic bellwether and the commodity has been on a tear for the past month, rising by more than 20 per cent in value as markets start to become more optimistic about economic activity amid positive vaccine news,” said Russ Mould, investment director at AJ Bell.

The benchmark STOXX 600 has surged 14.5 per cent so far this month and is on track for its highest monthly gain on record.

“Investors are drowning out the noise of potential near-term risk and purely focusing on the vaccine optimism coupled with positive political developments from the US” said Craig Erlam, senior market analyst at OANDA.

However, Europe’s businesses struggled during the month as fresh lockdown measures forced many firms to temporarily shut shop as a second wave of coronavirus infections swept across the continent.

German shares jumped 1.3 per cent, with exchange operator Deutsche Boerse revealing that the blue-chip index would expand to 40 from the current 30 companies with tougher membership criteria.

Data also showed that Europe’s biggest economy grew by a record 8.5 per cent in the third quarter.

France’s benchmark CAC 40 rose 1.2 per cent after the country on Monday reported its lowest daily tally of covid-19 infections since Sept. 28, while investors awaited a speech by President Emmanuel Macron later on Tuesday when he may announce a relaxation of lockdown rules.

Italy’s FTSE MIB was the top gainer among European indexes after a report suggested the country would get 16 million shots of the potential covid-19 vaccine developed by AstraZeneca in the first months of 2021 under a supply deal agreed at a European Union level.

British stocks climbed 1.6 per cent after England said it would introduce a new system allowing the use of testing to shorten quarantine requirements for incoming passengers.

The news lifted travel and leisure stocks, among the worst hit by the pandemic due to restrictions on travel, by 2.7 per cent.

North America

US stocks rallied on Tuesday and the Dow breached the 30,000 level for the first time, as investors anticipated a 2021 economic recovery, coronavirus vaccine progress and the formal clearance for President-elect Joe Biden’s transition to the White House.

Each of the 11 major S&P sectors were higher, economically sensitive stocks such as the financials, materials and energy names, while industrials hit a record.

President Donald Trump finally gave the green light for the formal transfer of power to begin on Monday, a process that was delayed for weeks despite Democrat Joe Biden emerging as the clear winner in the US elections. The General Services Administration told Biden he could formally begin the hand-over process.

Sentiment this week was also boosted by reports that Biden planned to nominate former Federal Reserve Chair Janet Yellen as Treasury Secretary, which could shift the focus heavily toward efforts to tackle growing economic inequality.

Recent data suggesting a covid-19 vaccine could be available before the end of the year has put the S&P 500 on course for its best monthly performance since April and sparked demand for value-linked stocks that were hammered following the coronavirus-driven crash earlier this year.

“A little bit of decreasing uncertainty on the election front, the market seems pretty favourable on the Yellen announcement, it just seems like one of those good days where all things are moving a little higher,” said Ross Mayfield, investment strategy analyst at Baird.

“If 2020 has shown us anything it is that stock markets have a tremendous ability to look past bad news if there is sun on the horizon.”

The Dow Jones Industrial Average rose 454.57 points, or 1.54 per cent, to 30,045.84, the S&P 500 gained 57.82 points, or 1.62 per cent, to 3,635.41 and the Nasdaq Composite added 156.15 points, or 1.31 per cent, to 12,036.79.

The Dow rose as high as 30,116.51 during the session.

US officials said on Tuesday they plan to release 6.4 million covid-19 vaccine doses nationwide in an initial distribution after the first one is cleared by regulators for emergency use.

Electric-car maker Tesla Inc jumped to boost its market value to over $500 billion, as investors lapped up its shares in the run-up to its addition to the S&P 500 index.

Boeing Co gained after European regulators gave draft approval to its 737 MAX jets, paving the way for a formal flight clearance in January.

BlackRock Inc, the world’s largest asset manager, on Monday upgraded US equities to “overweight,” turning bullish on quality large-cap technology companies and small cap firms that tend to perform well during a cyclical upswing.

Still, with coronavirus cases surging by the day and millions of Americans still unemployed, some analysts suggested the US stock market could be prone to a pullback and volatility from record levels in the next few months.

is content editor for Morningstar Australia

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