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Global Market Report - 28 May

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

The Australian share market is poised to rise in early trade after US investors were buoyed by the continued easing of lockdowns.

The SPI 200 futures contract was higher by 50 points, or 0.87 per cent, to 5,823.0 at 8am Sydney time on Thursday, indicating gains in early trade.

Bank stocks powered the US markets' advance, with the S&P 500 financial index leading gains among major sectors.

More US big businesses said they would reopen amid the coronavirus pandemic.

Walt Disney announced plans to reopen its Walt Disney World resort in Florida, the world's largest theme park, in phases beginning 11 July.

MGM Resorts said it would reopen its four Las Vegas casinos on 4 June.

The Dow Jones Industrial Average rose 553.16 points, or 2.21 per cent, to 25,548.27, the S&P 500 gained 44.36 points, or 1.48 per cent, to 3,036.13, and the Nasdaq Composite added 72.14 points, or 0.77 per cent, to 9,412.36.

In Australia on Thursday morning, Reserve Bank Governor Philip Lowe will appear before the Senate Select Committee, where he will discuss the economic implications of restrictions to slow the spread of the coronavirus.

Businesses' capital spending data from the first quarter of the year will also be published.

ANZ Bank economists expect a drop of 3.3 per cent on the previous quarter.

The benchmark S&P/ASX200 index closed Wednesday down five points, or 0.09 per cent, at 5,775 points.

The All Ordinaries also closed down five points, or 0.08 per cent, at 5,884.9 points.

One Australian dollar was buying 66.18 US cents at 8am, down from 66.44 US cents at the close of trade on Wednesday.

Asia

China stocks fell on Wednesday as rising Sino-US tensions and lingering worries over the coronavirus damage on the economy curbed risk appetite.

The blue-chip CSI300 index fell 0.7 per cent to 3,845.61, while the Shanghai Composite Index dropped 0.3 per cent to 2,836.80 points.

Hong Kong stocks fell on Wednesday due to fresh anti-government protests and rising tensions between China and the US.

The Hang Seng index fell 0.4 per cent, to 23,301.36, while the China Enterprises Index lost 0.3 per cent, to 9,567.43 points.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.06 per cent, while Japan’s Nikkei index closed up 0.7 per cent.

Europe

Euro zone stocks were buoyed on Wednesday by a 750-billion-euro ($1.24 billion) plan to prop up EU economies hammered by the coronavirus crisis, but falls for healthcare and technology stocks weighed on broader European markets.

The euro zone equities index finished 1.1 per cent higher after jumping as much as 1.6 per cent, while the pan-European STOXX 600 closed up 0.2 per cent.

Under the proposal, the European Commission would borrow the funds from the market and then disburse two-thirds in grants and the rest in loans, with much of the money going to Italy and Spain, the worst affected by the pandemic.

Spain's banking-heavy IBEX jumped 2.4 per cent, with Banco Santander and BBVA rising 4.9 per cent and 3.4 per cent respectively.

Euro zone banks climbed 4.8 per cent, with French lenders BNP Paribas and Societe Generale leading gains. Italy’s banking index rose 2.6 per cent.

A Franco-German proposal for 500 billion euros in grants last week faced some resistance from more frugal northern nations, which wanted only loans.

Aside from banks, other hard-hit sectors including travel and leisure and automakers rallied.

Renault jumped 17.5 per cent after the French carmaker and Nissan Motor Co doubled down on a plan to cooperate on production to save costs and salvage their troubled alliance.

Easing of lockdowns in several European countries and improving economic data have spurred buying in growth-exposed cyclical sectors in recent weeks, putting European stocks on course for a 2.8 per cent gain in May.

But the healthcare and technology sectors, which have been resilient during the coronavirus crisis, dropped 2.5 per cent and 1.4 per cent respectively.

Also keeping investors on edge are protests in Hong Kong over new national security laws proposed by Beijing and US President Donald Trump’s warning of a strong response to China’s move.

North America

US stocks rose on Wednesday, with the S&P 500 closing above 3000 for the first time since 5 March as the further easing of lockdowns lifted optimism for an economic recovery.

Bank stocks powered the day’s advance, with the S&P 500 financial index leading gains among major sectors. The index rose nearly 10 per cent over the past two sessions for its biggest two-day increase since 8-9 April.

Shares of JPMorgan Chase & Co were the leading gainer in the financial index, rising 5.8 per cent as the stock surged for a second day in a row. The bank’s chief executive, Jamie Dimon, said Tuesday he expects JPMorgan will boost its credit reserves again in the second quarter, but said there are signs the economy is regaining its footing.

Continued easing of lockdowns, optimism about an eventual COVID-19 vaccine and massive US stimulus have been driving the market’s recent gains. On Wednesday, Walt Disney Co announced plans to begin reopening its Walt Disney World resort in Florida, the world’s largest theme park, in phases beginning 11 July, and MGM Resorts said it would reopen its four Las Vegas casinos on 4 June.

Tech-related shares underperformed the broader market on Wednesday after leading the recent rally.

The Dow Jones Industrial Average rose 553.16 points, or 2.21 per cent, to 25,548.27, the S&P 500 gained 44.36 points, or 1.48 per cent, to 3,036.13, and the Nasdaq Composite added 72.14 points, or 0.77 per cent, to 9,412.36.

Amid the recent gains, US tensions with China have cast a cloud on markets.

President Donald Trump said Tuesday that Washington would announce its response to China’s planned national security legislation on Hong Kong before the end of the week.

Secretary of State Mike Pompeo said Wednesday that Hong Kong no longer warrants special treatment under US law as it did when it was under British rule, potentially a big blow to its status as a major financial hub.

Also on Wednesday, the Federal Reserve’s Beige Book report showed that US businesses continued to be hammered by the effects of the novel coronavirus epidemic into the middle of May.

is content editor for Morningstar Australia

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