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Global Market Report - 3 August

Lex Hall  |  03 Aug 2020Text size  Decrease  Increase  |  
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Australia

Australian stocks are set for a steady start despite a positive lead from Wall Street and ahead of the RBA meeting and the start of earnings season.

The Australian SPI 200 futures contract was down just one point, or 0.02 per cent, to 5,877 points at 8.45am Sydney time on Monday, suggesting a flat start to trading.

Wall Street stocks on Friday finished a choppy session higher after strong earnings from tech giants.

The Nasdaq led, gaining 1.5 per cent, while the Dow added 0.4 per cent and the S&P 500 gained 0.8 per cent.

Earlier on Friday, Australian stocks fell 2 per cent to a three-week low following Wall Street’s decline on news the US economy contracted by one-third in the second quarter—the worst decline on record.

The ASX still managed a 0.5 per cent gain in July.

Apart from the deepened coronavirus shutdown in Victoria, local focus this week will be on the RBA, which meets on Tuesday but which is not expected to move interest rates or its policy settings.

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However the RBA’s Statement on Monetary Policy on Friday may provide more clues to the RBA’s economic forecasts.

Retail sales figures on Tuesday are expected to shed some light on the impact of the reopening of parts of the economy in June.

Australian reporting season will click into gear later in the week, with the coronavirus pandemic expected to produce some shocking results.

In the US, attention will focus on negotiations on a new jobless support package and on Friday’s jobs report.

Elsewhere, China’s Caixin manufacturing index is expected to show another month of expansion in July.

The Australian dollar stood at US71.41c at 8.45am on Monday morning.

Asia

China stocks closed higher on Friday in choppy trading amid uncertainties in coronavirus resurgence, while liquidity and retail investor enthusiasm fuelled the main indexes to post the biggest monthly percentage rises since February last year.

At the close, the Shanghai Composite index was up 0.71 per cent at 3,310.01. The index ended July with a 10.9 per cent rise, its biggest monthly gain since February 2019.

The blue-chip CSI300 index was up 0.84 per cent, posting its biggest monthly gain since last February, rising 12.8 per cent.

Hong Kong shares ended lower on Friday, as a resurgence in coronavirus infections and likely delay in local elections countered optimism over faster recovery in Chinese factories and strong US tech earnings.

At the close of trade, the Hang Seng index was down 115.24 points or 0.47 per cent at 24,595.35.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.29 per cent, while Japan’s Nikkei index closed down 2.82 per cent.

Europe

European stocks posted their first monthly decline since a market selloff in March on Friday as growing doubts over a global recovery from the coronavirus crisis overshadowed a batch of strong earnings from technology firms.

The pan-European STOXX 600 index gave up early gains to close 0.9 per cent lower, pressured by a weak open for Wall Street as optimism from stellar earnings reports from big tech names Amazon, Apple and Facebook faded.

An early reading of the euro zone’s economy showed the bloc shrank by a bigger-than-expected 12.1 per cent in the second quarter, its deepest contraction on record as lockdowns ravaged business activity.

Spain's benchmark index dropped 1.7 per cent as the country posted the worst output slump, while GDP in Italy and France also fell sharply but less than forecast.

The STOXX 600 was down about 1 per cent in July, with fears of a resurgence in covid-19 cases also weighing on the mood as Britain imposed a tougher lockdown in swathes of northern England, while Spain saw a surge in new infections.

Technology stocks were among the few gainers, up 0.7 per cent after forecast-beating results from Wall Street’s tech majors on Thursday.

The top gainer on the STOXX 600 was Finnish telecom network equipment maker Nokia, up 12.5 per cent after reporting an unexpected rise in underlying profit as it reduced low-margin business.

BNP Paribas rose 0.8 per cent as it earned a higher-than-expected quarterly profit, boosted by a surge in fixed income trading and strong demand for corporate finance.

Nearly 50 per cent of the companies listed on the STOXX 600 have reported quarterly earnings so far, and 64 per cent of those have surpassed beaten-down profit expectations, according to Refinitiv data.

North America

The Nasdaq jumped more than 1 per cent on Friday, powered by strong earnings from some of the largest US companies, but the Dow and S&P finished with smaller gains as uncertainty about the government’s next round of coronavirus aid kept economic worries on the radar.

Apple Inc shares surged 10.5 per cent to close at a record US$425.04 in the wake of blowout quarterly results and a four-for-one stock split announcement.

Amazon.com Inc gained 3.7 per cent after posting its biggest profit ever while Facebook jumped 8.2 per cent after the social media platform blew past revenue expectations.

Google parent Alphabet Inc fell 3.3 per cent though, the biggest drag on the S&P 500 and Nasdaq, as it posted the first quarterly sales dip in its 16 years as a public company.

The four companies are among the top five in market capitalisation, representing roughly 20 per cent of the S&P 500’s total. Apple’s gain pushed it ahead of Saudi Aramco as the world’s most valuable public company, according to Refinitiv data.

The White House and Democrats were still negotiating on coronavirus relief aid, but not yet on a path toward reaching a deal, according to House of Representatives Speaker Nancy Pelosi, hours before the expiration of a federal unemployment benefit.

The Dow Jones Industrial Average rose 114.67 points, or 0.44 per cent, to 26,428.32, the S&P 500 gained 24.9 points, or 0.77 per cent, to 3,271.12 and the Nasdaq Composite added 157.46 points, or 1.49 per cent, to 10,745.28.

It was a choppy session with each major index up and down. The Dow at one point fell more than 1 per cent. In late trade, stocks moved higher into the close as Microsoft shares pared losses of more than 2 per cent after reports the company was said to be in talks to buy video app TikTok.

Kansas City Southern also provided a late boost, ending the session 9.7 per cent higher after the Wall Street Journal reported a group of buyout investors were considering a takeover bid for the rail operator.

US deaths from covid-19 appeared to be rising at their fastest rate since early June, and the Midwest looked like the current epicentre of the pandemic.

The benchmark index is now about 3.4 per cent shy of its February all-time high, but faltering macroeconomic data and rising covid-19 cases in the US were making investors cautious again.

Still, the S&P notched its fourth weekly gain in the past five, with a lift from massive fiscal and monetary stimulus measures to buttress the US economy during the pandemic.

For the week, the S&P gained 1.73 per cent, the Dow shed 0.15 per cent and the Nasdaq climbed 3.69 per cent. For the month, the S&P rose 5.52 per cent, the Dow advanced 2.39 per cent and the Nasdaq rallied 6.83 per cent.

Energy stocks were the worst performing among the 11 major S&P sectors after Chevron Corp reported an US$8.3 billion loss on asset writedowns and ExxonMobil Corp recorded a second consecutive quarterly loss.

Caterpillar Inc fell 2.8 per cent after the bellwether for economic activity offered little signs of improvement in equipment sales.

is senior editor for Morningstar Australia

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