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Global Market Report - 5 February

Lex Hall  |  05 Feb 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following record gains on Wall St overnight as strong results and job data lifted sentiment.

The Australian SPI 200 futures contract was up 68 points, or 1 per cent, at 6,765 points at 8.30am Sydney time on Friday, suggesting a positive start to trading.

US stocks ended solidly higher on Thursday and the S&P 500 and Nasdaq posted record closing highs after another batch of upbeat earnings and data suggesting the labour market may be stabilising.

The Dow Jones Industrial Average rose 332.2 points, or 1.08 per cent, to 31,055.8, the S&P 500 gained 41.57 points, or 1.09 per cent, to 3,871.74 and the Nasdaq Composite added 167.20 points, or 1.23per cent, to 13,777.74.

Locally, fund managers and economists say the Reserve Bank’s decision to add billions of dollars in more record low-cost borrowing for years out will set off a raging bull market this year with more GameStop-style events and stoke asset prices—from housing to aggressive mergers and acquisitions, the AFR reports.

The S&P/ASX200 benchmark index closed lower by 59.1 points, or 0.87 per cent, to 6,765.5 on Thursday.

The All Ordinaries closed lower by 53 points, or 0.75 per cent, at 7,037.9.

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All sectors were lower. Property had the biggest drop, 2.38 per cent, after climbing 2.56 per cent on Wednesday.

Gold was down 2.3 per cent at $US1,791.86 an ounce; Oil was up 0.9 per cent at $US59.01 a barrel; Iron ore was up 3.5 per cent to $US158.03 a tonne.

Meanwhile, the Australian dollar was buying 75.95 US cents at 8.30am, down from 76.26 US cents at Thursday's close.

Asia

China stocks ended lower on Thursday, paring some of the sharp losses earlier in the session, as worries over signs of liquidity tension ahead of the upcoming Lunar New Year holiday offset continued capital inflows.

At the close, the Shanghai Composite index was down 0.44 per cent at 3,501.86, while the blue-chip CSI300 index was down 0.21 per cent to 5,473.95.

Hong Kong stocks closed lower on Thursday, on weakness in tech shares and worries about recent tighter liquidity conditions in mainland Chinese markets.

The Hang Seng index ended 193.96 points or 0.66 per cent lower at 29,113.50, while the Hang Seng China Enterprises index fell 0.76 per cent to 11,563.5.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.92 per cent, while Japan's Nikkei index closed down 1.06 per cent.

Europe

European shares extended their rally to a fourth straight day on Thursday, as investors hoped for a swifter global economic recovery, while Unilever’s disappointing targets weighed on London’s blue-chip index.

The STOXX 600 index rose 0.6 per cent, while London’s FTSE 100 ended flat, underperforming regional peers for a second straight day, as consumer giant Unilever slumped 6.2 per cent after its sales growth target underwhelmed investors.

A slide in oil majors BP and Royal Dutch Shell also weighed, with Shell reporting its lowest annual profit in at least two decades.

Banks and the sterling rose as money markets pushed bets on negative UK interest rates out to February 2022 after Bank of England said Britain’s banks would need at least six months to prepare for sub-zero rates.

“The BoE look unlikely to cut rates anytime soon, with a six-month adjustment period meaning the UK economy will be well into its recovery by the time they are even considered,” said Joshua Mahony, senior market analyst at IG.

Italian shares gained 1.7 per cent to close at a one month high, extending a rally after former European Central Bank chief Mario Draghi accepted the task of forming a new government on Wednesday.

The prime minister designate will conclude his formal consultations with parties on Saturday, the parliament’s press office said in a statement on Thursday.

A 5.3 per cent jump in shares of Bayer lifted Germany’s DAX to one-month highs after the life science company struck a US$2 billion ($2.63 billion) deal to resolve future legal claims that its widely used weedkiller Roundup causes cancer.

Meanwhile, Germany’s ruling coalition parties on Wednesday agreed a batch of additional measures to support those hit hard financially by the covid-19 pandemic.

Global markets remained hopeful after Democrats pushed ahead on Wednesday with a manoeuvre to pass US President Joe Biden’s US$1.9 trillion covid-19 relief package without Republican support.

Among other companies reporting earnings, Swiss drugmaker Roche was the top boost on the STOXX 600 after it forecasted a rise in 2021 sales and profit thanks to surging demand for covid-19 tests.

North America

US stocks ended solidly higher on Thursday and the S&P 500 and Nasdaq posted record closing highs after another batch of upbeat earnings and data suggesting the labour market may be stabilising.

The Dow and S&P 500 rose for a fourth straight day, with investor hopes of further progress on a pandemic-relief package also boosting the market. Democrats in the US Senate were poised on Thursday to take a first step toward the ultimate passage of President Joe Biden’s US$1.9 trillion covid-19 relief proposal.

The number of Americans filing new applications for unemployment benefits decreased further last week, according to the Labor Department’s report.

“There’s news around the vaccines, the economic data is a little bit better, earnings have been pretty good across the board and there’s still talk of a US$1.9 trillion stimulus package. So all of those things are good for Wall Street, and that’s why we’re seeing the market continue to rally,” said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago.

Stronger-than-expected results so far in the fourth quarter have driven up analysts’ expectations, and S&P 500 companies are now on track to post earnings growth for the quarter instead of a decline as initially expected.

A pandemic-driven surge in online shopping during the holiday season helped e-commerce firm eBay Inc and payment platform PayPal Holdings Inc top quarterly earnings estimates.

The Dow Jones Industrial Average rose 332.2 points, or 1.08 per cent, to 31,055.8, the S&P 500 gained 41.57 points, or 1.09 per cent, to 3,871.74 and the Nasdaq Composite added 167.20 points, or 1.23 per cent, to 13,777.74.

The major indexes have bounced back sharply this week also as a recent buying frenzy driven by social media appeared to stall following a bout of market volatility last week.

Shares of videogame retailer GameStop Corp and other recent favourites of retail investors fell again on Thursday. US Treasury Secretary Janet Yellen has said that she and financial market regulators needed to “understand deeply” what happened in the recent retail trading frenzy before taking any action.

Investors will be watching closely the US government’s monthly employment report due out Friday.

According to a Reuters poll of economists, payrolls likely increased by 50,000 jobs in January after declining by 140,000 in December.

With Reuters

is senior editor for Morningstar Australia

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