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Global Market Report - 29 May

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

Sharemarket investors can expect the ASX to open lower after fears on Wall Street about rising US-China tensions.

The SPI 200 futures contract was lower by 20 points, or 0.34 per cent, to 5,836.0 at 8am Sydney time on Friday, indicating losses in early trade.

In the US overnight, the S&P 500 had been climbing for much of the day and was up as much as 1.1 per cent at one point but it disappeared after President Donald Trump said he would hold a news conference about China.

That raised immediate worries among investors about possibly worsening relations between the world's largest economies, which had signed a deal earlier this year to at least pause their trade war.

The S&P 500 ended the day down 6.40, or 0.2 per cent, at 3,029.73. The Dow Jones Industrial Average swung from a gain of 210 points to a loss of 147.63 by the close of trading, down 0.6 per cent to 25,400.64. The Nasdaq composite fell 43.37, or 0.5 per cent, to 9,368.99.

In Australia on Thursday morning, Westpac has announced the chief executive of its institutional bank, Lyn Cobley, will retire.

Recruiting will begin for her replacement.

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Private sector credit data for April will be published and ANZ Bank economists expect a 0.5 per cent rise on last month.

Trading will resume on the ASX after a buying spree on bank stocks on Thursday.

The S&P/ASX200 benchmark index moderated its gains after being up as much as 2.5 per cent and finished ahead by 76.1 points, or 1.32 per cent, at 5,851.1 points, while the All Ordinaries index rose by 72.9 points, or 1.24 per cent, to 5,957.8.

One Australian dollar was buying 66.20 US cents at 8am, up from 66.13 US cents at the close of trade on Thursday.

Asia

China stocks closed higher for a second straight session on Tuesday, as a top regulatory official downplayed the impact of the trade war with the US, and as foreign investors bought shares ahead of an increase in MSCI's weighting.

The blue-chip CSI300 index rose 1.0 per cent, to 3,672.26, while the Shanghai Composite Index closed up 0.6 per cent at 2,909.91.

In Hong Kong, the Hang Seng index closed down 0.7 per cent at 23,132.76, after falling more than 2 per cent mid-session to its lowest level since 25 May. The Hang Seng China Enterprises index fell 0.2 per cent.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.16 per cent , while Japan's Nikkei index closed up 0.37 per cent.

Europe

European shares rose for a fourth straight session on Thursday, as optimism over businesses returning to work and stimulus for the battered euro zone economy outweighed rising US-China tensions.

The pan-European STOXX 600 index rose 1.6 per cent to hit an 11-week high, with healthcare stocks rebounding from losses earlier this week.

GlaxoSmithKline, the world’s largest vaccine maker, gained 2.1 per cent as it laid out plans to produce 1 billion doses of vaccine efficacy boosters for COVID-19 shots next year.

Other defensive sectors such as personal & household goods, telecoms and utilities also rose.

UK cinema operator Cineworld surged 21.4 per cent to the top of the STOXX 600 after saying it expected to reopen all its venues in July and had secured additional liquidity.

The STOXX 600 has risen more than 32 per cent from its March lows as investors hope for a gradual recovery with policymakers injecting trillions of dollars into the global economy and drugmakers racing to develop a COVID-19 vaccine.

The mood in Europe has brightened this week on a 750-billion-euro ($1.13 billion) EU plan to prop up the bloc’s virus-hit economies, while hopes are running high the European Central Bank will further expand its bond purchase programme next week, possibly by 500 billion euros.

Investors looked past a fresh escalation in Sino-US tensions after China’s parliament approved a decision to move forward with national security legislation for Hong Kong.

US President Donald Trump has promised to take action over the move by the end of the week.

Italian luxury group Salvatore Ferragamo surged 16 per cent after it called back its former chief executive officer to help weather the COVID-19 storm.

And Scandinavian airline SAS slumped 11.2 per cent after revealing it was in talks with shareholders to raise funds as the collapse in travel demand hurt its quarterly results.

North America

Wall Street ended lower on Thursday following a late-session reversal, with Facebook weighing on the market after President Donald Trump said he would sign an executive order related to social media companies and would hold a news conference on China on Friday.

Shares of Twitter ended down 4.4 per cent and Facebook fell 1.6 per cent following news of the executive order. The White House, after the market close, said Trump had signed the order, which removes a liability shield they currently enjoy.

Trump said he was directing Attorney General William Barr to work with states to enforce their own laws against what he described as deceptive business practices by social media companies.

Concerns about China-US relations may also have driven the late decline. White House economic adviser Larry Kudlow told CNBC on Thursday that Hong Kong may now be needed to be treated like China when it comes to trade and other matters, echoing remarks by Secretary of State Mike Pompeo on Wednesday.

Stocks had been higher for most of the session as investors continued to bet on a swift recovery from the coronavirus-driven economic slump.

Worsening ties in recent weeks between the US and China, the world’s two largest economies, could pose a threat to the stock market’s strong recovery from its steep selloff.

The Dow Jones Industrial Average fell 147.63 points, or 0.58 per cent, to 25,400.64, the S&P 500 lost 6.4 points, or 0.21 per cenr, to 3,029.73 and the Nasdaq Composite dropped 43.37 points, or 0.46 per cent, to 9,368.99.

The S&P 500 is still up sharply from the low hit in March as a restart in business activity after weeks of shutdown and massive amounts of stimulus measures to support the economy have driven hopes of a strong recovery.

Boeing Co said it had resumed production of its 737 MAX passenger jet at its Washington state plant, although at a “low rate.”

is senior editor for Morningstar Australia

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