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Global Market Report - 29 January

Lex Hall  |  29 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise as Wall Street rebounded on strong earnings results and a cooling in short squeeze fears.

The Australian SPI 200 futures contract was up 94 points, or 1.4 per cent, at 6,684 points at 8.30am Sydney time on Friday, suggesting a positive start to trading.

US stocks closed higher on Thursday, bouncing from sharp losses in the prior session, thanks to a broad rally as earnings season got off to a strong start and fears lessened around hedge funds selling long positions to cover shorts.

The Dow Jones Industrial Average rose 300.75 points, or 0.99 per cent, to 30,603.92, the S&P 500 gained 36.49 points, or 0.97 per cent, to 3,787.26 and the Nasdaq Composite added 66.56 points, or 0.5 per cent, to 13,337.16.

Locally, households and small businesses are now paying back more than 80 per cent of the almost $250 billion in loans deferred at the height of the coronavirus pandemic, with new figures revealing the national economic recovery is on track, The Australian reports.

Australia's share market on Thursday staged its biggest loss since September after Wall Street markets sunk following US Federal Reserve concerns about its economy's recovery.

The S&P/ASX200 benchmark index closed lower by 130.9 points, or 1.93 per cent, to 6,649.7 on Thursday.

The decline was the biggest since a 2.29 per cent loss on September 30.

The All Ordinaries closed down 142.6 points, or 2.02 per cent, at 6,917.6.

Gold was down 0.2 per cent at $US1,839.88 an ounce; Oil was down 0.2 per cent at $US55.71 a barrel; Iron ore was down 5.5 per cent to $US157.42 a tonne.

Meanwhile, the Australian dollar was buying 76.95 US cents at 8.30am, down from 77.34 US cents at Thursday's close.

Asia

China stocks slumped on Thursday, with major indexes posting their worst drop in more than six months, hit by investor concerns that policymakers may be starting to shift to a tighter stance to rein in share prices and property markets.

China's short-term money rates climbed for a fourth straight session, with some key tenors approaching the higher end of the interest rate corridor, as tight cash conditions persisted and market worries over a switch in authorities' policy stance mounted.

The Shanghai Composite index ended down 1.91 per cent at 3,505.18, its lowest closing since 4 January and biggest intraday fall since 24 July. The blue-chip CSI300 index was down 2.73 per cent to 5,377.14, its biggest one-day drop since 24 July.

Hong Kong stocks posted their biggest drop in more than eight months on Thursday, pressured by an overnight Wall Street sell-off, while tighter onshore liquidity also dampened market sentiment.

At the close of trade, the benchmark Hang Seng index was down 746.76 points or 2.55 per cent at 28,550.77, lowest close since Jan. 14 and the biggest daily drop since May 22. The Hang Seng China Enterprises index fell 2.72 per cent to 11,334.03.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 1.09 per cent, while Japan's Nikkei index closed down 1.53 per cent.

Europe

European stocks hit a near one-month low on Thursday following Wall Street’s worst sell-off since October on concerns about high valuations, with investors also growing wary about a rise in more contagious coronavirus variants.

The pan-European STOXX 600 fell 1.9 per cent, turning negative for the year, while major regional bourses like Germany’s DAX and France CAC 40 slid further into the red and UK’s FTSE 100 held on to slim gains for the year.

Investors looked past strong earnings from Apple and Facebook overnight as well as the US Federal Reserve’s pledge to stick to loose monetary policy as worries about slow rollout of covid-19 vaccines and more curbs in Europe weighed on the mood.

European stocks that were highly bid in the wake of an online retail trading frenzy, like Ambu, Evotec and Unibail, reversed some of the previous session’s strong gains.

“With valuations at levels already pricing in much of the recovery from a pandemic that is far from over, these corrections are always possible,” Ian Williams, economics and strategy research analyst at Peel Hunt said in a note.

Meanwhile, Germany is preparing entry restrictions for travellers from Britain, Brazil and South Africa and its health minister expects the current shortage of coronavirus vaccines to continue well into April.

Spanish officials said delays to vaccine shipments are threatening supplies in Catalonia and have forced authorities in Madrid to halt inoculations.

The European Union failed to make a breakthrough in crisis talks with AstraZeneca, which announced delivery hold-ups to the bloc in recent weeks.

Technology stocks fell 2.6 per cent, pulling back further from a two-decade high hit earlier this year, while insurers, oil & gas and automakers stocks were the biggest sectoral decliners, falling almost 2.5 per cent.

Swatch Group slipped 2.5 per cent after it reported its first annual loss since the early days of the Swiss watchmaker almost 40 years ago as the pandemic battered demand in the luxury sector.

The world’s largest spirits maker Diageo jumped 3.7 per cent after it reported a surprise rise in underlying net sales growth in the first half of the year, helped by strong US demand.

North America

US stocks closed higher on Thursday, bouncing from sharp losses in the prior session, thanks to a broad rally as earnings season got off to a strong start and fears lessened around hedge funds selling long positions to cover shorts.

Heavyweights, including Microsoft Corp, Amazon.com and Alphabet Inc, were among the biggest boosts to the S&P 500, a day after the three major US indexes suffered their biggest daily percentage drop in three months.

Apple reported holiday-quarter sales and profit that beat Wall Street expectations. However, shares of the iPhone maker fell after climbing about 7 per cent to start the year.

With quarterly earnings season in full swing, market participants have looked to see whether companies could justify high valuations, with the forward price-to-earnings ratio on the benchmark S&P index near 20-year highs at almost 22.7.

“By and large the surprises have been positive, even more so than typical and by and large companies are showing positive operating leverage where they are able to grow earnings a little bit faster than they are able to grow revenue,” said Ellen Hazen, portfolio manager at F.L.Putnam Investment Management in Wellesley, Massachusetts.

“It is still early days where we are only a third of the way through the S&P but the surprises look more positive than usual and that bodes well as an outlook for the economy and for the markets.”

The Dow Jones Industrial Average rose 300.75 points, or 0.99 per cent, to 30,603.92, the S&P 500 gained 36.49 points, or 0.97 per cent, to 3,787.26 and the Nasdaq Composite added 66.56 points, or 0.5 per cent, to 13,337.16.

Shares in GameStop Corp and AMC Entertainment Holdings Inc tumbled after a meteoric rise in recent sessions in a social media-driven trading frenzy that shook stock markets. Trading platforms, including Robinhood and Interactive Brokers, restricted trading in several stocks that soared this week, easing concerns about a ripple effect to the broader market.

“Trading platforms are not going to want to stick their necks out and be on the frontline of what they may see as a reckless war, in part, against the elite and the system of Wall Street that’s being democratized by information and the social media,” said Eric Schiffer, chief executive officer of private equity firm the Patriarch Organization.

Of the 159 companies in the S&P 500 that reported earnings through Thursday morning, 83 per cent posted results that topped analyst expectations, according to Refinitiv data, well above the 76 per cent beat rate over the past four quarters.

Facebook fell in choppy trading despite soundly beating quarterly revenue estimates, while Tesla lost ground after posting disappointing fourth-quarter results and failing to provide a clear target for 2021 vehicle deliveries.

But Comcast Corp jumped after it reported better-than-expected fourth-quarter revenue, as broadband demand continued to offset pandemic-related weakness in its theme park and filmed entertainment businesses.

A Commerce Department report showed fourth-quarter gross domestic product increased at a 4 per cent annualised rate, in line with expectations, as the virus and lack of another spending package curtailed consumer spending, while a separate report showed 847,000 more people filed jobless claims last week, lower than the 875,000 estimate.

With Reuters

is content editor for Morningstar Australia

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