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Global Market Report - 29 September

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

Australian shares are set to follow Wall Street higher as investors piled in to sectors hardest hit by the virus.

The Australian SPI 200 futures contract was up 24 points, or 0.4 per cent, to 5,968 points at 8.30am Sydney time on Tuesday, suggesting a positive start to trading.

Wall Street rallied to close sharply higher on Monday as investors sought bargains among sectors hardest-hit by the coronavirus recession, now limping toward its ninth month.

The Dow Jones Industrial Average rose 410.1 points, or 1.51 per cent, to 27,584.06, the S&P 500 gained 53.14 points, or 1.61 per cent, to 3,351.6 and the Nasdaq Composite added 203.96 points, or 1.87 per cent, to 11,117.53.

The S&P/ASX 200 index swung between gains and losses throughout the session on Monday before settling 0.2 per cent lower at 5,952.3. The All Ordinaries fell 5.6 points, or 0.09 per cent, to close at 6,134.90.

Gold was up 1.0 per cent at $US1,880.48 an ounce; Brent oil was up 1.2 per cent to $US42.44 a barrel; Iron ore was up 0.8 per cent to $US116.15 a tonne.

Meanwhile, the Australian dollar was buying 70.72 US cents at 8.30am, up from 70.60 US cents at Monday’s close.

Asia

China’s blue-chip index inched up on Monday, as industrial firms posted profit growth for a fourth straight month in August, pointing to a continued recovery in the world’s second-largest economy from the coronavirus crisis.

The blue-chip CSI300 index rose 0.3 per cent, to 4,581.91, while the Shanghai Composite Index slipped 0.1 per cent to 3,217.53.

Hong Kong stocks climbed on Monday, boosted by robust gains for financial and properties firms, after China’s upbeat data pointed to recovery gaining momentum in the world’s second-largest economy from the coronavirus crisis.

At the close of trade, the Hang Seng index was up 240.63 points or 1.04 per cent at 23,476.05. The Hang Seng China Enterprises index rose 0.87 per cent to 9,383.4.

In Japan, the benchmark Nikkei share average rose 1.32 per cent to 23,511.62 and the broader Topix gained 1.69 per cent to 1,661.93. All but two of the 33 sector sub-indexes on the Tokyo exchange traded higher.

Europe

European stocks bounced back sharply on Monday as investors snapped up beaten-down shares in the banking sector that hit a record low last week and data gave signs of pick-up in the Chinese economy.

The pan-European STOXX 600 index jumped 2.2 per cent, recording its biggest percentage gain since mid-June, after last week's 3.6 per cent drop.

The broader banks index surged 5.6 per cent in its first session of gain in eight days.

HSBC Holdings surged 8.9 per cent after Chinese insurance group Ping An, the biggest shareholder in the British bank, boosted its stake to 8.00 per cent from 7.95 per cent.

Commerzbank rose 5.6 per cent after it named a top manager at rival Deutsche Bank, Manfred Knof, to lead the bank. The stock move was, however, in line with the broader sector.

Investors have shunned Europe’s banking sector hit by a cocktail of lower global borrowing costs, rising bad loans due to the economic downturn and a dirty money scandal that made it the worst performer this year with a 42 per cent decline.

“There’s a chance for tactical rebalancing, but not a structural rally in banks,” said Dhaval Joshi, European investment strategist at BCA Research.

Investors have been wary about a second wave of coronavirus infections hampering business activity in Europe, while uncertainty about more US fiscal stimulus and a Brexit trade deal have all sparked bouts of volatility in financial markets this month.

“With each of these issues remaining ‘live’ in the near term, we expect markets to remain choppy for a bit longer,” Morgan Stanley’s equity strategist Graham Secker wrote in a note.

However, the worst weekly selloff in three months drove bargain hunters to step in, while data showed profits at China's industrial firms grew for the fourth straight month in August helped the trade-sensitive German index outperform.

Europe's auto and industrial sectors, heavily reliant on Chinese demand, rose more than 3.5 per cent.

ArcelorMittal gained 4.8 per cent after Cleveland-Cliffs agreed to buy the US assets of the steelmaker for about US$1.4 billion ($2 billion).

Sonova Holding, the world's biggest hearing aid maker, surged 14.4 per cent as it expects revenue to return to growth in the next six months.

London-based spirits maker Diageo rose 6.1 per cent after saying it had made a strong start to its fiscal year 2021, with its US business performing ahead of expectations.

North America

All three major US stock indexes made solid gains on the heels of the longest weekly losing streak in over a year for both the S&P 500 and the Dow.

But energy and financials, which suffered the most bruising blows from the economic shutdown, enjoyed the largest percentage gains among major S&P 500 sectors, all of which ended the session in the black.

“Today’s market is being led by energy and financials, but it’s a very well-balanced market,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “Every sector is participating in this rally.”

However, even with Monday’s jump, the indexes are only days away from closing the books on their first monthly declines since March, when markets were sent into a freefall by pandemic-related lockdowns.

“Given that it’s been a weak month, some rebalancing may be occurring,” Ghriskey added. “The rebalancing would move allocations to equities and some of that may be happening today.”

The third quarter also draws to a close on Wednesday, and despite September’s expected loss, the S&P and the Nasdaq are on course for their best two-quarter winning streaks since 2009 and 2000, respectively.

Market leaders Apple and Amazon.com once again gave the biggest boost to the S&P 500 and the Nasdaq.

The lack of a covid-19 vaccine and an additional fiscal stimulus package from Washington have weighed on the markets in recent sessions.

But US House of Representatives Speaker Nancy Pelosi said in an MSNBC interview that stimulus talks with Treasury Secretary Steven Mnuchin are due to continue on Monday, suggesting a possible progress to end the stalemate.

“I’m not sure there’s any chance of it happening before the end of the year but it’s in the news and giving some traders some confidence,” said Ghriskey.

American Airlines Group announced late Friday that it has secured a US$5.5 billion government loan, and might access more. The news sent the commercial carrier's stock up 3.8 per cent.

This also gave a lift to the broader airline sector. The S&P 1500 Airlines index closed 4.1 per cent higher.

Boeing extended Friday's gains, rising 6.4 per cent after Federal Aviation Administration Chief Steve Dickson said the agency would conduct a 737 MAX evaluation flight this week.

Devon Energy Corp said it would buy peer WPX Energy for US$2.56 billion, sending their shares jumping 11.1 per cent and 16.4 per cent, respectively.

Ride-hailing platform Uber Technologies rose 3.2 per cent after a judge ruled the company could resume operations in London.

is content editor for Morningstar Australia

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