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Global Market Report - 26 May

Lex Hall  |  26 May 2020Text size  Decrease  Increase  |  
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Australia

Shares are set to rise in early trade on the ASX after improved business confidence and easing of restrictions in Japan and Spain helped boost global stocks.

The SPI 200 futures contract was higher by 47 points, or 0.84 per cent, to 5,673.0 at 8am Sydney time on Tuesday, indicating a positive start.

Financial markets were closed on Monday in Singapore, Britain and the United States for public holidays.

Germany's Ifo institute survey for May showed business morale rebounded in May after its worst decline on record in April.

More optimism came from Japan and Spain. Japanese Prime Minister Shinzo Abe lifted the state of emergency for Tokyo and four remaining areas while the government is also considering fresh stimulus worth 100 trillion yen ($US930 billion).

Spain also announced it will lift a quarantine requirement on overseas visitors from July 1, which may help its tourism sector.

The MSCI's gauge of world stocks gained 0.4 per cent, nearing a 2½ month high. The pan-European STOXX 600 index rose 1.2 per cent.

In Australia, Prime Minister Scott Morrison will speak at the National Press Club in Canberra and discuss new initiatives to education and training that will help the economy recover from the coronavirus crisis.

Coca Cola Amatil will hold its annual general meeting.

The Australian dollar was buying 65.41 US cents at 8am, higher from 65.24 US cents at the close of trade on Friday.

Asia

China stocks closed higher on Monday, lifted by gains in consumer companies, though their rise was capped by simmering Sino-US tensions.

The Shanghai Composite index rose 0.15 per cent to 2,817.97.

The blue-chip CSI300 index was up 0.14 per cent, while its financial sector sub-index fell 0.01 per cent, the consumer staples sector gained 2.19 per cent, the real estate index rose 1.56 per cent and the healthcare sub-index added 1.31 per cent.

Hong Kong stocks dropped on Monday, extending losses from the previous session on Beijing’s plan to impose new national security legislation on the Asian financial hub and souring Sino-US relations.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.04 per cent, while Japan’s Nikkei index was up 1.42 per cent.

Europe

European shares rose in thin trade on Monday as a closely watched indicator of German business sentiment rebounded in May, with a slew of positive corporate updates boosting sentiment.

Germany's DAX surged 2.9 per cent to its highest level since 6 March, recovering nearly 38 per cent from this year's low.

The euro zone stock index rose 2.1 per cent, while the pan-European STOXX 600 gained 1.5 per cent. Trading volumes were lower across the board with the US, UK and some Asian countries closed for holidays.

A survey by the Ifo Institute showed German business morale rebounded in May after a dramatic fall the previous month, with activity gradually returning to normal after weeks of coronavirus-induced curbs.

The Ifo business climate index rose to a better-than-expected 79.5 from a downwardly revised 74.2 in April.

Lufthansa surged 7.5 per cent after the German government approved a 9 billion euro ($15 billion) package and a company spokeswoman said it would resume flights to 20 destinations from mid-June.

Travel group TUI jumped 15.3 per cent on plans to resume flights to main holiday destinations in Europe by the end of next month.

France’s Airbus gained 8.5 per cent, while the broader travel & leisure index was up 1.2 per cent.

Despite growing US-China tensions and worries of a resurgence in covid-19 cases stalling a recovery for equities in recent weeks, investors focused on signs that many European economies were coming back to life.

French authorities reported the smallest daily rise in new coronavirus cases and deaths since before a lockdown began in mid-March, while Spain is set to reopen to international tourism from July, Prime Minister Pedro Sanchez said over the weekend.

All eyes will turn to the European Commission’s recovery plan on Wednesday after EU member states Austria, Sweden, Denmark and the Netherlands stated their opposition to a French-German plan for a 500-billion euros ($832 billion) coronavirus recovery fund.

Boosting the STOXX 600, Germany’s Bayer gained 7.8 per cent, after saying it had made progress in seeking a settlement over claims its Roundup weedkiller causes cancer.

French multimedia conglomerate Lagardere surged 16.2 per cent after Bernard Arnault, the billionaire behind luxury fashion group LVMH, agreed to buy a stake in the holding company of fellow billionaire Arnaud Lagardere.

North America

US markets were closed for Memorial Day. Futures tied to the S&P 500 climbed 1.2 per cent, following a 3.2 per cent gain in the gauge last week after some states eased coronavirus restrictions.

There are some early signs that the US economy is starting what's likely to be a slow and painful recovery, with air travel and hotel bookings edging upward. 

For the first time since the pandemic forced widespread US business closures in March, conditions in parts of the economy aren't getting worse, and might even be improving.

Coronavirus-related deaths in the US neared 100,000, prompting officials to urge caution as Americans venture outside over the holiday weekend. 

Authorities across the world remain on high alert for a second wave of infections―which could trigger another round of lockdowns that further cripple the economy―as restrictions are eased in many regions. 

The Trump administration imposed new travel restrictions on Brazil on Sunday after covid-19 cases there rose sharply.

is content editor for Morningstar Australia

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