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Global Market Report - 5 August

Lex Hall  |  05 Aug 2020Text size  Decrease  Increase  |  
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Australia

Australian stocks are set to slip at the open, even as Wall Street posted gains on optimism about the passage of a US economic aid package.

The Australian SPI 200 futures contract was down 14 points, or 0.23 per cent, to 5,983 points at 8.30am Sydney time on Wednesday, suggesting a flat start to trading.

Wall Street ended higher after a choppy session on Tuesday, lifted by Apple and energy stocks but limited by declines in AIG and Microsoft while investors awaited more US government stimulus to fight economic fallout from the covid-19 pandemic.

The Dow Jones Industrial Average rose 0.62 per cent to end at 26,828.47 points, while the S&P 500 gained 0.36 per cent to 3,306.51.

The Nasdaq Composite climbed 0.35 per cent to 10,941.17.

Australia's share market closed almost two per cent higher as investors gained confidence from a technology-led Wall Street rally, rather than focusing on the coronavirus crisis in Victoria.

The Australian dollar was this morning higher at US71.63c.

Asia

China stocks ended higher on Tuesday, underpinned by strong gains in banks as investors cheered Beijing’s latest move to ease pressure on the country’s financial institutions.

The blue-chip CSI300 index rose 0.1 per cent, to 4,775.80, while the Shanghai Composite Index also inched up 0.1 per cent to 3,371.69.

Hong Kong stocks snapped a three-session losing streak and ended higher on Tuesday, led by strong gains in technology firms.

At the close of trade, the Hang Seng index was up 488.50 points or 2 per cent at 24,946.63. The Hang Seng China Enterprises index rose 1.7 per cent to 10,203.88.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.48 per cent, while Japan’s Nikkei index closed up 1.7 per cent.

Europe

A surge in BP shares after it laid out plans to cut its oil and gas output and boost investments in renewable energy offset disappointing earnings reports including from spirits maker Diageo, although European stocks closed largely flat.

After sliding as much as 0.6 per cent, the pan-European STOXX 600 index recouped some of the losses in late afternoon trading to close 0.1 per cent lower.

BP rose 6.5 per cent even as it cut its dividend for the first time in a decade and recorded a $6.7 billion quarterly loss.

The broader oil & gas sector rose 2.5 per cent, with other growth-linked cyclical sectors such as automakers and banks also rising.

By contrast, Johnnie Walker whisky maker Diageo’s shares slid 5.6 per cent after it reported a bigger-than-expected decline in underlying sales in nearly all markets.

German drugs and pesticides group Bayer slipped 2.4 per cent as moves to settle lawsuits over its Roundup weedkiller contributed to a 9.5 billion euro ($15.6 billion) loss.

Of the 223 companies listed on the STOXX 600 that have reported so far, nearly 62 per cent have topped analysts’ much-reduced expectations for profits, according to Refinitiv data. In a typical quarter, 50 per cent beat earnings estimates.

After a recovery from March lows that has seen the STOXX 600 climb nearly 36 per cent, markets have wobbled in recent weeks on concerns about a resurgence in coronavirus cases.

Doubts over the progress of a US coronavirus aid package and a diplomatic tussle over Chinese tech companies’ operations in the US also kept investors on edge.

Banking-heavy Italian and Spanish indexes were both higher, as data showed Italy standing out as the main beneficiary of the European Central Bank's efforts to support a virus-stricken euro zone economy.

Intesa Sanpaolo, which just sealed a takeover of smaller rival UBI, gained 5 per cent after saying it would seek clearance to return more cash to shareholders.

North America

Apple climbed 0.7 per cent, up for a fifth straight session as investors cheered the iPhone maker’s blowout quarterly report last week. The Silicon Valley heavyweight is around $120 billion away from becoming the first US publicly listed company with a stock market value of $2 trillion.

The S&P 500 energy index jumped 2.45 per cent and was the strongest performer among 11 sectors, while healthcare declined.

Ralph Lauren Corp dropped 4.4 per cent to its lowest since May after quarterly revenue plunged due to coronavirus-related store closures and a slowdown in global demand for luxury goods.

American International Group tumbled 7.5 per cent after its quarterly adjusted profit slumped.

Notwithstanding those two reports, about 83 per cent of the 352 companies in the S&P 500 that have reported quarterly results so far have beaten estimates for earnings, according to IBES Refinitiv data.

Investors are awaiting a major new coronavirus-aid bill, with Senate Democratic Leader Chuck Schumer saying talks with the White House were moving in the “right direction.”

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.

Microsoft Corp, which is looking to buy short-video app TikTok’s US operations, fell 1.5 per cent.

White House officials could not say how the US government would receive a portion of the proceeds from any sale of TikTok’s US operations, one day after President Donald Trump called for a cut of the money.

Evergy Inc slumped nearly 12 per cent after two sources said the board of the Midwest utility planned to remain independent as bids solicited from prospective merger partners did not offer sufficient value.

Take-Two Interactive Software rose nearly 6 per cent after it raised its annual adjusted sales forecast on demand for its videogame franchises “Grand Theft Auto” and “NBA 2K”.

Walt Disney Co rose 4 per cent in extended trade after the company reported a rare quarterly loss, even as the coronavirus crisis helped its streaming services gain subscribers.

is content editor for Morningstar Australia

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