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Global Market Report - 27 July

Lex Hall  |  27 Jul 2020Text size  Decrease  Increase  |  
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Shares are expected to fall at the start of the trading week on the ASX after a broad sell-off on US markets last week due to weak earnings and surging coronavirus cases.

The Australian SPI 200 futures contract was lower by 27.0 points, or 0.45 per cent, to 5,972.0 points at 8am Sydney time on Monday.

US markets closed lower on Friday after more than 1000 people died from covid-19 in that country. The grim milestone came as total US cases surged past 4 million.

The tech sector weighed heaviest on all three major US stock averages, ahead of results from Apple, Alphabet and Amazon.com on July 30 in a weak trading environment.

The Dow Jones Industrial Average fell 0.68 per cent to 26,469.89, the S&P 500 lost 0.62 per cent to 3,215.63 and the Nasdaq Composite dropped 0.94 per cent to 10,363.18.

Investors have also been concerned about relations between the US and China following tit-for-tat moves by both countries to close the other's consulate in one of their cities.

Gold prices on Friday topped the $US1,900 per ounce ceiling for the first time since 2011 due to the uncertainty.

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Meanwhile, oil prices rose after supportive Euro and US economic data with Brent crude at $US43.34 a barrel.

In Australia, the point of most interest this week will be inflation data for the June quarter, due on Wednesday.

The CBA and AMP Capital both forecast Australia's key inflation measure, the consumer price index, will drop about 2 per cent.

That would be the biggest quarterly fall since records began in 1948 and would take the annual rate negative for the first time since 1997.

The Australian dollar was trading at 70.96 US cents at 8am, barely changed from 70.94 US cents at Friday's close.


China stocks slumped on Friday to finish the week lower, as investors fretted over an escalation in tensions between Beijing and Washington after China ordered the US to close its consulate in Chengdu in a tit-for-tat response.

The blue-chip CSI300 index fell 4.4 per cent to 4,505.59, while the Shanghai Composite Index retreated 3.9 per cent to 3,196.77.

Hong Kong stocks fell on Friday to close the week lower as escalating tensions between China and the US assuaged optimism about a swift post-pandemic economic rebound.

At the close of trade, the Hang Seng index was down 557.67 points or 2.21 per cent at 24,705.33. The Hang Seng China Enterprises index fell 2.37 per cent to 10,080.86.


European shares posted their biggest session drop in a month on Friday as global sentiment soured after Beijing ordered the US to close its consulate in a Chinese city in retaliation to a similar move by Washington.

With all sectors trading in the red, technology stocks such as SAP and ASML led losses following a continued sell-off in US peers.

The pan-European STOXX 600 index fell 1.7 per cent, pushing it to a weekly loss for the first time in four weeks. Increasing global covid-19 cases also weighed as investors feared that containment measures may reverse a pick-up in business activity.

PMI data on Friday showed Germany’s manufacturing sector avoided contraction for the first time in 19 months in July, while euro zone data showed business activity in the bloc had returned to growth.

Germany's DAX slumped 2 per cent, while London blue-chips hit two-week lows with investors looking past data that showed strong June UK retail sales.

A 750-billion euro ($1.4 trillion) EU recovery fund and hopes of an eventual covid-19 vaccine had put European stocks on course to end the week higher, until a US order to shut the Chinese consulate in Houston over accusations of spying, prompting a tit-for-tat move by Beijing, ordering the closure of the US consulate in Chengdu. The STOXX 600 ended the week down 1.5 per cent.

British Gas owner Centrica surged 16.8 per cent to post its best session in two decades, as it announced plans to sell its North American business Direct Energy to NRG Energy for US$3.63 billion ($5.2 billion).

In earnings, Equinor climbed 4.6 per cent as a strong performance from its refinery and trading business helped the group beat forecasts for a loss, while plumbing supplier Ferguson rose as the pace of decline in sales at its main US operations slowed in the May to July period.

A 62 per cent jump in second-quarter net profit saw lighting maker Signify jump 5.7 per cent.

Next week, results from luxury good stocks will be watched. Louis Vuitton owner LVMH is expected to have weathered the coronavirus crisis better than most rivals.

North America

Wall Street retreated on Friday, heading into the weekend with a broad sell-off due to weak earnings, surging coronavirus cases and geopolitical uncertainties.

For the second day in a row, the tech sector weighed heaviest on all three major US stock averages. Intel Corp led the decline, its shares plunging 16.2 per cent after the chipmaker reported a delay in production of a smaller, faster 7-nonometer chip.

Each index posted a weekly loss, with the S&P 500 and the Dow snapping three-week winning streaks. Nasdaq had its weakest week of the last four.

The retreat followed a rally that brought the S&P 500 to nearly 5 per cent below its record high reached in February. The bellwether index is now near break-even for the year, while the Nasdaq has gained more than 15 per cent year-to-date.

Momentum stocks Apple, Alphabet Inc and Amazon.com are scheduled to post results on 30 July, the day the US Commerce Department is due to give its first take on second-quarter GDP. Analysts project that the economy dropped by a bruising 35 per cent during the three-month period.

More than 1000 Americans died from covid-19 on Thursday, the third straight day for that grim milestone as total cases surged past 4 million.

Beijing fired back at Washington shuttering China’s Houston consulate by closing the US consulate in the city of Chengdu.

The Dow Jones Industrial Average fell 182.44 points, or 0.68 per cent, to 26,469.89, the S&P 500 lost 20.03 points, or 0.62 per cent, to 3,215.63 and the Nasdaq Composite dropped 98.24 points, or 0.94 per cent, to 10,363.18.

Of the 11 major sectors in the S&P 500, all but consumer discretionary closed in the red. Tech was the biggest percentage loser.

Healthcare lost ground, dropping 1.1 per cent ahead of executive orders by President Donald Trump aimed at lowering drug prices.

Second-quarter earnings season charges ahead, with 128 constituents of the S&P 500 having reported. Of those, 80.5 per cent have cleared a very low bar of analyst expectations.

American Express Co fell 1.4 per cent after reporting an 85 per cent slump in quarterly profit after setting aside nearly $628 million to cover potential defaults.

Verizon Communications Inc beat analyst profit and revenue estimates as the telecom saw strong demand due to stay-at-home mandates, boosting its shares by 1.8 per cent.

Honeywell International Inc’s cost-cutting efforts resulted in better-than-expected second-quarter profit, but cautioned of many unknowns going forward. Its shares dropped 2.8 per cent.

Intel rival Advanced Micro Devices jumped 16.5 per cent.

Tesla extended Thursday’s losses, falling 6.3 per cent.

is senior editor for Morningstar Australia

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