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Global Market Report - 25 September

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

Australian shares are set to follow Wall Street higher as tech stocks regained investor favour and a surge in new homes sales boosted sentiment.

The Australian SPI 200 futures contract was up 7 points, or 0.12 per cent, to 5,862 points at 8.30am Sydney time on Friday, suggesting a slightly positive start to trading.

Wall Street rallied in a rocky session on Thursday as beaten-down technology shares gained favour after data showing a surge in the sale of new homes revived faith in the economic recovery even as US jobless claims rose unexpectedly.

Stocks reacted positively to news of efforts to enact further stimulus in Washington, helping lift the S&P to a session high, although the index then turned negative before retracing some gains.

The Dow Jones Industrial Average closed up 52.31 points, or 0.20 per cent, to 26,815.44. The S&P 500 gained 9.67 points, or 0.30 per cent, to 3,246.59, and the Nasdaq Composite added 39.28 points, or 0.37 per cent, to 10,672.27.

Locally, Treasurer Josh Frydenberg has called the government’s moves today to relax credit and lending rules as “absolutely critical” to Australia’s economic recovery.

The S&P/ASX200 benchmark index finished down 48.0 points, or 0.81 per cent, to 5,875.9 points on Thursday. The All Ordinaries index closed lower by 54.8 points, or 0.9 per cent, to 6,056.5.

Gold was up 0.2 per cent at $US1,866.71 an ounce; Brent oil +0.1 per cent to $US41.81 a barrel; Iron ore +0.8 per cent to $US114.67 a tonne.

Meanwhile, the Australian dollar was buying 70.56 US cents at 8.30am, up from 70.35 US cents at Thursday’s close.

Asia

China shares ended lower on Thursday, after falling the most in more than two weeks, taking cues from an overnight slump on Wall Street on renewed concerns over a coronavirus-led slowdown in global economic recovery.

At the close, the Shanghai Composite index was down 1.72 per cent at 3,223.18, while the blue-chip CSI300 index was down 1.92 per cent, both posting their biggest one-day percentage drop since 9 September.

Hong Kong shares closed near a four-month low on Thursday following a selloff in equity markets worldwide, as a resurgence in COVID-19 cases and warnings from US Federal Reserve officials undermined hopes for a quick global recovery.

At the close of trade, the Hang Seng index was down 431.44 points, or 1.82 per cent, at 23,311.07, its lowest since 29 May. The Hang Seng China Enterprises index fell 1.96 per cent to 9,371.19.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.04 per cent, while Japan's Nikkei index closed down 1.11 per cent.

Europe

A sell-off in global risk assets drove European equities to near three-month lows on Thursday, as the absence of fresh stimulus for the US economy and a second wave of coronavirus cases raised fears of a slowing global recovery.

The pan-European STOXX 600 index fell 0.8 per cent, recovering slightly after hitting its lowest level since 26 June, while bourses in Frankfurt, London and Paris were down between 0.3 per cent and 0.6 per cent.

Wall Street indexes suffered sharp losses overnight, led by technology stocks after US Federal Reserve officials called for more government aid from Congress, while reinforcing their stance of loose monetary policy.

European tech names were down 1.4 per cent, while growth-sensitive sectors such as travel and oil & gas fell about 1.3 per cent.

“There’s a lot of profit taking happening in the tech names. It’s not being helped by the prospect of US elections, Brexit and increasing infection rates on top of that,” said Will James, deputy head of European equities at Aberdeen Standard Investments in London.

France has become the latest European country to reimpose curbs with the government unveiling a map of coronavirus “danger zones” and giving the hardest-hit local authorities days to tighten restrictions or risk having a state-of-health emergency declared there.

British cinema operator Cineworld slumped 13.7 per cent as it swung to a loss and said it may have to raise more money if pushed to shut its theatres again due to government curbs on social gathering.

However, losses in German markets eased after an economist at the Ifo economic institute said the German industry is recovering and its export expectations have improved significantly.

Online payments company Adyen fell 1.4 per cent after it said co-founder Arnout Schuijff would step down from its management board as of 1 January.

French utility Suez fell 4 per cent after rival Veolia's CEO said the company will not rule out increasing the price it has offered for a stake owned by Engie.

Suez sees Veolia’s bid plan as hostile and is working on finding a consortium of investors to put together a rival bid for Engie’s stake.

However, the utilities and real estate indexes, among the so-called defensive sectors which tend to find favour during economic uncertainty, rose slightly.

North America

Apple, Amazon.com, Nvidia Corp and Facebook, stocks that have outperformed at a time of increased economic uncertainty, all rose.

The wild session indicated caution was in store, said Dennis Dick, a trader at Bright Trading, who warned market sentiment that drove momentum has sharply changed.

“Fear of missing out has turned into fear of losing actual money,” Dick said. “This is a shakeout of all the Robinhood traders, a shakeout of retail investors. They’re getting punished, and rightfully so, because you can’t just buy stocks out of a hat thinking stocks only go up.”

Democrats in the US House of Representatives are working on a US$2.2 trillion coronavirus stimulus package that could be voted on next week, a key lawmaker said, as House Speaker Nancy Pelosi reiterated she is ready to negotiate with the White House.

Wall Street started the day lower after the jobless claims data. The S&P 500 briefly fell 10 per cent below the intraday record peak it hit 2 September for the second time in recent days.

Dow constituents, considered a barometer of economic confidence, lagged the S&P 500 as data showed 870,000 Americans applied for jobless benefits in the week ended 19 September, up from 866,000 in the previous week.

Homebuilders rose 0.73 per cent after the Commerce Department reported that sales of new single-family homes rose to their highest level in nearly 14 years in August. That report followed data this week showing sales of previously owned homes also near a 14-year high.

Phil Orlando, chief equity strategist at Federated Hermes, said notwithstanding spats of poor data, the US economy is on a path to a powerful V-shaped recovery as seen in auto sales, the housing market and overall consumer spending.

“All of the inventory rebuilding is starting, all of the things you want to see are happening,” Orlando said. “Now, are there some chinks in the armour? Yes, just saw it in the claims numbers this morning.”

The CBOE volatility index, known as Wall Street's fear gauge and which is hovering near two-week highs, is expected to climb in the run-up to the quarter-end next week.

“The key is the VIX index, which has not yet reached levels that would suggest a continued strong move to the downside,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “So you might get a day of bargain hunting followed by a day of selling, but as the last days of September come into place, we should begin to see some sort of window dressing by institutions.”

Nikola Corp, which is set for its biggest weekly decline ever, slid 9.69 per cent as Wedbush downgraded the stock to "underperform."

Accenture fell 7.04 per cent after the IT consulting firm forecast current-quarter revenue below expectations, while U.S.-listed shares of BlackBerry initially jumped after the Canadian security software firm posted a surprise rise in quarterly revenue, but finished the day lower.

is content editor for Morningstar Australia

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