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Global Market Report - 3 June

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

Investors appear set to push Australian shares higher in early trade before the release of GDP figures which could all but confirm Australia's first recession in almost 30 years.

The SPI 200 futures contract was higher by 31 points, or 0.53 per cent, to 5,861.0 at 8am on Wednesday, indicating a slight gain at the start.

A late-session rally helped push Wall Street to solid gains overnight as traders looked past race riots and pandemic worries to focus instead on easing lockdown restrictions and signs of economic recovery.

Tech shares, along with cyclical stocks like industrials and financials, gave the biggest lift to all three major stock indexes.

Most of the attention in Australia will be on economic growth figures for the March quarter, which will reflect the devastating impact of the summer bushfires and the early stages of the coronavirus pandemic.

Economists expect GDP will be a contraction of between 0.1 per cent and 0.5 per cent.

A negative figure will almost certainly mean a recession, given the much deeper impact expected in the June quarter from travel bans and social distancing.

A technical recession is defined as two quarters of declining economic activity. The ABS will also publish building approvals data for April on Wednesday.

There was plenty of economic data on Tuesday for investors to consider and the benchmark S&P/ASX200 index closed up 15.9 points, or 0.27 per cent, at 5,835.1 points.

The All Ordinaries also closed up 21.7 points, or 0.37 per cent, at 5,960.1 points. The Australian dollar continues to gain momentum from strong iron ore prices.

Concerns about supply from Brazil, which is struggling to stop the spread of COVID-19, has meant more demand for producers in Australia. One Australian dollar was buying 68.89 US cents at 8am Sydney time, up from 68.02 US cents at the close of trade on Tuesday.

Asia

China shares closed higher on Tuesday as optimism over the government's new policies seeking to support the economy trumped concerns over deteriorating Sino-US relations.

The Shanghai Composite index closed up 0.2 per cent at 2,921.40.

The blue-chip CSI300 index was up 0.31 per cent, with its financial sector sub-index higher by 1.04 per cent, the consumer staples sector down 0.35 per cent, the real estate index up 2.41 per cent and the healthcare sub-index down 0.91 per cent.

In Hong Kong, the Hang Seng index closed up 263.42 points or 1.11 per cent at 23,995.94. The Hang Seng China Enterprises index rose 0.43 per cent to 9,876.25.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.61 per cent, while Japan's Nikkei index closed up 1.19 per cent.

Europe

European stocks hit their highest levels since early March on Tuesday, with German stocks outperforming as carmakers rallied on hopes of stimulus and Lufthansa gained after its board approved a state bailout.

The pan-European STOXX 600 rose 1.4 per cent to reclaim levels not seen since March 9. Traders in Germany returned from a long weekend to drive the DAX up 3.2 per cent to its highest level since 5 March.

Volkswagen, Daimler and BMW gained between 5.9 per cent and 9 per cent on a Reuters report on Sunday that the country’s Ministry of Economics had proposed a 5 billion euro buyer bonus scheme to boost car sales.

Europe’s automobiles & parts index jumped 4.9 per cent, leading gains, while insurers, real estate and banking rose between 2.5 per cent and 3 per cent.

Lufthansa surged 6.3 per cent as its supervisory board approved a 9 billion euro ($14.5 billion) government bailout even as it forced the German airline to give some of its prized landing slots to rivals.

German leaders are expected to present a stimulus package on Tuesday worth 75 billion–80 billion euros ($120 billion–$129 billion) to support economic recovery after the coronavirus pandemic, according to a media report.

With restrictions easing across the globe, data on Tuesday suggested the worst may be over for European manufacturers. All eyes are on the European Central Bank meeting later this week, where policymakers are expected to ramp up bond purchases.

Gains across the other markets were tempered by US-China tensions, with Wall Street futures coming under pressure after President Donald Trump vowed to use the military to halt protests over the death of a black man in police custody.

France’s biggest private TV operator TF1 jumped 7.8 per cent as it announced the launch of a new soccer channel Telefoot along with its partner MediaPro Group.

Norway’s Seadrill slid 8.2 per cent after writing down $1.2 billion on the value of its oil drilling rigs and warning that it may have to convert a part of its $7.4 billion in debt into equity to survive.

North America

A late-session rally pushed Wall Street to solid gains on Tuesday as market participants looked past widespread social unrest and pandemic worries to focus instead on easing lockdown restrictions and signs of economic recovery.

Tech shares, along with cyclical stocks like industrials and financials, gave the biggest lift to all three major stock indexes.

The Nasdaq, the S&P 500 and the Dow have been approaching their all-time closing highs in recent weeks and are now about 2 per cent, 9 per cent and 13 per cent, respectively, below record closing levels.

The S&P 500 and the Nasdaq have closed in positive territory in six of the last seven sessions.

Nationwide, violent protests over the death of a black man at the hands of law enforcement officers continued unabated, even as President Donald Trump vowed to unleash the military on the demonstrators.

But the green shoots of economic rebound driven in no small part by massive stimulus packages from Capitol Hill and the US Federal Reserve has helped fuel investor optimism.

Market participants now await Friday’s crucial jobs report from the Labor Department for a clearer picture of the extent of economic damage wrought by mandated lockdowns. The report is expected to show the unemployment rate surging to a historic 19.7 per cent.

The Dow Jones Industrial Average rose 267.63 points, or 1.05 per cent, to 25,742.65, the S&P 500 gained 25.09 points, or 0.82 per cent, to 3,080.82 and the Nasdaq Composite added 56.33 points, or 0.59 per cent, to 9,608.38.

All 11 major sectors in the S&P 500 ended the session in the black, with energy and materials enjoying the largest percentage gains.

The ARCA Airline index, whose constituents have been hit particularly hard by COVID-19-related restrictions, was up 3.8 per cent boosted by a slow but steady increase in commercial air traffic.

Southwest Airlines Co rose 2.6 per cent after extending buyout and paid leaves to employees in what its chief executive called an effort to “ensure survival.”

Shares of Slack Technologies Inc advanced 3.2 per cent after Cowen initiated coverage of the workspace communication platform with an “outperform” rating.

A report that Western Union has made an offer to buy smaller rival MoneyGram International Inc sent the money transfer companies shares up by 11.3 per cent and 29.7 per cent, respectively.

Shares of luxury retailer Tiffany & Co dropped 8.9 per cent following a report from WWD that its deal with LVMH is seen as uncertain amid the deteriorating US market.

is content editor for Morningstar Australia

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