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Global Market Report - 4 August

Lex Hall  |  04 Aug 2020Text size  Decrease  Increase  |  
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Australia

Australian stocks are tipped for a strong start after gains on Wall Street as the tech-heavy Nasdaq hit a record and stimulus boosted sentiment.

The Australian SPI 200 futures contract was up 84 points, or 1.43 per cent, to 5,972 points at 8.30am Sydney time on Monday, suggesting a strong start to trading.

On Wall Street, the Nasdaq’s rise was fuelled by Microsoft’s potential takeover of TikTok. Microsoft jumped 5.6 per cent after it said it would push ahead with talks to buy the US operations of Chinese-owned TikTok.

President Donald Trump reversed course earlier on a planned ban of the short-video app.

Market sentiment also rose amid talks in Washington on another federal relief package. The Dow Jones Industrial Average rose 0.89 per cent to end at 26,664.4 points, while the S&P 500 gained 0.72 per cent to 3,294.61.

The Nasdaq Composite climbed 1.47 per cent to 10,902.80, beating its previous record high close on 20 July.

On Monday, Australian stocks ended flat after falling as much as 1.1 per cent during the day, weighed down by the Victoria lockdown.

The Australian dollar is weaker, at US71.21c.

The spot price of iron ore is up 4.4 per cent to $US116.35.

Asia

Chinese shares ended higher on Thursday, underpinned by gains in tech stocks, as strong domestic factory data for July added to signs of an economic recovery from the coronavirus outbreak.

At the close, the Shanghai Composite index was up 1.75 per cent at 3,367.97. The blue-chip CSI300 index was up 1.62 per cent.

Hong Kong shares closed down on Monday on weak global sentiment, with US lawmakers struggling to agree to a new stimulus plan, and after a bigger-than-expected drop in profit at HSBC pulled the bank’s shares sharply lower.

At the close of trade, the Hang Seng index was down 137.22 points or 0.56 per cent at 24,458.13.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.42 per cent, while Japan’s Nikkei index closed up 2.24 per cent.

Europe

A modest expansion in euro zone manufacturing activity and hopes of fresh US stimulus lifted European stocks across the board on Monday, with automakers, miners and construction & material firms leading the gains.

After a lukewarm trading session in the morning, the pan-European STOXX 600 picked up momentum after a strong Wall Street start and closed 2.1 per cent higher.

German stocks outperformed, rising 2.7 per cent after the country reported in July an expansion in factory activity for the first time since 2018, lifting hopes that the impact of the pandemic was easing in the sector.

Factory activity across the euro zone expanded, reflecting an improvement globally as China, Britain and the US reported upbeat numbers.

However, analysts were cautious about a sustained recovery amid concerns about a further tightening of restrictions in Europe as covid-19 cases rose.

Carmakers were the top gainers in Europe, up 3.8 per cent, after Ferrari trimmed its full-year earnings forecast but said its second quarter order book rose significantly versus a year ago.

The broad gains helped banking stocks shed early losses following a set of disappointing earnings.

Europe’s biggest lender by assets, HSBC, dropped 2.9 per cent after its half-yearly profits more than halved and the bank warned its bad debt charges could blow past a previous estimate to $18.25 billion this year.

“While the Asian business remained resilient with limited impact from the US-China tensions and global markets had a solid quarter, pressure on net interest margin intensified and the quarterly cost of risk increased further, driven by the economic impact of covid-19,” analysts at Morningstar wrote.

France’s Societe Generale slipped 0.7 per cent as it reported a 1.26 billion euro ($2.08 billion) quarterly loss.

Spanish stocks rose 1.4 per cent, but underperformed regional peers as the country saw the biggest jump in coronavirus cases since a lockdown was lifted in June, while data showed international tourist arrivals to Spain fell 98 per cent year on year in June.

British engineer Senior, which counts planemaker Boeing and heavy equipment maker Caterpillar as some of its biggest customers, tumbled 15.1 per cent as it shelved its interim dividend after swinging to a first-half loss.

North America

The Nasdaq surged to a record high close on Monday as a rebound in multibillion-dollar deals, including Microsoft’s pursuit of TikTok’s US operations, lifted sentiment, and efforts to hammer out a coronavirus relief bill resumed.

ADT soared over 56 per cent on news that Alphabet’s Google was buying a nearly 7 per cent stake in the home security firm for US$450 million ($631 million) in a deal that will allow it to provide service to customers of its Nest home security devices.

Varian Medical Systems jumped 22 per cent after a US$16 billion buyout by Germany’s Siemens Healthineers, while Kansas City Southern gained after a report a group of buyout investors were considering a takeover bid in a deal of about US$20 billion.

Apple Inc climbed 2.5 per cent, expanding its rally following stunning quarterly results and announcing a four-for-one stock split. The tech giant is about US$140 billion short of hitting US$2 trillion in market capitalisation.

The S&P 500 information technology index jumped 2.5 per cent, far outpacing other sector indexes.

Congressional Democrats and Trump administration officials resumed talks aimed at hammering out a coronavirus relief bill after missing a vital deadline to extend relief benefits to tens of millions of jobless Americans.

A rally in tech-related stocks and trillions of dollars in monetary and fiscal stimulus have lifted the S&P 500 to within about 3 per cent of February’s record high.

The Labor Department’s monthly employment report is due on Friday, on the heels of last week’s weekly jobless claims data that showed a recovery in the job market appeared to have stalled in late July.

With the US corporate earnings season now past its half-way mark, a record number of companies have beaten dramatically lowered estimates, but the second quarter is still set to be the low point for earnings this year.

Drug distributor McKesson Corp jumped 6.5 per cent after boosting its full-year earnings forecast.

is content editor for Morningstar Australia

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