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Global Market Report - 31 March

Lex Hall  |  31 Mar 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is set to surge again, having just recorded its best ever day following the announcement of a $130 billion wage subsidy package for businesses.

The SPI200 futures contract was up 66 points, or 1.27 per cent, at 5257.0 points at 8am Sydney time on Tuesday, suggesting strong early gains for local stocks.

The S&P/ASX200 benchmark index finished Monday up 399 points—a record 7.0 per cent—after the government announced new stimulus to help businesses through the coronavirus pandemic.

In an unprecedented move, employees will receive a flat-rate payment of $1500 per fortnight through their employers in a bid to lessen the economic blow caused by COVID-19.

The payment amounts to about 70 per cent of the median wage.

The treasurer says about 60,000 businesses had already signed up for the scheme announced on Monday, on the tax office website.

The local market has fallen by as much as 39 per cent from peak to trough during the virus pandemic but is now up 18 per cent since hitting a seven-year low eight days ago.

IG Markets' Kyle Rodda said local markets were a long way from being out of the woods yet, but green shoots were emerging.

"The future is still too uncertain for anyone to make any sort of pronouncement that markets are ‘risk-on’," Rodda said in a note.

"However, as stocks begin the new week higher, there's hope in some corners of the market a bottom for stocks is ‘in’."

Wall Street also rose overnight after US President Donald Trump followed his own stimulus measures by extending stay-at-home guidelines.

The Dow Jones Industrial Average rose 690.7 points, or 3.19 per cent, to 22,327.48, the S&P 500 gained 3.35 per cent, and the Nasdaq Composite added 3.62 per cent.

The Australian dollar was buying 61.65 US cents at 8am, up from 61.47 US cents as the market closed on Monday.

Asia

China stocks ended lower on Monday as investor concerns over coronavirus-driven global shutdowns overshadowed an unexpected rate cut by the country’s central bank.

At the close, the Shanghai Composite index was down 0.9 per cent at 2747.21.

The blue-chip CSI300 index was down 0.97 per cent, with its financial sector sub-index lower by 0.69 per cent, the consumer staples sector fell 0.3 per cent, the real estate index was down 0.93 per cent and the healthcare sub-index lost 1.07 per cent.

Hong Kong stocks settled lower on Monday as investors braced for a deep recession in the global economy with more countries tightening or imposing lockdowns to contain the spread of the coronavirus outbreak.

At the close of trade, the Hang Seng index was down 309.17 points, or 1.32 per cent, at 23,175.11. The Hang Seng China Enterprises index fell 1.08 per cent to 9402.17.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.4 per cent, while Japan’s Nikkei index closed down 1.57 per cent.

Europe

European stocks closed higher on Monday after last-minute gains, with buying focused largely on defensive sectors amid plummeting oil prices and continued anxiety over the coronavirus.

The pan-European STOXX 600 index closed up 1.1 per cent, having dropped about 1 per cent earlier in the day. A stronger open on Wall Street, spurred by optimism over battling the outbreak’s economic impact, also lent support late in the European session.

Still, the benchmark was a long way from a peak hit in late-February, and likely to record its second-worst quarter ever, owing to the panic selling brought about by the coronavirus.

The healthcare sector was the biggest boost to the STOXX 600, closing about 3 per cent higher as fears of the coronavirus kept investors trading cautiously. Utilities and telecom stocks also rose on the day.

Belgian-Dutch biotech company Galapagos jumped about 6 per cent after Jefferies upgraded the stock to ‘buy’, citing potential in the firm’s lead product.

Energy stocks shrugged off a slump in oil prices, adding about 3 per cent. However, the gains were meagre compared to what has been lost over the past month, when a crash in prices had seen the sector plumb a 24-year low and prompted widespread scaling back by major producers.

“The demand hit is weighing heavily on oil prices, and European oil & gas majors are responding to the situation by cancelling share buybacks and reducing capital expenditure,” ING analysts wrote in a note.

“These actions, combined with the companies’ robust liquidity and leverage positions should limit the extent of negative credit rating actions.”

Chemical producers were the best performing sector for the day, rising about 3.9 per cent, with several firms looking to benefit from lower crude prices.

On the other hand, bank stocks slumped 3.1 per cent as lenders complied with the European Central Bank’s call to freeze dividends in a bid to shore up credit, with the pandemic causing a liquidity squeeze across the bloc.

Spain's bank-heavy Ibex index dropped 1.7 per cent.

Travel and leisure stocks, among the worst hit from the virtual halt in global travel, fell 0.6 per cent on Monday as JP Morgan forecast a 42 per cent slump in aftermarket sales in the European civil aerospace sector in 2020.

London-listed mid-cap stocks .FTMC fell as a senior medical officer said the lockdown in Britain could last for months.

British shopping centre owner Hammerson plummeted 22 per cent, bottoming out the STOXX 600 after it suspended its guidance and its 2019 dividend.

North America

US stocks rose on Monday, led in part by healthcare stocks as investors looked for shares that have become cheap and can withstand the impact to the economy from efforts to stem the spread of the coronavirus.

The S&P healthcare sector jumped 4.67 per cent, in part due to gains in Johnson & Johnson and Abbot Laboratories. JNJ surged 8.00 per cent on the US government’s plans to help fund the creation of enough manufacturing capacity for its coronavirus vaccine, currently under development.

Abbott Laboratories climbed 6.41 per cent after winning US approval for a diagnostic test for COVID-19.

Along with healthcare, the technology sector also rose more than 4 per cent on the day, as Microsoft shares jumped more than 7 per cent, the biggest boost to the broad S&P 500.

A record $2.2 trillion in aid and policy easing from the Federal Reserve helped equities recover some of their losses last week, with the S&P 500 posting its biggest weekly percentage gain in over a decade and the Dow Jones its best since 1938, even after each dropped more than 3 per cent to end the trading week on Friday.

Each of Wall Street’s three major indexes remain down more than 20 per cent from the February highs, but investors are now trying to assess the economic damage and identify which companies will be on solid footing when the economy begins to accelerate.

The Dow Jones Industrial Average rose 690.7 points, or 3.19 per cent, to 22,327.48, the S&P 500 gained 85.18 points, or 3.35 per cent, to 2,626.65 and the Nasdaq Composite added 271.77 points, or 3.62 per cent, to 7774.15.

President Donald Trump followed last week’s massive fiscal stimulus package by extending his stay-at-home guidelines, leaving investors to await more signs on the next stages of a deepening economic crisis.

That is convincing few that the worst of the most dramatic sell-off in a decade is over, and Wall Street’s fear gauge , which predicts future volatility, is still running as high as it has been since the 2008 financial crisis.

However, the prospect of more government stimulus has given investors something to hold on to as they wait for signs of economic relief. Upcoming data is likely to confirm damage to the economy, but how much has been priced in by the market remained to be seen.

JPMorgan Chase & Co said on Saturday it expected real US gross domestic product to fall 10 per cent in the first quarter and plunge 25 per cent in the second quarter.

is content editor for Morningstar Australia

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