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Global Market Report - 3 March

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

The Australian share market seems headed for moderate falls despite a rebound on Monday and overnight gains on US markets.

The SPI200 futures contract was down 69 points, or 1.09 per cent, at 6413 at 8am on Tuesday, suggesting a fall when the local market opens.

It closed lower on Monday after a dramatic turnaround from huge early losses amid hopes the Reserve Bank will again cut rates on Tuesday.

US and European stocks rebounded overnight on hopes of central bank stimulus action.

On Wall Street, the Dow Jones Industrial Average rose 1296.81 points, or 5.1 per cent, to 26,706.17, the S&P 500 gained 4.61 per cent, and the Nasdaq Composite added 4.49 per cent.

The Aussie dollar was buying 65.33 US cents at 8am, from 65.27 US cents on Monday.

Asia

China and Hong Kong stocks rebounded on Monday, led by infrastructure and real estate stocks, as bleak economic data fuelled hopes Beijing will roll out further stimulus to support the world’s second-largest economy, and as new virus cases declined.

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The Shanghai composite was 3.15 per cent higher at about 2,970.93. The Shenzhen component added 3.65 per cent to 11,381.76 while the Shenzhen composite gained 3.769 per cent to 1,869.65.

In Hong Kong, the Hang Seng index also advanced 0.62 per cent.

In Japan, the Nikkei rose 0.95 per cent to 21,344.

Europe

European shares edged higher at the close after seesawing for most of the session on Monday, as traders swung their attention to the extra injections of support they now expect major central banks to provide following the coronavirus outbreak.

The pan-European STOXX 600 index closed 0.1 per cent higher after a 12 per cent slump last week, their worst weekly showing since the 2008 financial crisis. Oil & gas companies led gains as crude prices jumped 5 per cent.

Sentiment firmed as bleak February factory activity data out of China due to the virus fueled hopes of more stimulus, even as new infections in the country declined.

The virus continues to spread elsewhere. The US reported its second death, while the United Kingdom reported a total of 36 cases as of Sunday.

Italy, the worst-hit in Europe, saw its death toll rise to 52 from 34 within 24 hours. Battered Milan stocks kept sliding, despite reports the government will introduce measures worth 3.6 billion euros ($3.5 billion), or 0.2 per cent of gross domestic product (GDP), this week to soften the blow.

Traders are now betting that the US Federal Reserve will cut interest rates by 50 basis points as early as this month, while the European Central Bank is expected to cut rates by a 10 bps at its April meeting.

Investors paid little attention to data which showed Germany’s manufacturing sector eased further in February. IHS Markit said the prospect of disruptions to supply chains due to the virus outbreak means the data could be misleading.

Meanwhile, Britain and the European Union were due to begin talks on their future relationship after Brexit. Both sides say they want to reach a deal by the end of the year.

Travel & leisure stocks continued to decline, falling 2.7 per cent, hurt by a nearly 5 per cent drop in shares of Ireland’s Ryanair.

The budget airline said it will cut its routes in and out of Italy, one of its largest markets, by 25 per cent for three weeks, due to a significant drop-off in bookings since the virus outbreak.

Telecoms equipment maker Nokia rose 1.4 per cent as long-time chief executive officer Rajeev Suri plans to step down in September.

Satellite operator SES slumped 30 per cent after it cut its 2020 core profit and revenue forecasts, projecting a slowdown in its video and networks divisions.

North America

The Dow Jones Industrial Average surged over 5 per cent on Monday while the S&P 500 and Nasdaq each jumped more than 4 per cent in a major rebound following last week’s steep sell-off sparked by fears about the coronavirus.

After the stock market extended gains in the session’s final minutes, the Dow wrapped up its strongest one-day gain since 2009, while the S&P 500 and Nasdaq each had their strongest one-day rise since December 2018.

That rally followed the US stock market’s worst week since the 2008 financial crisis, sinking into correction territory on Thursday due to fears of a recession resulting from the epidemic.

The S&P 500 remains down 8.7 per cent from its Feb. 19 record high close. Many investors will consider the index to remain in a correction until it reclaims its high.

Apple jumped 9.3 per cent in its largest one-session leap since 2008. The iPhone maker is still down nearly 9 per cent from its record high close on 12 February.

Bank of Japan Governor Haruhiko Kuroda said on Monday that Japan’s central bank would take necessary steps to stabilize financial markets. That followed a similar move by Fed Chair Jerome Powell last Friday.

Traders see a 100 per cent chance of a 50 basis point rate cut at the Fed’s March meeting, according to CME Group’s FedWatch tool.

The Dow Jones Industrial Average jumped 5.09 per cent to end at 26,703.32 points, while the S&P 500 surged 4.60 per cent to 3,090.23.

The Nasdaq Composite added 4.49 per cent to 8,952.17.

Trading was very busy on US exchanges, with 14 billion shares changing hands compared with a 9.5 billion-share average for the last 20 days.

The S&P 500 information technology index jumped 5.7 per cent in its strongest session since December 2018.

The Institute for Supply Management said domestic manufacturing activity barely expanded last month due to supply issues stemming from the virus outbreak.

Cancer drug developer Forty Seven Inc soared 62 per cent after larger peer Gilead Sciences made a $4.9 billion offer for the firm. Gilead jumped 8.71 per cent.

Surgical mask maker Alpha Pro Tech Ltd tumbled 22 per cent but remains up over 350 per cent year-to-date.

is senior editor for Morningstar Australia

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