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Global Market Report - 4 March

Lex Hall  |  04 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to follow Wall St lower as investors rotated from tech stocks into those set to benefit from stimulus.

The Australian SPI 200 futures contract was down 0.8 points, or 0.1 per cent, at 6,771 points at 8.30am Sydney time on Thursday, suggesting a negative start to trading.

The Nasdaq ended sharply lower on Wednesday after investors sold high-flying technology shares and pivoted to sectors viewed as more likely to benefit from an economic recovery on the back of fiscal stimulus and vaccination programs.

The Dow Jones Industrial Average fell 119.08 points, or 0.38 per cent, to 31,272.44, the S&P 500 lost 50.46 points, or 1.30 per cent, to 3,819.83 and the Nasdaq Composite dropped 361.04 points, or 2.7 per cent, to 12,997.75.

Locally, Australia’s economy is on track to fully recover from the covid-19 financial shock within months, as early wins on the health front, unprecedented fiscal stimulus and an end to lockdowns have triggered a surge in consumer spending, The Australian reports.  

A booming materials sector has helped the Australian share market close higher.

The S&P/ASX200 benchmark index closed higher by 55.7 points, or 0.82 per cent, to 6,818.0 on Wednesday.

The All Ordinaries closed higher by 58 points, or 0.83 per cent, at 7,067.9.

The materials sector was best, up 3.09 per cent.

The Aussie dollar jumped to 78.38 US cents after data showed the economy grew by more than expected in the December quarter.

Gold was down 1.1 per cent at $US1,719.44 an ounce; Brent oil was up 2.7 per cent to $US64.42 a barrel; Iron ore was up 0.5 per cent to $US176.40 a tonne.

Meanwhile, the Australian dollar was buying 78.05 US cents at 8.30am, down from 78.22 US cents at Wednesday’s close.

Asia

China stocks posted their biggest one-day gain in three weeks on Wednesday, led by banking and commodity shares, as hopes of domestic economic growth offset fears of tighter monetary policy.

Some traders also attributed the market strength to bullishness ahead of the annual gathering of the National People's Congress, which starts on Friday.

The blue-chip CSI300 index jumped 1.9 per cent to 5,452.21, while the Shanghai Composite Index gained 2 per cent to 3,576.90 points. Both indexes notched their best performance since early February.

Hong Kong stocks climbed the most in six weeks to end higher on Wednesday, lifted by financials, as optimism towards economic growth in China outweighed investor concerns over inflation.

The Hang Seng index and the China Enterprises Index each ended 2.7 per cent firmer at 29,880.42 points and 11,666.24 points, respectively.

Japanese shares ended marginally higher on Wednesday, as investors picked up cyclical stocks on hopes of a quicker economic recovery from the pandemic-led recession.

However, gains were capped by worries about bond market volatility and talk of huge selling for rebalancing this month.

The Nikkei average rose 0.51 per cent to close at 29,559.10, while the broader Topix gained 0.51 per cent to 1,904.54.

Europe

European stocks rose for a third straight session on Wednesday on hopes of a rebound in economic growth as Germany looked set to relax its coronavirus curbs, while investors awaited details on the UK's new budget.

The pan-European STOXX 600 index rose 0.8 per cent, while the German DAX gained 1 per cent to hit a record high, France’s CAC 40 was up 0.9 per cent and UK’s FTSE 100 added 1.3 per cent.

All eyes will be on UK finance minister Rishi Sunak’s budget, which includes a five-month extension of a huge jobs rescue plan, to steer the economy through what he hopes will be the final months of covid restrictions.

Hotel operator Whitbread, catering firm Compass Group and British Airways-owner IAG were among the top gainers on the FTSE 100, with banks providing the biggest boost.

Helping sentiment, German Chancellor Angela Merkel is expected to agree to a gradual relaxation of coronavirus curbs with regional leaders, but the rules can be tightened again if infections rise, according to draft plans seen by Reuters.

“Markets in Europe have generally been driven by cyclical and value sectors - banks, autos etc,” said Thomas Dorner, investment director at Aberdeen Standard Investments.

“The market is anticipating that the worst impact of covid-19 and lockdowns is over, and we are looking forward to the benefit of vaccines and a wider reopening of the economy.”

Economically sensitive sectors such as automakers, banks as well as travel and leisure stocks were the top gainers in Europe.

Stellantis, the world’s fourth-largest carmaker, gained 2.1 per cent after saying it was aiming for a margin on its adjusted operating profit of 5.5 per cent-7.5 per cent this year as the auto industry is expected to grow in 2021.

Renault and Volkswagen jumped almost 5 per cent.

Meanwhile, a survey showed the euro zone economy is almost certainly in a double-dip recession as lockdowns continue to hammer the services industry, but hopes for a wider vaccine rollout drove optimism to a three-year peak.

Swiss logistics group Kuehne & Nagel International rose 4.7 per cent as it marked a new record for full-year operating profit.

UK insurer Hiscox Ltd tumbled 12.2 per cent to the bottom of STOXX 600 as it swung to a huge loss for 2020 and continued to withhold its dividend.

North America

The Nasdaq ended sharply lower on Wednesday after investors sold high-flying technology shares and pivoted to sectors viewed as more likely to benefit from an economic recovery on the back of fiscal stimulus and vaccination programs.

Microsoft Corp, Apple Inc and Amazon.com Inc dropped, weighing more than any other stocks on the S&P 500.

The S&P 500 financial and industrial sector indexes reached intra-day record highs. Most other S&P 500 sectors declined.

The Russell 1000 value index, which leans heavily on economy-linked sectors, edged up, while its growth index, comprising large tech companies, lost ground.

“Today is the perfect encapsulation of the big theme we’ve been seeing in the past couple of months: The vaccine rollout is going well and the economy improving, and that is sending yields and rate expectations higher, which is hurting growth stocks,” said Baird investment strategist Ross Mayfield, in Louisville, Kentucky.

The Dow Jones Industrial Average fell 119.08 points, or 0.38 per cent, to 31,272.44, the S&P 500 lost 50.46 points, or 1.30 per cent, to 3,819.83 and the Nasdaq Composite dropped 361.04 points, or 2.7 per cent, to 12,997.75.

The US economic recovery continued at a modest pace over the first weeks of this year, with businesses optimistic about the months to come and demand for housing “robust,” but only slow improvement in the job market, the Federal Reserve reported.

While the vaccine distribution is expected to help the economy, data showed US private employers hired fewer workers than expected in February, suggesting the labor market was struggling to regain speed.

Another report showed US services industry activity unexpectedly slowed in February amid winter storms, while a measure of prices paid by companies for inputs surged to the highest level in nearly 12½ years.

The US 10-year Treasury yield ticked up to 1.47 per cent, pressuring areas of the market with high valuations. It was still off last week’s peak of above 1.61 per cent that roiled stock markets as investors bet on rising inflation.

Rising interest rates disproportionately hurt high-growth tech companies because investors value them based on earnings expected years into the future, and high interest rates hurt the value of future earnings more than the value of earnings made in the short term.

“There is a definite headwind for equity markets if yields go above the 1.5 per cent level with most investors keeping an eye on the pace of yield growth,” said Michael Stritch, chief investment officer at BMO Wealth Management.

President Joe Biden’s proposed US$1.9 trillion ($2.44 trillion)  coronavirus relief bill would phase out US$1400 payments to high-income Americans in a compromise with moderate Democratic senators, according to lawmakers and media reports.

Exxon Mobil Corp rose after the oil major unveiled plans to grow dividends and curb spending with projections that were less bold than previous years.

With Reuters

is content editor for Morningstar Australia

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