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Global Market Report - 29 April

Lex Hall  |  29 Apr 2020Text size  Decrease  Increase  |  
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Australia

The ASX is on track for minor gains but will battle a weak lead from Wall Street, after US investors dumped market-leading stocks for cyclical value ones.

The SPI 200 futures contract was up 20.0 points, or 0.38 per cent, to 5,325.0 points at 7am Sydney time on Wednesday.

The major US indices fell overnight as investors shift to stocks that stand to benefit more from the easing of coronavirus pandemic restrictions, as US states try to restart the economy.

The benchmark S&P/ASX200 index also finished lower on Tuesday.

It fell 8.3 points, or 0.16 per cent, to 5,313.1 points.

The All Ordinaries closed down 7.1 points, or 0.13 per cent, at 5,381.2 points.

The Dow Jones Industrial Average fell 32.23 points, or 0.13 per cent, to 24,101.55, the S&P 500 lost 0.52 per cent, and the Nasdaq Composite dropped 1.4 per cent.

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One Australian dollar buys 64.91 US cents at 7am, up from 64.82 US cents at Tuesday's close.

The price of gold is $US1,707.46 an ounce.

Asia

China's blue-chip and start-up shares inched up on Tuesday after fresh regulatory reform cheered the market, but the main Shanghai benchmark slipped as big banks lined up their earnings following a tumultuous first quarter.

The blue-chip CSI300 index added 0.7 per cent, with its financial sector sub-index higher by 0.9 per cent, the consumer staples sector up 1.5 per cent, the real estate index up 1.1 per cent and the healthcare sub-index up 0.2 per cent.

The Shanghai Composite index closed down 0.2 per cent at 2,810.02, having dipped to its lowest level in over three weeks and then fitted in and out of positive territory during the session.

Hong Kong shares climbed to their highest level in more than a week, as the financial hub showed some signs of returning to normalcy with civil servants set to head back into offices after the government eased lockdown restrictions.

The Hang Seng index was up 1.2 per cent at 24,575.96, having reached its highest level since 17 April during the session.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.4 per cent, while Japan's Nikkei index closed down 0.1 per cent.

Europe

A rally in banking shares helped European shares end at seven-week highs on Tuesday, with further optimism kindled by signs that several economies were starting to ease coronavirus-driven lockdowns.

The pan-European STOXX 600 closed up 1.7 per cent on largely broad-based gains.

A 40 per cent jump in first-quarter profit for UBS, the world’s largest wealth manager, and a 4.2 per cent in Spain’s Santander despite an 82 per cent slump in quarterly net profit lifted Europe’s battered banking sector to its highest point in two weeks.

UK-based HSBC Holdings Plc’s shares rallied 1 per cent but it warned of more earnings pain ahead as it set aside a hefty $3 billion in bad loan provisions due to the COVID-19 pandemic.

Companies listed on the STOXX 600 are expected to report a near 25 per cent decline in first-quarter profits, according to Refinitiv data.

Drugmaker Novartis reported growth in quarterly sales and confirmed its 2020 targets, but the stock gave up session gains after its chief executive warned of a tapering buying rush for its products and a decline in M&A activity in the sector due to the pandemic.

The healthcare sector was the only sectoral decliner, down 0.1 per cent. Roche Holding, however, gained 0.9 per cent on positive data from its treatment for spinal muscular atrophy.

The Swiss stock index got a boost from a 5.3 per cent jump in ABB after the engineering company reported first-quarter results topped expectations.

European stocks have recovered more than 25 per cent from mid-March lows, following unprecedented measures from major central banks and governments to support the global economy and, more recently, on signs that many countries such as Italy and Spain plan to restart their economies.

But Britain stood firm on not lifting its lockdown, with the country on track to become one of Europe’s worst hit by the pandemic.

London-based BP forecast significantly lower refining margins in the second quarter and its first-quarter profits tumbled by two-thirds. But shares of the oil major retraced losses as Brent crude prices rose.

Germany’s Wirecard plunged 26.1 per cent after an investigation by auditor KPMG found the payments company did not provide sufficient documentation to address all allegations of accounting irregularities made by the Financial Times.

North America

Wall Street’s major indexes lost ground on Tuesday as investors moved out of market-leading growth stocks, though a rotation into cyclical value stocks indicated hopes of economic revival as states began to relax restrictions enacted to fight the deadly COVID-19 pandemic.

While technology stocks pulled all three major US stock indexes into the red, they all remained within 20 per cent of their February all-time highs.

Smaller companies have fared better than larger ones in recent days, as they stand to benefit more from the state-by-state easing of shutdown restrictions. The Russell 2000, which tracks small-cap companies, posted its fifth straight advance.

But with US coronavirus cases topping 1 million, a predictive model often cited by White House officials warned the country’s death toll could climb higher than previously projected if states reopen prematurely.

First-quarter earnings season has shifted into high gear, with S&P 500 earnings now expected to be down 14.8 per cent from a year ago, a dramatic U-turn from the 6.3 per cent year-on-year growth seen on 1 January, according to Refinitiv data.

The US Federal Reserve convenes its two-day monetary policy meeting to contend with crushing joblessness and an ailing economy.

Consumer confidence plunged in April, with the “current conditions” component suffering its largest drop ever, according to the Conference Board.

The Dow Jones Industrial Average fell 32.23 points, or 0.13 per cent, to 24,101.55, the S&P 500 lost 15.09 points, or 0.52 per cent, to 2,863.39 and the Nasdaq Composite dropped 122.43 points, or 1.4 per cent, to 8,607.73.

Of the 11 major sectors in the S&P 500, seven closed in the black, led by energy and materials.

Healthcare stocks dropped 2.1 per cent. Merck & Co warned of a $US2.1 billion hit to its 2020 revenue. The drugmaker’s shares dropped 3.3 per cent.

3M Co, manufacturer of highly sought-after N95 protective masks, reported better-than-expected quarterly profit, sending its shares up 2.6 per cent.

Harley-Davidson Inc shares jumped 15.2 per cent after the motorcycle maker took steps to boost cash reserves to contend with dropping demand due to lockdowns.

PepsiCo rose 1.4 per cent, benefiting from rising snack demand due to stay-at-home orders.

Following after-the-bell quarterly reports, Alphabet Inc shares rose by more than 3 per cent, Starbucks Corp dipped 1.7 per cent, and Ford Motor Co was down more than 6 per cent in after-hours trading.

is senior editor for Morningstar Australia

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