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Global Market Report - 30 March

Lex Hall  |  30 Mar 2020Text size  Decrease  Increase  |  
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Australia

Australian stocks are poised to edge higher but analysts are anticipating another week dominated by covid-19 volatility.

The SPI200 futures contract was up just six points, or 0.12 per cent, at 4834 points at 8am Sydney time on Monday, suggesting modest early gains.

The federal government is expected to make an announcement on Monday about wage subsidies to keep Australians working during the coronavirus pandemic.

Nervousness remains high however, according to IG Markets' Kyle Rodda, with sectors most exposed to the increased lock down of the economy.

"Consumer, real estate and financial stocks, (are) displaying the most volatility," Rodda said in a note on Monday morning.

The S&P/ASX200 benchmark index gained 2 per cent in early trade on Friday but then faded throughout the day to finish Friday down 270.9 points, or 5.3 per cent, to 4824.4.

For the week the market finished just 25.7 points up, or 0.5 per cent, with three days of gains totalling 567.2 points sandwiched by two days of losses on Monday and Friday.

Wall Street also fell in the final session of the week, ending a three-day surge as the number of coronavirus cases in the country climbed.

The Dow Jones Industrial Average slumped 4.06 per cent to end at 21,636.78 points, while the S&P 500 lost 3.37 per cent to 2,541.47.

The Nasdaq Composite dropped 3.79 per cent to 7,502.38.

The number of covid-19 cases continues to explode globally, most sharply in the US.

The country's reported case-load jumped to over 123,000 over the weekend, with the number of new daily cases still climbing day-by-day.

"If the market's ultimate turnaround hinges on a 'flattening over the curve' in the world's largest economy, then logically, further downside in risk-assets ought to be assumed," he said.

The Australian dollar was buying 61.56 US cents at 8am, up from 61.08 US cents as the market closed on Friday.

Asia

China stocks rose on Friday to end the week higher, boosted by hopes of more stimulus to shield the world's second-largest economy from the coronavirus pandemic.

The blue-chip CSI300 index rose 0.3 per cent, to 3,710.06, while the Shanghai Composite Index also added 0.3 per cent to 2,772.20.

For the week, CSI300 gained 1.6 per cent, while SSEC was up 1 per cent, ending a two-week losing streak.

Hong Kong stocks rose on Friday to finish the week higher, joining a global rally as investors bet policymakers will roll out more measures to counter the economic impact of the coronavirus outbreak.

The Hang Seng index rose 0.6 per cent, to 23,484.28, while the China Enterprises Index also gained 0.6 per cent, to 9,504.92.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.23 per cent, while Japan's Nikkei index closed up 3.88 per cent, as stimulus hopes were bolstered after US unemployment filings surged to a record.

Europe

European shares closed in the red on Friday after EU lawmakers failed to agree on a coronavirus rescue package and British Prime Minister Boris Johnson announced he had been infected.

The pan-European STOXX 600 index started the day about 2 per cent lower, then closed down 3.3 per cent after the announcement about Johnson’s test. The declines followed a three-day rally, and the index marked its best week since 2011.

London bluechip stocks had extended losses after the news, closing 5.3 per cent down.

With most of Europe practically under lockdown due to the virus, a recession appears imminent. EU lawmakers on Thursday extended the deadline for agreeing on a comprehensive economic rescue package by two weeks over a dispute between the ailing south and the fiscally conservative north.

Stephen Innes, chief market strategist at financial services firm AxiCorp, wrote in a note: “There was no specific new coordinated action to ramp up the fiscal response to the crisis and, in particular, no agreement around ‘corona bonds’.”

A swathe of bumper stimulus measures from around the globe had bought about a modicum of stability in equity markets, prompting the three-day rally.

However, with the outbreak showing no signs of slowing, risk assets are likely due for more pain. Cases in the United States are now the highest in the world.

Oil and gas stocks, while dropping 4.6 per cent on the day, outperformed their peers over the course of the week, surging about 19 per cent as they continued to recover from a 24-year low.

European carmakers were the worst performers on the day, shedding about 5.8 per cent.

Volkswagen fell 7.3 per cent after its chief executive Herbert Diess said it may have to cut jobs if the pandemic is not brought under control, as the carmaker is still spending about 2 billion euros ($2.2 billion) a week.

Travel and leisure stocks fell 5.8 per cent, with cruise ship operator Carnival Corp slumping nearly 21 per cent to the bottom of the index.

Banks dropped 5.4 per cent as the European Banking Federation said they should halt 2020 dividend payments to preserve capital and continue to lend until the impact of the coronavirus epidemic is clearer.

North America

Wall Street stocks tumbled on Friday, ending a massive three-day surge after doubts about the fate of the US economy resurfaced and the number of coronavirus cases in the country climbed.

US stocks deepened their losses late in the session, even after the House of Representatives approved a $2.2 trillion aid package - the largest in American history - to help people and companies cope with an economic downturn caused by the coronavirus outbreak and provide hospitals with urgently needed medical supplies.

The US has surpassed China and Italy as the country with the most coronavirus cases. The number of US cases passed 100,000, and the death toll exceeded 1500.

“We have still not fully understood the degree of the economic impact,” warned Massud Ghaussy, senior analyst at Nasdaq IR Intelligence in New York.

“Currently, from a policymaker’s perspective, it’s a relative balance between managing the spread of the virus and opening the economy.”

After the market closed, President Donald Trump signed the stimulus package into law.

The bill, along with unprecedented policy easing by the Federal Reserve, helped the S&P 500 surge 10.2 per cent for the week, its best week since 2009. But the US stock market benchmark is still down about 25 per cent from its February high.

In its strongest three-day performance since 1931, the Dow surged 21 per cent in three straight days through Thursday, establishing it in a bull market, according to one widely used definition. Even after Friday’s drop, the Dow ended 12.8 per cent higher, its best week since 1938.

Many investors see a strong risk the market could fall deeply again as coronavirus infections increase and more people die, however.

“Next week will depend on what happens over the weekend,” said Lindsey Bell, chief investment strategist at Ally Invest. “If there is a major acceleration over the weekend of coronavirus cases in New York and other states and the hospital system continues to get jammed up, then I think it will be a rough week for the market.”

Macroeconomic indicators offered a glimpse of the economic devastation from the crisis as the lockdown of major cities upends the lives of millions of Americans.

US consumer sentiment dropped to a near 3½ year in March, according to a survey released on Friday, a day after data showed a record 3 million surge in jobless claims last week.

The Dow Jones Industrial Average slumped 4.06 per cent to end at 21,636.78 points, while the S&P 500 lost 3.37 per cent to 2,541.47.

The Nasdaq Composite dropped 3.79 per cent to 7,502.38.

Volume on US exchanges was 13.4 billion shares, its lowest since 5 March, according to Refinitiv data.

Delta Airlines, American Airlines and United Airlines fell between 6 per cent and 11 per cent as US Treasury Secretary Steve Mnuchin said the help designated for airlines in the aid package was not a bailout and that taxpayers would need to be compensated.

Boeing Co slumped 10 per cent, but was still up more than 70 per cent for the week, after Mnuchin said the planemaker had no intention of using federal money.

The banking index fell 4.6 per cent, tracking US Treasury yields as investors sought safety in high-quality assets.

The energy index was the biggest percentage loser among the 11 major S&P sectors, sliding 6.9 per cent, following a drop in oil prices.

is content editor for Morningstar Australia

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