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Global Market Report - 5 May

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

The Australian share market is set to open slightly higher after US markets rose due largely to gains in technology stocks.

The benchmark SPI 200 futures contract was up 17 points, or 0.32 per cent, to 5,335.0 points at 8am Sydney time on Tuesday, indicating a subdued start.

US stocks finished higher overnight with increases in large tech and internet companies and oil price gains.

Gains in Microsoft, Apple and Amazon were the biggest lifts for the S&P 500.

Energy was the best performing S&P 500 sector, rising 3.7 per cent, as oil prices gained.

Meanwhile in Australia, the Reserve Bank board will this afternoon declare any change to the cash rate, but economists expect the record low level of 0.25 per cent to remain.

JP Morgan Australia chief economist Ben Jarman said: "There aren't any other obvious policy levers to be pulled right now given how much already has been done".

The bank cut the rate twice in March, and introduced quantitative easing measures, as COVID-19 crept its way into the country.

Elsewhere on the home front, construction industry data for April is due to be published.

The S&P/ASX200 benchmark index closed Monday up 73.9, or 1.41 per cent, at 5,319.8 points, while the All Ordinaries index finished 64.5 points higher, or 1.21 per cent, at 5,389.5 points.

One Australian dollar buys 64.26 US cents at 8am, down from 63.90 US cents at Monday's close.

Asia

In China, the Shanghai Composite was closed.

Hong Kong shares marked their biggest daily drop in six weeks on Monday, as investors braced for an escalation in US-China tensions and the release of the city’s economic growth data.

The Hang Seng Index ended 4.2 per cent lower at 23,613.80, its biggest percentage fall since 23 March, trading at near two-week lows for much of the session. The Hang Seng China Enterprises index fell 4.4 per cent.

In Japan, the Nikkei 225 index was closed.

Europe

European stocks ended lower on Monday as investors were greeted with fresh Sino-US tensions following a May Day break, after Washington threatened tariffs against China over the coronavirus.

The pan-European STOXX 600 closed 2.7 per cent lower in a downbeat start to the month, having risen 6 per cent in April on hopes of major economies re-emerging from virus-related lockdowns. Euro zone shares were down 3.8 per cent.

Sectors sensitive to economic growth, including oil and gas, automakers and banking, were particularly rattled by the possibility of a fresh trade spat between the world’s two largest economies.

European oil and gas stocks were among the worst performers for the day, tracking a tumble in oil prices. The sector was already on shaky footing after a crash in crude prices last month. 

Germany’s ThyssenKrupp plunged 14 per cent to the bottom of the STOXX 600 after its management board told staff in a letter that the pandemic could cause a new financial squeeze despite the sale of its elevator business.

European stocks had fallen from near two-month highs last week after dismal first-quarter GDP data, while the European Central Bank held off on further major policy moves to support the economy.

Data also showed that euro zone manufacturing activity collapsed through April, due to the virus.

Meanwhile, J.P.Morgan’s equity analysts downgraded eurozone stocks to “neutral” from “overweight”, saying a tilt towards value stocks such as banks was a drag and policy response to the COVID-19 crisis was weaker.

Germany's DAX fell 3.6 per cent, while France's CAC 40 dropped 4.2 per cent as shares in automakers PSA and Renault retreated on data showing French car registrations slumped by almost 89 per cent in April.

North America

US stocks ended higher on Monday as increases in large tech and internet companies and oil price gains outweighed concerns about the latest US-China tensions and downbeat sentiment from the annual meeting of Warren Buffett’s Berkshire Hathaway.

Major US indexes opened lower but moved higher throughout the afternoon to snap two-day losing streaks.

Stocks have rebounded sharply since late March from the coronavirus-fuelled sell-off, helped by massive monetary and fiscal stimulus. Investors are now watching efforts by a number of states trying to spark their economies by easing restrictions put in place to fight the outbreak.

On Monday, New York governor Andrew Cuomo outlined a phased reopening of business in the state hardest hit by the COVID-19 pandemic. California governor Gavin Newsom said that retail businesses in the state may begin reopening as early as this week.

The Dow Jones Industrial Average rose 26.07 points, or 0.11 per cent, to 23,749.76, the S&P 500 gained 12.03 points, or 0.42 per cent, to 2,842.74 and the Nasdaq Composite added 105.77 points, or 1.23 per cent, to 8,710.72.

Gains in Microsoft, Apple and Amazon were the biggest lifts for the S&P 500, following mixed reactions last week to reports from big tech names.

Energy was the best performing S&P 500 sector, rising 3.7 per cent, as oil prices gained.

Shares of Delta Air Lines Inc, American Airlines Group Inc, Southwest Airlines Co and United Airlines Holdings Inc fell between 5 and 8 per cent, among the biggest decliners on the S&P 500 after Berkshire Hathaway dumped stakes in major US airlines.

Shares of Berkshire itself fell 2.6 per cent and weighed on the S&P 500 after the conglomerate posted a record quarterly net loss of nearly US$50 billion.

Buffett, whose comments are closely followed by investors, acknowledged at Berkshire’s annual meeting on Saturday that the pandemic could significantly damage the economy and his investments.

A flare-up in US-China tensions also pressured the market. Secretary of State Mike Pompeo said on Sunday there was “a significant amount of evidence” that the new coronavirus emerged from a Chinese laboratory. An editorial in China’s Global Times said he was “bluffing”.

Investors are also digesting a difficult corporate results season. With more than half of S&P 500 companies reporting so far, first-quarter earnings are expected to have fallen 12.5 per cent, according to Refinitiv data.

Shares of Tyson Foods Inc tumbled 7.8 per cent after the company said the coronavirus crisis will continue to idle US meat plants and slow production as it reported lower-than-expected earnings and revenue for the quarter.

Data on Monday showed new orders for US-made goods suffered a record decline in March and could sink further as disruptions from the coronavirus fracture supply chains and depress exports.

is content editor for Morningstar Australia

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