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Global Market Report - 27 January

Lex Hall  |  27 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to weaken despite gains on Wall St, including strong earnings results from US blue chips.

The Australian SPI 200 futures contract was down 34 points, or 0.5 per cent, at 6,736 points at 8.30am Sydney time on Wednesday, suggesting a negative start to trading.

US stocks edged up on Tuesday to push the S&P 500 to a new high as investors digested a batch of corporate profit results, including Johnson & Johnson’s strong profit forecast and 3M’s quarterly profit beat as the pace of earnings season picks up.

The Dow Jones Industrial Average rose 8.29 points, or 0.03 per cent, to 30,968.29, the S&P 500 lost 0.86 points, or 0.02 per cent, to 3,854.5 and the Nasdaq Composite added 8.94 points, or 0.07 per cent, to 13,644.94.

Locally, the world’s largest fund manager BlackRock, has warned companies that fail to plan slashing carbon emissions to net zero face steep cuts in their valuations and being cut from its $US8.7 trillion ($11.3 trillion) investment pool as it ratchets up action on climate change including a vow to back proposals from green activists, The Australian reports.

The S&P/ASX200 benchmark index closed higher by 24.3 points, or 0.36 per cent, to 6,824.7 on Monday.

The All Ordinaries closed higher by 32.5 points, or 0.46 per cent, at 7,111.4.

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Gold was down 0.2 per cent at $US1,851.75 an ounce; Oil was flat at $US55.89 a barrel; Iron ore was down 2.4 per cent to $US165.07 a tonne.

Meanwhile, the Australian dollar was buying 77.47 US cents at 8.30am, up from 77.40 US cents at Monday's close.

Asia

China's blue-chip stock index fell on Tuesday, marking its biggest daily loss since September after touching a 13-year high in the previous session, amid tightening liquidity conditions and Sino-US tensions.

At the close, the Shanghai Composite index was down 1.51 per cent to 3,569.43, its biggest daily drop since 22 December.

The blue-chip CSI300 index tumbled 2.01 per cent, its biggest one-day loss since 9 September.

Hong Kong shares slumped 2.5 per cent on Tuesday, pulling back sharply from the previous session’s rally, as global investor concerns over the timing of aggressive US stimulus and rising Sino-US tensions whacked risk appetite.

The Hang Seng index ended down 767.75 points or 2.55 per cent at 29,391.26—biggest one-day drop for the index since 22 May 2020. The index closed 2.42 per cent firmer on Monday.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 1.33 per cent, while Japan's Nikkei index closed down 0.96 per cent.

Europe

European stocks rose on Tuesday as strong earnings from wealth manager UBS and auto parts maker Autoliv added to a string of upbeat corporate updates, while the International Monetary Fund raised its forecast for global growth in 2021.

The pan-European STOXX 600 index closed up 0.6 per cent, with a rally in automakers, industrial companies and SAP and helping the German DAX outperform.

UBS rose 2.4 per cent as high levels of client activity helped the world’s largest wealth manager record a 137 per cent rise in net profit.

The broader financial services index gained 1.8 per cent, with Swedish buyout group EQT jumping 14.6 per cent after it signed a deal to buy global real estate investment manager Exeter Property Group for $1.87 billion.

The STOXX 600 tumbled to a two-week low on Monday after data painted a gloomy picture of Europe’s economy in January as many countries tighten curbs to combat new variants of the coronavirus.

“The numbers that are coming out show economic activity in Europe is falling back and underperforming other parts of the world,” said David Miller, investment director at Quilter Cheviot.

“So far, investors are prepared to look through the current difficulties on the basis that the second half will be better.”

Supporting the sentiment, the International Monetary Fund raised its forecast for global economic growth in 2021 and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.

Italy’s FTSE MIB rose 1.2 per cent after Prime Minister Giuseppe Conte handed in his resignation to the head of state, hoping he would be given an opportunity to put together a new coalition and rebuild his parliamentary majority.

Conte lost his absolute majority in the upper house Senate last week when a junior partner, the Italia Viva party quit in a row over the various issues.

Boosting Milan’s bourse, UniCredit jumped 4.5 per cent after reports it set to appoint Andrea Orcel, one of Europe’s best known investment bankers, as its new chief executive.

Sweden’s Autoliv gained 5.3 per cent after it reported higher than expected quarterly earnings, boosted by a recovery in car production.

Industrial gas producer Linde rose 3.5 per cent after announcing an increase to its quarterly dividend and a US$5-billion share buyback programme.

Spanish pharmaceutical company PharmaMar surged 21.1 per cent after peer review journal Science published a paper that confirmed its drug plitidepsin has a “potent preclinical efficacy” against the covid-19.

North America

US stocks edged up on Tuesday to push the S&P 500 to a new high as investors digested a batch of corporate profit results, including Johnson & Johnson’s strong profit forecast and 3M’s quarterly profit beat as the pace of earnings season picks up.

3M Co climbed 3.03 per cent as one of the biggest boosts on the Dow after it benefited from lower costs and demand for disposable respirator masks, hand sanitizers and safety glasses amid a surge in coronavirus infections.

Also providing a strong lift was Johnson & Johnson, which added 2.52 per cent, as the drugmaker also said it expected to report eagerly awaited covid-19 vaccine data early next week.

Of the 84 companies that have posted earnings through Tuesday morning, 86.9 per cent have topped analyst expectations, according to Refinitiv data.

Still, some companies showed the toll the pandemic has had on their businesses. American Express Co fell 3.78 per cent after it posted a 15 per cent drop in quarterly profit as pandemic-led lockdowns and business restrictions kept the credit card issuer’s members from traveling and dining out.

Verizon shed 3.39 per cent, after the company posted earnings that topped expectations but missed prepaid phone subscriber estimates.

“Even though the expectations for the earnings recovery are pretty robust, at this stage it is still going to be a situation where there is not going to be a whole lot of visibility on earnings given the depths of the pandemic and uncertainty in the path ahead,” said Tom Garretson, senior portfolio strategist at RBC Wealth Management in Minneapolis.

“So at this stage that is probably why the market seems a bit more comfortable, because it is a little trickier than usual to put the right valuation on things.”

The Dow Jones Industrial Average rose 8.29 points, or 0.03 per cent, to 30,968.29, the S&P 500 lost 0.86 points, or 0.02 per cent, to 3,854.5 and the Nasdaq Composite added 8.94 points, or 0.07 per cent, to 13,644.94.

Tech heavyweights Microsoft Corp and Advanced Micro Devices Inc were both modestly higher ahead of their earnings report after markets close.

Few if any changes are expected in the  US Federal Reserve’s policy statement at the end of a two-day meeting on Wednesday, with Fed Chair Jerome Powell likely to address inflation in his post-meeting news conference.

With the S&P 500 trading at more than 22 times 12-month forward earnings, concerns about stock bubbles on Wall Street are sparking fears of a pullback. Investors are keeping an eye out for forecasts from corporate America to justify the higher valuations.

Progress in stimulus talks is in focus, with  US Senate Majority Leader Chuck Schumer saying Democrats will move forward on President Joe Biden’s coronavirus relief plan without Republican support if necessary.

Videogame retailer GameStop Corp climbed 72.56 per cent after surging 144 per cent on Monday, as individual investors again piled into a number of niche stocks, prompting short sellers to scramble to cover losing bets.

General Electric Co jumped 4.19 per cent after the industrial conglomerate offered an upbeat outlook for its business this year and reported a surge in quarterly free cash flow.

With Reuters

is content editor for Morningstar Australia

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