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Global Market Report - 27 February

Lex Hall  |  27 Feb 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to open lower as investors watch for more news on the coronavirus outbreak that threatens to hurt the global economy.

The SPI200 futures contract was down 28 points, or 0.42 per cent, at 6627 at 8am Sydney time on Thursday, pointing to another fall when the local market opens, albeit less severe than earlier this week.

A third straight day of huge losses on the Australian share market on Wednesday came close to wiping out the local bourse's phenomenal gains since the start of the year.

US and European stock markets stabilised overnight.

Investors will be watching for any coronavirus news, data on new private capital expenditure for the December quarter of 2019 and expected expenditure.

On Wall Street, the Dow Jones Industrial Average fell 122.21 points, or 0.45 per cent, to 26,959.15, the S&P 500 lost 0.37 per cent and the Nasdaq Composite added 0.17 per cent.

Companies reporting their earnings to the market on Thursday include Air New Zealand, A2 Milk, Flight Centre, Afterpay and Ramsay Healthcare.

The Australian dollar was buying 65.58 US cents at 8am on Thursday, down from a near 11-year low of 65.88 US cents on Wednesday as the market closed.

Asia

China stocks ended lower on Wednesday as fears over the global coronavirus contagion rose, though losses were contained as new infections fell in China and investors expected a further stimulus from Beijing to support the domestic economy.

Asia reported hundreds of new coronavirus cases on Wednesday, including the first US soldier to be infected, as the US warned of an inevitable pandemic and outbreaks in Italy and Iran spread to other countries.

Both the Shanghai Composite index and the blue-chip CSI300 index dropped more than 1 per cent in early morning trade following Wall Street’s sharp losses on growing global virus fears. The indexes regained some lost ground as real estate and industrial stocks lent support.

In Hong Kong, the benchmark Hang Seng index fell as much as 1.54 per cent in early trade following Wall Street’s sharp losses on growing fears of a global pandemic. The index later recovered some ground as investors cheered Hong Kong’s latest stimulus, finishing the day down 0.73 per cent.

The benchmark Nikkei average lost 0.79 per cent to 22,426.19, its lowest close since 15 October 2019 though the index pared most of its early losses to end above a major support level of 200-day moving average at 22,196.

Europe

European shares fell to a near four-month low on Wednesday, as the fast-spreading coronavirus deepened fears about its impact on global growth with marquee companies sounding the alarm on earnings.

The main European equity benchmark STOXX 600 tumbled 2.6 per cent, marking its first five-day losing streak since July.

Travel stocks, financial services, chemical and technology stocks were among the worst hit, falling between 3 per cent and 4 per cent.

The losses followed a grim session for Asia and Wall Street overnight after US health officials warned Americans should prepare for possible community spread of the virus that has now hit Spain and dozens of countries from South Korea to Italy.

The STOXX 600 is trading 9.4 per cent below the record highs hit just last week, while the past four trading sessions has wiped out about $3 trillion in value of world stocks.

British spirits maker Diageo fell 3 per cent after estimating an up to £200 million pounds ($260 million) hit to fiscal 2020 profit from the outbreak.

Rivals Remy Cointreau and Pernod Ricard dropped 4.2 per cent and 2.2 per cent, respectively.

Food group Danone cut its 2020 forecast for sales and profit margin, citing an uncertain economic climate and the coronavirus outbreak. However, its shares rose 1.4 per cent.

Global miner Rio Tinto fell 1.8 per cent after signalling that the outbreak may create challenging conditions in the next six months.

Latest data from Refinitiv shows European companies are expected to report a 1.2 per cent fall in profits in the fourth quarter, a bigger drop than previously expected, which would keep them stuck in a year-long earnings recession.

The biggest decliner on the STOXX 600 was Danish services company ISS, slumping 14 per cent after results.

Pressuring Norwegian shares was a 4 per cent fall in fish farmer Salmar after warning of weak salmon output volumes for the current quarter.

North America

The S&P 500 fell for a fifth straight day on Wednesday and while its decline was slower than the last few days, the session was volatile as investors reacted to headlines about coronavirus and sought to gauge its economic fallout.

After rising as much as 1.7 per cent in the morning, the S&P 500 hit a session low after health officials in Nassau County, New York, said they were monitoring 83 people who visited China and may have come in contact with the virus. Still, Governor Andrew Cuomo said the state has had no confirmed cases.

Adding to pressure was a warning from US Food and Drug Administration officials that the outbreak was on a path to becoming a pandemic, according to a report.

Earlier, stocks lost ground after Germany said it was heading for a coronavirus epidemic and could no longer trace all cases, and Norway confirmed its first case of the virus. For the first time, the number of new infections outside China overtook those inside the country, the source of the outbreak.

Trading volume was far more active than usual, yet some investors were relieved the slide was slower. The S&P ended down 0.38 per cent, compared with its 6.3 per cent of losses in the previous two sessions.

The Dow Jones Industrial Average fell 123.77 points, or 0.46 per cent, to 26,957.59, the S&P 500 dropped 11.82 points to 3116.39 and the Nasdaq Composite added 15.16 points, or 0.17 per cent, to end at 8980.78.

Of the S&P’s 11 major sectors energy was the biggest laggard with an almost 3 per cent drop, while technology was its outperformer with a 0.4 per cent gain.

Many investors were cautious about making any big bets without more clarity on the spread of the virus.

President Donald Trump accused cable TV news channels of presenting the danger from the coronavirus in as bad a light as possible and upsetting financial markets.

The Dow ended the day 8.8 per cent below its recent record close, 12 reached February while the S&P 500 was just under 8 per cent off its record high reached last Wednesday. Nasdaq finished 8.5 per cent below its recent record.

is content editor for Morningstar Australia

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