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Global Market Report - 29 October

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

Australian shares are set to follow Wall Street sharply lower as global covid cases soar and fears of a contested US election intensify.

The Australian SPI 200 futures contract was down 88 points, or 1.5 per cent, to 5957 points at 8.30am Sydney time on Thursday, suggesting a negative start to trading.

US stocks tumbled on Wednesday, with the Dow closing at lows last seen in late July, as coronavirus cases soared globally and investors also worried about the possibility of a contested US presidential election next week.

The Dow Jones Industrial Average fell 939.13 points, or 3.42 per cent, to 26,524.06, the S&P 500 lost 119.26 points, or 3.52 per cent, to 3,271.42 and the Nasdaq Composite dropped 426.48 points, or 3.73 per cent, to 11,004.87.

Locally, former Victorian premier Jeff Kennett has slammed the James Packer-backed Crown Resorts, claiming the “wonderful assets” of the gaming company have been “let down” by its board of directors, the bulk of whom he says should quit, including chair Helen Coonan, The Australian reports.

The S&P/ASX200 benchmark index finished up 6.7 points, or 0.11 per cent, to 6057.7 on Wednesday. The All Ordinaries closed higher by 15.3 points, or 0.24 per cent, to 6262.5.

Gold was down 1.6 per cent at $US1878.44 an ounce; Brent oil was down 5.0 per cent to $US39.15 a barrel; Iron ore was up 1.5 per cent to $US116.87 a tonne.

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Meanwhile, the Australian dollar was buying 70.60 US cents at 8.30am, down from 71.44 US cents at Wednesday’s close.

Asia

China shares ended higher for a second consecutive day on Wednesday, as consumers and healthcare stocks gained amid hopes of further economic recovery from the pandemic.

At the close, the Shanghai Composite index was up 0.46 per cent at 3,269.24. The blue-chip CSI300 index was up 0.81 per cent, with its consumer staples sector 2.24 per cent higher, and the healthcare sub-index rose 1.13 per cent.

Hong Kong shares ended lower on Wednesday, tracking the weak lead of global markets, as sentiment took a hit with the resurgence of covid-19 cases in the US and Europe. At the close of trade, the Hang Seng index was down 75.11 points or 0.3 per cent at 24,727.20.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.14 per cent, while Japan’s Nikkei index closed down 0.29 per cent.

Europe

German shares suffered their weakest day since early June on Wednesday as the government agreed on an emergency lockdown to combat surging covid-19 cases, with other European markets following suit on fears of more curbs around the continent.

The German DAX sank as much as 5 per cent before cutting some losses to close down 4.2 per cent at its lowest in five months. The precise measures were still subject to negotiation, with sources saying the government had agreed to shut bars and restaurants from 2 November.

The pan-European STOXX 600 index fell 3 per cent in its sharpest one-day drop in five weeks. France's main index dropped 3.4 per cent ahead of France's decision to reimpose a month-long lockdown.

“News of renewed lockdown measures... will add further to growth concerns in the region, at a time when mobility indicators have already started to fall and survey indicators moderate,” said Mohammed Kazmi, portfolio manager for UBP’s Absolute Return Fixed Income team.

“This will likely drive European Central Bank President (Christine) Lagarde to remain dovish in her comments in the press conference tomorrow, laying out the path for more easing to come down the line.”

The European Commission proposed new tax and trade measures on Wednesday to fight the pandemic around the EU, while sources said Germany aims to increase its debt plans next year to finance new coronavirus aid measures.

All sectors in Europe were firmly in the red, with the economically sensitive autos sector leading losses, down almost 5 per cent.

US stocks also tripped with surging cases there weighing on sentiment and no stimulus package in sight just a week ahead of the US presidential election.

The downbeat mood overshadowed a batch of upbeat quarterly results from European companies, with Deutsche Bank and retailer Carrefour down despite upbeat results.

German online takeaway food company Delivery Hero and industrial technology group Hexagon, however, were among the rare gainers after robust earnings reports.

Aero-engine maker Rolls-Royce, meanwhile, soared 12.5 per cent a day after shareholders approved a 2 billion pound ($3.7 billion) rights issue to bolster its finances.

North America

US stocks tumbled on Wednesday, with the Dow closing at lows last seen in late July, as coronavirus cases soared globally and investors also worried about the possibility of a contested US presidential election next week.

The spiraling pandemic and Washington’s failure to reach a deal on new fiscal stimulus before the 3 November election drove all three stock indexes to close almost 3 per cent lower.

Twelve US states set records for hospitalized covid-19 patients on Tuesday, while Germany and France announced plans to shut large swathes of public life for a month as the pandemic surged across Europe.

“Obviously the virus is out of control. It’s spiking, it’s bad,” said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago. “The concept that ... it’s going to disappear is just a faulty assumption.”

Shares of hotels, airlines and other companies sensitive to covid-19-related turmoil sank. The S&P 1500 airlines index and leisure related stocks fell, and the energy index slid as oil prices tumbled on fears of a deeper drop in fuel demand.

With just six days to the election, Wall Street's fear gauge spiked to its highest level since 15 June. Concerns that a winner might not be declared the night of 3 November also spurred the wide sell-off.

Democratic challenger Joe Biden leads President Donald Trump nationally by 10 percentage points, according to Reuters/Ipsos polling, but the competition is tighter in swing states, which will decide the victor.

Investors are worried about various potential outcomes: that the election may be contested; a “blue wave” gives Biden a victory and his Democrats control of Congress; or that Trump gets re-elected, said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

“As people run through the likely scenarios of what could happen with the election, there’s no short-term good answer,” he said.

Losses were broad-based with technology stocks weighing the most.

The Big Tech companies—Apple, Alphabet, Amazon and Facebook—which are due to report results on Thursday, all fell about 3 per cent or more, weighing the most on the S&P 500.

The Dow Jones Industrial Average fell 939.13 points, or 3.42 per cent, to 26,524.06, the S&P 500 lost 119.26 points, or 3.52 per cent, to 3,271.42 and the Nasdaq Composite dropped 426.48 points, or 3.73 per cent, to 11,004.87.

Of the 206 S&P 500 companies that have reported third-quarter earnings so far, about 83 per cent have topped expectations, according to Refinitiv data. But earnings on average are expected to fall 14.8 per cent from a year earlier.

Microsoft Corp's quarterly results surpassed analysts targets, benefiting from a pandemic-driven shift to working from home and online learning. Its shares, however, fell about 4 per cent after rising nearly 35 per cent so far this year.

General Electric Co was one bright spot, jumping 8 per cent after posting a surprise quarterly profit and a positive cash flow on the back of cost cuts and improvements in its power and renewable energy businesses. GE was the largest percentage gainer on the S&P 500.

is senior editor for Morningstar Australia

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