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Global Market Report - 3 July

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

Investors can expect Australian shares to rise at the start of trading after their US counterparts were encouraged by an improving jobs market there.

The Australian SPI 200 futures contract was higher by 35.0 points, or 0.58 per cent, to 6,048.0 points at 8am Sydney time on Friday.

US markets were boosted by a government report that said employers added 4.8 million jobs to their payrolls in June for a second-straight month of growth. That was 1.8 million more jobs than analysts expected.

However, the US unemployment rate remains very high at 11.1 per cent.

The jobs figures helped the S&P 500 edge higher 14.15 points to 3,130.01. The Dow Jones Industrial Average gained 92.39 points, or 0.4 per cent, to 25,827.36. The Nasdaq rose 53 points, or 0.5 per cent, to 10,207.63.

The rally was not impervious to worries about the coronavirus outbreak. News that Florida had another sharp increase in confirmed cases helped cut the S&P 500's early gains by more than half.

Meanwhile in Australia today, retail trade figures for May will show the extent of economic recovery from the peak of the pandemic in this country.

The Victorian government's efforts to control a coronavirus outbreak will continue to be watched closely, after 77 new cases were recorded on Thursday.

The Australian dollar was buying 69.24 US cents at 8am, lower from 69.29 US cents at the close of trade on Thursday.

Asia

China stocks rallied on Thursday, with the blue-chip index closing at its highest in 2½ years, boosted by Beijing’s decision to spend more to prop up the economy.

The blue-chip CSI300 index ended 2.1 per cent higher at 4,335.84, its highest closing level since 26 January 2018, while the Shanghai Composite Index gained 2.1 per cent to 3,090.57.

Leading the gains, the CSI300 real estate index and the CSI300 SWS securities index rallied 3.5 per cent and 7 per cent, respectively.

Hong Kong stocks posted strong gains on Thursday, with the index tracking mainland stocks having its best day in more than three months, after a security law went into effect in the city this week.

The Hang Seng index rose 2.9 per cent, to 25,124.19, while the China Enterprises Index, tracking mainland companies listed in Hong Kong, gained 3.1 per cent to 10,056.86, logging its best session since 25 March. 

Europe

European shares closed at a one-week high on Thursday as hopes of a COVID-19 vaccine and a better-than-expected rebound in US hiring overshadowed concerns about surging coronavirus infections.

The pan-European STOXX 600 rose 2 per cent, easing slightly from highs hit after data showed the US economy created a record 4.8 million jobs in June as more restaurants and bars resumed operations.

Banks were the top gainers in Europe, jumping 4.3 per cent to mark their best day since 5 June, while other cyclical sectors such as automakers, chemicals and insurance companies gained between 2.5 per cent and 3.4 per cent.

Equity markets started the second half of the year on a positive note earlier this week, as a COVID-19 vaccine developed by German biotech firm BioNTech and US giant Pfizer was found to be well-tolerated in early stage human trials, while business surveys showed a slump in global manufacturing eased in June.

Raising risks of fresh lockdowns, new US cases of COVID-19 jumped nearly 50,000 on Wednesday, according to a Reuters tally, marking the biggest one-day rise since the start of the pandemic.

Further adding to concerns, Britain and the European Union failed to make progress in talks on post-Brexit relations this week due to major differences, officials said.

Among individual movers, Associated British Foods gained 4.1 per cent after saying trading in its Primark fashion stores that reopened after the lockdown has been “reassuring and encouraging”.

Scandal-hit Wirecard slumped 35.4 per cent after police and public prosecutors raided its headquarters in Munich and four properties in Germany and Austria.

Dutch construction company BAM Groep dropped 11.6 per cent as it warned of a “significant” loss in the first half of the year.

North America

Wall Street closed higher and the Nasdaq reached an all-time closing high on Thursday as investors headed into their long holiday weekend buoyed by a record surge in payrolls, which provided assurance that the US economic recovery was well under way.

All three major US stock averages advanced, with the benchmark S&P 500 posting its fourth straight daily gain.

Massive stimulus and hopes for a speedy economic rebound have returned the S&P 500 and the Nasdaq to 7.6 per cent and 12.6 per cent below their record highs reached in February.

The indexes registered strong gains for the week.

The US economy added 4.8 million jobs in June according to the Labor Department, 1.8 million more than analysts expected, setting a second consecutive record.

Massive rehiring sent the unemployment rate down to 11.1 per cent.

Still, even with May and June’s consecutive record payroll gains, the labor market has still recovered only a fraction of the 22 million jobs lost in the March-April plunge.

The recovery of the US economy, now in its sixth month of recession, could stall as new cases of COVID-19 hit record levels and several states hit hardest by the resurgence halted or reversed plans to reopen their economies.

On Thursday, Florida reported a record-shattering 10,000 new cases of the disease, worse than any European country reported at the peak of their outbreaks.

In the coming weeks, market participants will train their focus on second-quarter reporting season. In aggregate, analysts now expect S&P earnings to have dropped by 43.1 per cent as companies grappled with plunging demand and disrupted supply chains.

The Dow Jones Industrial Average rose 92.39 points, or 0.36 per cent, to 25,827.36, the S&P 500 gained 14.15 points, or 0.45 per cent, to 3,130.01 and the Nasdaq Composite added 53.00 points, or 0.52 per cent, to 10,207.63.

The CBOE Volatility index, a barometer of investor anxiety, logged its largest weekly point drop since the week ending 8 May.

Of the 11 major sectors in the S&P 500, all but real estate and communications services closed higher, with materials enjoying the largest percentage gain.

Microsoft Corp provided the biggest boost to the S&P 500, and in June retained its top spot as the most globally invested stock, according to data from trading platform eToro.

Tesla jumped 8 per cent after the electric car maker’s second-quarter vehicle deliveries beat Wall Street estimates.

is content editor for Morningstar Australia

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