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Global Market Report - 28 April

Lex Hall  |  28 Apr 2020Text size  Decrease  Increase  |  
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Australia

The Australian stock market is tipped for a flat open despite an overnight surge on Wall Street fuelled by the potential easing of some coronavirus restrictions.

The SPI 200 futures contract was up 5.0 points, or 0.09 per cent, to 5,313.0 points at 8am on Tuesday, pointing to a subdued open for local stocks.

US indices gained more than 1.0 per cent as investors looked towards several US states that are relaxing shutdown restrictions put in place to curb the spread of the COVID-19 pandemic.

IG Markets analyst Kyle Rodda said there were similar hopes among investors in Australia.

He said trading results on the ASX on Monday were generally positive and driven by hopes the economy would begin reopening.

The West Australian and Queensland governments are relaxing some restrictions on movement this week.

NAB's poor first-half result may have blighted the financial sector on Monday but the S&P/ASX200 benchmark index still finished 78.8 points higher, or 1.5 per cent, at 5,321.4.

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The All Ordinaries index rose 87.6 points, or 1.65 per cent, at 5,388.3.

Oil prices have plunged again due to lack of storage to deal with a coronavirus-induced collapse in demand.

Fewer people are driving and flying due to government-imposed restrictions.

One Australian dollar buys 64.65 US cents at 8am, up from 64.60 US cents at Monday's close.

Asia

China shares closed higher on Monday, as the country reported a drop in fresh coronavirus cases and amid hopes for further stimulus to cushion the economic fallout of the pandemic.

At the close, the Shanghai Composite index was up 0.25 per cent at 2,815.49, as investors also awaited the rescheduled date for the parliament’s key annual meeting. The index narrowed from early gains of 0.7 per cent by the mid-day break.

The blue-chip CSI300 index was up 0.68 per cent, with its financial sector sub-index higher by 1.12 per cent, the consumer staples sector up 1.1 per cent, the real estate index up 1.03 per cent and the healthcare sub-index up 1.97 per cent.

In Hong Kong, the Hang Seng index was up 448.81 points or 1.88 per cent at 24,280.14. The Hang Seng China Enterprises index rose 2.27 per cent to 9,875.59, its best daily performance since 25 March.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.81 per cent, while Japan’s Nikkei index closed up 2.71 per cent.

Europe

Airline stocks led European shares higher on Monday on hopes of state support, while upbeat earnings from Deutsche Bank and others added to optimism fuelled by signs that many countries will soon ease coronavirus-driven lockdown measures.

Shares of Lufthansa jumped 10.5 per cent after Germany’s transport minister said he was in favour of protecting the airline company. Air France KLM advanced 0.9 per cent following a 7 billion euro ($11 billion) government aid package.

German shares surged 3 per cent, while the pan-European STOXX 600 closed up 1.8 per cent after a modest fall last week.

With all eyes on central bank moves this week, the Bank of Japan pledged to buy unlimited amounts of bonds to keep borrowing costs low as the novel coronavirus pandemic wreaks economic havoc across the globe.

The US Federal Reserve’s decision is due on Wednesday while on Thursday, the European Central Bank is likely to signal more bond buying.

The volatility gauge for euro zone stocks dropped to its lowest in nearly eight weeks at 34.7193, more than halving from its peak of 95.02 in mid-March.

Euro zone banks surged 3.9 per cent as Deutsche Bank beat first-quarter earnings expectations but warned it might miss its capital requirement target this year. The German lender’s shares jumped 12.7 per cent.

Drugs and pesticides company Bayer rose 5.8 per cent after its quarterly adjusted core earnings topped estimates.

But according to Refinitiv data, STOXX 600 companies are to record a 24.6 per cent drop in first-quarter earnings, steeper than last week’s 22 per cent, with consumer cyclical companies expected to take the biggest hit.

Milan-listed shares rose 3 per cent after ratings agency S&P Global on Friday left Italy's credit rating unchanged late on Friday, calming worries about a potential junk rating for the euro zone's third largest economy.

Italy, among the countries worst hit by the virus, is set to allow factories and building sites to reopen from 4 May.

The STOXX 600 has recovered about 25 per cent from mid-March lows as policymakers inject trillions of dollars into the global economy, which has ground to a virtual halt due to the health crisis.

Planemaker Airbus was among the biggest drags on the benchmark after it warned 135,000 employees to brace for potentially deeper job cuts and said its survival is at stake without immediate action.

North America

Wall Street gained more than 1 per cent on Monday at the onset of a hectic earnings week, as investors turned a hopeful eye toward several US states that are relaxing shutdown restrictions put in place to curb the spread of the COVID-19 pandemic.

All three major US stock averages advanced, and are all now within 20 per cent of their record closing highs reached in February, with the benchmark S&P 500 on track for its best month since 1987, after trillions of stimulus dollars helped US equities claw back much of the ground lost since the coronavirus crisis brought the economy to a grinding halt.

But some analysts believe gains may be limited unless there is progress in finding treatments for the disease.

Several states have begun easing stay-at-home restrictions, in efforts to revive economies and get Americans back to work following crushing job losses.

Economists expect first-quarter US GDP to have shrunk at a 4 per cent annualised rate when the Commerce Department releases its report on Wednesday.

Market participants will also pay close attention to the US Federal Reserve when it concludes its monetary policy meeting on Wednesday.

The Dow Jones Industrial Average rose 358.51 points, or 1.51 per cent, to 24,133.78, the S&P 500 gained 41.74 points, or 1.47 per cent, to 2,878.48 and the Nasdaq Composite added 95.64 points, or 1.11 per cent, to 8,730.16.

All 11 major sectors of the S&P 500 closed higher, with financials, helped by rising US Treasury yields, posting the largest gains.

A spate of high-profile earnings is expected this week, including Caterpillar, Alphabet, Boeing Co, Facebook, Apple, Amazon.com and others.

Analysts expect first-quarter S&P 500 earnings to have fallen 15 per cent from last year, a dramatic reversal from the 6.3 per cent year-on-year growth forecast at the start of the year, according to Refinitiv data.

The US Supreme Court ruled in favour of health insurers seeking Obamacare payments from the government. The S&P 1500 Managed Care index was up 1.1 per cent.

Tesla Inc jumped 10.1 per cent and gave the Nasdaq its biggest boost after a report said the company was calling some workers back to its California vehicle-assembly plant next week.

Crude oil prices, under pressure amid a supply glut and plunging demand, plummeted 23.3 per cent.

is senior editor for Morningstar Australia

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