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Global Market Report - 3 February

Lex Hall  |  03 Feb 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following gains on Wall Street, led by Amazon and Google, and optimism over covid stimulus.

The Australian SPI 200 futures contract was up 54 points, or 0.8 per cent, at 6,742 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

US stocks finished up sharply for a second straight day on Tuesday, helped by gains in Amazon.com and Google-parent Alphabet ahead of their results and by optimism over progress on a US pandemic relief package.

The Dow Jones Industrial Average rose 476.09 points, or 1.58 per cent, to 30,688, the S&P 500 gained 52.37 points, or 1.39 per cent, to 3,826.23 and the Nasdaq Composite added 209.38 points, or 1.56 per cent, to 13,612.78.

Locally, the RBA forecasts the economy will return to its pre-pandemic size by the middle of this year, six months earlier than expected, The Australian reports.

But the RBA will embark on a $100 billion monetary support plan and keep interest rates on hold until 2024 “at the earliest” to help underwrite a “bumpy and uneven” recovery.

The S&P/ASX200 benchmark index closed higher by 99.6 points, or 1.49 per cent, to 6,762.6 on Tuesday.

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The All Ordinaries closed higher by 104.7 points, or 1.51 per cent, at 7,027.5.

The strong performance followed a good lead from US markets.

Gold was down 1.4 per cent at $US1,835.59 an ounce; Oil was up 2.2 per cent at $US57.59 a barrel; Iron ore was down 4.6 per cent to $US149.80 a tonne

Meanwhile, the Australian dollar was buying 75.88 US cents at 8.30am, down from 76.22 US cents at Tuesday's close.

Asia

Asian stock markets extended gains on Tuesday on increased optimism about stimulus packages and global economic recovery.

In China, the Shanghai Composite gained 28 points, or 0.8 per cent to close at 3,533.68.

The blue-chip CSI 300 finished up 83 points, or 1.54 per cent, at 5,501.09.

In Hong Kong, the Hang Seng finished up 355 points, or 1.23 per cent, at 29,248.70.

Around the region, in Japan, the Nikkei 225 closed up 271 points, or 0.97 per cent, at 28,362.17.

Europe

European shares rose on Tuesday on hopes of a faster economic recovery, with some upbeat economic growth data and encouraging outlook on big names such as Airbus and LVMH putting a pan-regional index on course to erase last week’s hefty losses.

Europe’s STOXX 600 index closed higher for a second straight session, up 1.3 per cent on broad-based gains after losing over 3 per cent last week on concerns around the slow rollout of covid-19 vaccines in the euro zone.

Preliminary data on Tuesday showed the euro zone economy contracted by less than expected in the fourth quarter of 2020 as large economies Germany and Spain still managed slight expansions.

“But with lockdowns extended well into the first quarter, another technical recession is in the making,” said Bert Colijn, senior euro zone economist at ING.

Luxury brand owners LVMH and Kering jumped 3.4 per cent and 1 per cent respectively after brokerage Berenberg recommended the stocks, noting long-term structural drivers of demand for luxury products remain intact.

Planemaker Airbus rose after a Morgan Stanley upgrade on overlooked production increases.

Anticipation of strong results from Amazon and Google-parent Alphabet and hopes of a US$1.9 trillion US covid-19 relief package in the US also kept sentiment buoyed.

Medical device maker Coloplast and Sweden’s Indutrade were the top gainers on STOXX 600 on topping quarterly earnings.

Basic materials was the only sector in the red as copper and iron ore prices tanked, while gains in the oil sector were limited by a 4.5 per cent slide in BP after it reported its first loss in a decade.

London’s blue-chip FTSE 100 gained the least among regional peers, weighed upon by reports that the UK variant of the coronavirus has developed a new, concerning mutation that could reduce the efficacy of vaccines.

Fresenius Medical Care tumbled 10.3 per cent after the world’s No.1 kidney dialysis firm warned its adjusted net profit was likely to drop this year.

Silver prices dropped on Tuesday, halting a rally to near eight-year highs in the previous session that was the latest move in two weeks of turmoil on financial markets fuelled by a pack of Reddit-centred individual investors.

A pause in a social media driven rally that drove up prices of the commodity as well as certain stocks including GameStop Corp has helped calm worries about potential losses incurred by certain hedge funds causing disruption to markets as a whole.

Finnish shares of Nokia, also caught up in the frenzy, slid 5.3 per cent.

North America

US stocks finished up sharply for a second straight day on Tuesday, helped by gains in Amazon.com and Google-parent Alphabet ahead of their results and by optimism over progress on a US pandemic relief package.

Alphabet and Amazon.com Inc were among the top boosts to the S&P 500. Each was set to post fourth-quarter results after the bell, with Alphabet expected to report the cost and operating profit of its Google Cloud business for the first time.

More than 80 per cent of reports from S&P 500 companies so far have surpassed analysts’ earnings expectations, with 97 per cent of reports from technology companies beating, according to IBES data from Refinitiv.

Investors also were optimistic as Democrats in Congress prepared to take the first steps toward fast-track passage of President Joe Biden’s relief package.

Adding to the upbeat mood, new cases of covid-19 in the US fell for a third week in a row, the first time since last September.

“Some form of the Biden proposal will pass, and there are certainly investors who are willing to look down the road and think the market and economy will look brighter,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.

The Dow Jones Industrial Average rose 476.09 points, or 1.58 per cent, to 30,688, the S&P 500 gained 52.37 points, or 1.39 per cent, to 3,826.23 and the Nasdaq Composite added 209.38 points, or 1.56 per cent, to 13,612.78.

The recent market mania driven by retail traders over heavily shorted assets showed some signs of fizzling out. GameStop Corp, one of the stocks that had been pushed up sharply in the frenzy, sank for a second day.

“Hedge funds are looking for places to put money and the easy trade for them is to go into big-cap stocks and probably the broad market in general, just to ensure that they are not left behind,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York, New York. “That’s probably where we’re getting all of the extra flows here.”

Wall Street’s fear gauge, the Cboe Volatility index, retreated.

Exxon Mobil Corp posted its first annual loss as a public company. However, its shares were higher as its quarterly adjusted profit topped estimates.

Shares of United Parcel Service climbed after it beat quarterly profit estimates on a surge in home delivery volume due to pandemic-fuelled online purchases of holiday gifts and staples.

With Reuters

is senior editor for Morningstar Australia

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