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Global Market Report - 5 January

Lex Hall  |  05 Jan 2021Text size  Decrease  Increase  |  
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Australian shares are tipped to slide following falls on Wall St as the Georgia runoff hurt sentiment while England was again plunged into lockdown.

The Australian SPI 200 futures contract was down 30 points, or 0.45 per cent, at 6583 points at 8.30am Sydney time on Tuesday, suggesting a negative start to trading.

Shares on Wall Street closed sharply lower on Monday, sliding from all-time peaks on the first trading day of the year, as risk appetite ebbed amid upcoming runoff elections in Georgia and the persistent surge in coronavirus cases.

The Dow Jones Industrial Average fell 387.92 points, or 1.27 per cent, to 30,218.56, the S&P 500 lost 56.08 points, or 1.49 per cent, to 3,699.99 and the Nasdaq Composite dropped 191.23 points, or 1.48 per cent, to 12,697.06.

Locally, the nation’s top energy adviser has warned the electricity market needs urgent reform as a major ­report raises concern about the security of east coast power supplies and predicts a flood of new renewable energy will force the early retirement of coal-fired ­generators, The Australian reports.

The S&P/ASX200 benchmark index closed higher by 97.1 points, or 1.47 per cent, to 6684.2 on Monday.

The All Ordinaries closed higher by 103.1 points, or 1.5 per cent, at 6953.7.

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The materials sector rose 2.35 per cent, with Fortescue Metals closing 5.85 per cent higher and at a record price of $24.80.

Gold was up 2.7 per cent to $US1946.20 an ounce; Oil was down 1.0 per cent to $US51.27 a barrel; Iron ore was up 3.0 per cent to $US165.29 a tonne.

Meanwhile, the Australian dollar was buying 76.65 US cents at 8.30am, down from 76.93 US cents at Monday’s close.


China stocks kicked off 2021 on a firm note on Monday, after a survey pointing to a continued recovery in the world’s second-largest economy bolstered investor sentiment.

The blue-chip CSI300 index rose 1.1 per cent to 5,267.72, while the Shanghai Composite Index added 0.9 per cent to 3,502.96.

Hong Kong stocks tracked gains in other Asian markets to kick off the new year on an upbeat note, although the gains were capped by Sino-US tensions.

The Hang Seng index rose 0.9 per cent to 27,472.81, its highest since Feb. 20, 2020, while the China Enterprises Index lost 0.1 per cent to 10,722.99.

Japanese shares ended lower on Monday after Prime Minister Yoshihide Suga said he is considering a state of emergency for Tokyo and surrounding prefectures to contain a spike in local coronavirus infections.

The Nikkei 225 Index ended down 0.68 per cent at 27,258.38 in its first trading session of 2021—the biggest daily decline in two weeks. The broader Topix fell 0.56 per cent to 1,794.59.


European shares rallied in the first trading session of the year on Monday, as a landmark Brexit trade deal and coronavirus vaccination campaigns across the continent bolstered expectations of a strong economic rebound.

However, later in the day, British Prime Minister Boris Johnson ordered England into a new national lockdown to try to slow a surge in covid-19 cases that threatens to overwhelm parts of the health system before a vaccine programme reaches a critical mass.

Before that announcement, the pan-regional STOXX 600 index gained 0.7 per cent to touch fresh February 2020 highs, with economically sensitive mining jumping more than 3 per cent.

Germany-listed shares in the world’s biggest holiday company TUI rose 2.7 per cent after its chief executive told a newspaper that he expects “a largely normal summer” this year.

Germany’s DAX was up 0.1 per cent after a long weekend to trade below all-time highs, while France’s CAC 40 added 0.7 per cent.

Global stocks hit record highs, with the STOXX 600 recovering about 50 per cent from its March 2020 trough as investors pinned their hopes on coronavirus vaccines to fuel a speedy economic bounceback.

Britain began vaccinating its population with the covid-19 shot developed by Oxford University and AstraZeneca on Monday.

“The distribution of the AstraZeneca-Oxford University covid-19 vaccine is also behind the broader positive move in European stocks,” said David Madden, market analyst at CMC Markets in London.

Adding to the upbeat sentiment, a survey showed German factories churned out more goods in December despite a stricter lockdown to head off a spike in coronavirus deaths.

IHS Markit’s final Purchasing Managers’ Index (PMI) for manufacturing rose to 58.3 from 57.8 the previous month.

London’s blue-chip index gained 1.7 per cent in its first day of trading with Britain outside the European Union’s orbit.

While the hard-fought trade deal agreed late December set rules for industries such as fishing and agriculture, it did not cover Britain’s much larger finance sector, meaning automatic access to the EU’s financial markets came to an end on 31 December.

Shares in UK banks such as Lloyds Banking Group, Barclays and Natwest fell between 0.7 per cent and 3 per cent, while the broader European banking index fell 0.8 per cent.

In a bright spot, however, Ladbrokes owner Entain Plc jumped 25.3 per cent after it confirmed an US$11 billion ($14.36 billion) bid proposal from US casino operator MGM Resorts, which it said significantly undervalued its business.

UK betting firms like Flutter Entertainment, William Hill and 888 rose between 2.6 per cent and 3.5 per cent.

French wine and spirits maker Remy Cointreau slipped 0.2 per cent as brokerage Kepler Cheuvreux downgraded the stock to “hold” after a US decision last week to impose additional tariffs on French wines and cognac.

North America

Shares on Wall Street closed sharply lower on Monday, sliding from all-time peaks on the first trading day of the year, as risk appetite ebbed amid upcoming runoff elections in Georgia and the persistent surge in coronavirus cases.

The Dow, which touched a record high earlier in the session along with the S&P 500, was also dragged down by a more than 4 per cent fall in Boeing Co’s shares after Bernstein cut its rating to “underperform,” citing concerns about cash flow.

All three main indexes hit two-week lows, with record highs in the Dow and S&P 500 extending a 2020 rally fuelled by monetary stimulus and the start of vaccine rollouts.

The fate of US President-elect Joe Biden’s agenda, meanwhile, including rewriting the tax code, boosting stimulus and infrastructure spending hinges firmly on Tuesday’s twin Senate races in the battleground state of Georgia that will determine control of the chamber.

Wall Street’s fear gauge touched a two-week high on Monday.

“Stocks are pulling back from a stunning year of gains,” said Brian Reynolds, chief market strategist, at Reynolds Strategy.

“We’re starting off with a virus out of control. We’re probably going to end 2021 with a virus that could be under control by that time. How we get from start to finish will be filled with frequent pullbacks because people will be looking at short-term headlines,” he added.

Total US deaths from covid-19 have reached more than 350,000.

Almost all S&P sectors dropped with real estate, utilities and industrials posting the sharpest percentage declines. Consumer discretionary and materials hit all-time highs in early trading.

Unofficially, the Dow Jones Industrial Average fell 387.92 points, or 1.27 per cent, to 30,218.56, the S&P 500 lost 56.08 points, or 1.49 per cent, to 3,699.99 and the Nasdaq Composite dropped 191.23 points, or 1.48 per cent, to 12,697.06.

“Investors are at a point where they want to take a breather while they assess all the different things coming in the new year,” said Lindsey Bell, chief investment strategist at Ally Invest, in Charlotte, North Carolina.

On the data front, US manufacturing activity picked up at its briskest pace in more than six years in December, a survey showed on Monday. It comes on the heels of upbeat factory activity surveys across Europe and Asia earlier in the day.

Some investors are cautious about the pace of economic growth as US jobless claims remain stubbornly high, while a new round of pandemic-related restrictions last month and a new variant of the coronavirus have cast a shadow on the outlook.

Tesla Inc’s shares extended a meteoric rally to scale a record high after the electric-car maker reported better-than-expected vehicle deliveries in 2020.

Shares of FLIR Systems Inc jumped after Teledyne Technologies Inc agreed to buy the thermal imaging camera supplier for $8 billion in cash and stock. Teledyne’s shares dropped as well.

is senior editor for Morningstar Australia

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