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Global Market Report - 26 February

Lex Hall  |  26 Feb 2020Text size  Decrease  Increase  |  
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Australian shares face another hammering after big falls on US equity markets overnight following a warning for Americans to prepare for the coronavirus.

At 8am Sydney time the SPI200 futures contract was down 147 points, or 2.15 per cent, at 6679, pointing to another sharp fall when the local market opens.

Local stocks lost $US37.8 billion in value on Tuesday in the Australian share market’s second worst day of 2020, following Monday’s 2.25 per cent plunge.

It was followed by another sell off overnight on US markets after the US Centres for Disease Control and Prevention said Americans should begin to prepare for community spread of the new coronavirus.

On Wall Street, the Dow Jones Industrial Average fell 880.79 points, or 3.15 per cent, to 27,080.01, the S&P 500 fell 3.03 per cent, and the Nasdaq Composite dropped 2.77 per cent.

Oil prices also continued their fall on fears of a demand hit from the flu-like virus that has infected more than 80,000 people.

The Australian dollar was buying US66 cents at 8am, down from US66.12 cents on Tuesday.


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Losses in China stocks, which ended lower on Tuesday, were capped as investors expected the coronavirus contagion outside China to have a limited impact on the Chinese market.

At the close, the Shanghai Composite index was down 0.6 per cent at 3,013.05. The blue-chip CSI300 index was down 0.22 per cent.

In Hong Kong, the Hang Seng Index edged up 0.3 per cent.


European shares ended at their lowest in nearly two months on Tuesday as concerns over the coronavirus pandemic roiled markets which had already marked enormous losses in the prior session.

The pan-European STOXX 600 index ended 1.8 per cent lower as the virus’ spread to shores beyond China made investors swiftly reassess its potential economic impact. The STOXX has seen nearly $700 billion wiped off its value since Friday’s close.

Hopes that the virus’ impact would be limited to China, and that any headwinds would be countered by central bank stimulus had seen markets scale record highs, despite warnings pointing to the contrary.

Banking and insurance shares led declines, as a rush for safety saw a drop in bond yields.

Germany’s Commerzbank was the worst performer on the bank index, closing about 5.8 per cent lower, while insurers were bottomed out by Legal & General Group PLC.

Bucking the trend, albeit slightly, Prudential, ended marginally in the black after hedge fund Third Point LLC said it had amassed a more than $2 billion stake and called on the British insurer to split into two companies.

Among individual movers, German car parts maker Leoni slumped 6 per cent after reporting lower-than-expected core profits, while UK engineering firm Meggitt slid 5 per cent after warning it would be hurt by the virus and Boeing’s 737 MAX problems.

Sunglasses maker EssilorLuxottica closed nearly 2 per cent lower after EU antitrust regulators on Tuesday extended their investigation into the firm’s 7.2 billion-euro ($7.8 billion) bid for Dutch opticians group GrandVision by two weeks.

Euro zone data on Tuesday was also underwhelming, with figures showing German economic activity stagnated in the fourth quarter due to shrinking exports.

Germany's GDAXI fell 1.9 per cent, while Italian shares added to Monday's decline with a 1.4 per cent loss amid reports that major banks were curbing trips to the country as it plays host to Europe's biggest coronavirus outbreak.

Airline stocks, which took the biggest hit on Monday, also fell further, with Lufthansa, EasyJet and Ryanair ending between 1.5 per cent to 3.6 per cent lower.

North America

The Dow and the S&P 500 tumbled 3 per cent on Tuesday in their fourth straight day of losses as the coronavirus spread further around the world and investors offloaded risky assets as they struggled to gauge the economic impact.

Both averages recorded their biggest four-day percentage losses since the massive sell-off in December 2018, while US 10-year Treasury yields hit a record low.

The S&P 500 lost $2.138 trillion in market capitalisation over the last four sessions, according to S&P Dow Jones Indices analyst Howard Silverblatt.

Fears of a pandemic escalated after the coronavirus spread to Spain and dozens of countries, from South Korea to Italy, accelerated emergency measures while Iran’s virus death toll rose to 16, the highest outside China.

In the US, the Centers for Disease Control and Prevention said Americans should prepare for possible community spread of the virus.

The Nasdaq ended the session 8.7% below its record closing high, reached last Wednesday, while the S&P finished 7.6% under its record close achieved the same day. A total 314 of the benchmark’s 500 stocks were in correction territory, traditionally viewed as a 10% drop from their high.

The Dow ended the day 8.4 per cent below its 12 February record close.

In the busiest trading day since December 21, 2018, volume on U.S. exchanges was 12.24 billion shares, compared with the 7.99 billion average for the full session over the last 20 trading days.

The Dow Jones Industrial Average ended down 879.44 points, or 3.15 per cent, at 27,081.36 and the S&P 500 lost 97.68 points, or 3.03 per cent, to finish at 3,128.21. The Nasdaq Composite dropped 255.67 points, or 2.77 per cent, to 8,965.61.

The Cboe Volatility Index , known as Wall Street’s fear gauge, climbed above 30 for the first time since December 2018 and closed at 27.85.

The NYSE Arca Airline index closed down 5%, clocking its biggest three-day decline since October 2011. Delta Airlines, down 6 per cent, said on Tuesday that it expects US-China flights to be suspended until the end of April and expanded its travel waiver to Seoul until 30 April.

The Associated Press reported here that a senior member of the International Olympic Committee said organisers are more likely to cancel the 2020 Olympics than to postpone or move them if the coronavirus makes it too dangerous to hold in Tokyo.

Only 10 S&P stocks advanced on the day, while all of the S&P’s 11 industry sectors fell. The energy sector was the biggest loser, with a more than 4 per cent dip as oil prices tumbled.

Marriott International was the S&P’s biggest percentage decliner, down almost 8%, and other travel stocks such as Tripadvisor, down 4.7 per cent, and Norwegian Cruise Line Holdings, down 7.7 per cent, also underperformed sharply.

Mastercard shares fell 6.7 per cent, also putting it among the S&P’s biggest percentage decliners.

HP, the S&P’s biggest boost, pared early gains but still closed up 5.7 per cent after saying it would step up efforts to slash costs and buy back stock as it sought investor support to defend against a $35 billion takeover offer from US printer maker Xerox Holdings Corp.

is senior editor for Morningstar Australia

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