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Global Market Report - 4 May

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

Investors in the Australian stock exchange are likely to see flat trade when the market opens after US indexes fell last week and Westpac this morning posted a 70pc profit fall.

The Australian benchmark SPI 200 futures contract was down 7 points, or 0.13 per cent, to 5,230.0 points at 8am Sydney time on Monday.

Westpac declared its half-year profit this morning.

It has reported a 70 per cent fall in first-half cash earnings following a hefty impairment charge due to the coronavirus outbreak. The bank has also deferred its interim dividend.

ANZ and NAB recently released their half year results and included significant writedowns due to the economic impact of COVID-19.

Afterpay shares may also gain some interest after Chinese gaming and social media group Tencent Holdings bought a 5 per cent stake in the Australian credit provider last week.

Tencent's shareholding is worth $390 million.

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One Australian dollar buys 64.13 US cents at 8am, down from 64.60 US cents at Friday's close.

The price of gold is $US1,685.1.

Asia

China stocks rallied on Thursday to post their biggest monthly advance since December, after positive trial results for a drug to treat COVID-19 and downbeat data reinforced hopes of further stimulus to bolster the world’s second-largest economy.

The blue-chip CSI300 index ended up 1.2 per cent at 3,912.58, while the Shanghai Composite Index closed 1.3 per cent higher at 2,860.08.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.43 per cent, while Japan’s Nikkei index was up 2.14 per cent.

Europe

European shares fell from seven-week highs on Thursday after the European Central Bank held back on big policy moves despite mounting evidence of the damage being wrought on the euro zone economy by the coronavirus crisis.

Euro zone banks sank 5.5 per cent as the central bank said it would pay more for banks to borrow from it but otherwise kept much of its remaining policy powder dry.

The ECB reaffirmed its already vast bond purchase scheme, disappointing some investors who were expecting it to raise its target and add junk-rated bonds to its shopping list in the coming months.

The banking sector also came under pressure from a 8.6 per cent decline in France’s Societe Generale as it reported a quarterly loss, while Britain’s Lloyds Banking Group became the latest to be hit by provisions against expected bad loans due to the pandemic.

Along with a slide in energy stocks as oil major Royal Dutch Shell slumped 10.8 per cent on cutting its dividend for the first time in 80 years, London's FTSE dived 3.5 per cent. The index logged its steepest one-day loss in one month.

The wider oil & gas sector fell 3.4 per cent.

The pan-European STOXX 600 fell 2 per cent after a three-day rally, while euro zone stocks were down 1.9 per cent.

A preliminary reading showed economic activity in the bloc contracted at a record rate in the first quarter and inflation slowed sharply due to coronavirus-induced lockdowns. Economists expect even worse numbers for the second quarter.

However, the STOXX 600 logged its biggest monthly gain since October 2015 as signs of easing restrictions in several major economies, aggressive stimulus actions and more recently, hopes of a coronavirus treatment, helped a recovery from a rout in February

UK’s Reckitt Benckiser rose 3.6 per cent as the consumer giant achieved record sales growth in the first quarter and predicted a stronger than expected performance in 2020 as customers stocked up essentials.

Shares of BE Semiconductor topped the STOXX 600 after the Dutch company forecast a rise to second quarter revenue.

North America

Wall Street sold off sharply on Friday after President Donald Trump revived a threat of new tariffs against China in response to the COVID-19 pandemic, which has brought global economies to a grinding halt.

All three major US stock averages closed down well over 2 per cent, and for the week they all lost ground.

May is often marked by sell-offs, and on the month’s first day, with jitters on the rise as some US states begin easing coronavirus shutdowns, the adage held true.

Indeed, stocks had a remarkable run in April, with the S&P 500 and the Dow both posting their strongest monthly percentage gains in 33 years.

Trump said his administration was crafting retaliatory measures against China as punishment for the coronavirus outbreak, once again sparking tariff fears that rattled markets through much of the last two years. Trump has blamed China for what he says is “misinformation” when the virus emerged from the Chinese city of Wuhan and then quickly spread around the world.

A mixed bag of earnings, particularly a disappointing report from Amazon.com, along with a fresh round of dismal economic data, also weighed on sentiment.

US manufacturing activity skidded to an 11-year low last month as lockdowns shuttered factories, according to the Institute for Supply Management’s purchasing managers index.

The Dow Jones Industrial Average fell 622.03 points, or 2.55 per cent, to 23,723.69, the S&P 500 lost 81.72 points, or 2.81 per cent, to 2,830.71, and the Nasdaq Composite dropped 284.60 points, or 3.2 per cent, to 8,604.95.

All 11 sectors of the S&P 500 closed in the red, with energy companies suffering the largest percentage drop.

The corporate reporting season has crossed the midpoint, with 275 of the companies in the S&P 500 having reported quarterly results. Of those, 68 per cent have beaten consensus estimates.

In aggregate, first-quarter S&P 500 earnings are seen having fallen 12.7 per cent from a year ago, a stark reversal from the 6.3 per cent annual growth forecast that stood on Jan. 1.

Tesla Inc plunged 10.3 per cent after company Chief Executive Elon Musk said in a tweet that the electric car maker’s stock price was “too high.”

Amazon.com shares slid 7.6 per cent after the online retailer warned pandemic-related expenses could lead to its first quarterly loss in five years.

Apple Inc’s quarterly results beat expectations, but the iPhone maker declined to provide current-quarter forecasts. Its shares lost 1.6 per cent.

Exxon Mobil dropped 7.2 per cent after the company reported a drop in profit due to a massive $3 billion writedown on plummeting oil demand and prices.

Rival Chevron Corp posted a 38 per cent profit increase, boosted by asset sales, and slashed spending plans. Its shares dipped 2.8 per cent.

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