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Global Market Report - 6 April

Lex Hall  |  06 Apr 2020Text size  Decrease  Increase  |  
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Australia

The Australian share market is tipped to rise but economists remain wary of the coronavirus volatility that ensured global equities ended the week on a sour note.

The SPI200 futures contract was up 46 points, or 0.91 per cent, at 5,079.0 points at 8am on Monday, suggesting local stocks will gain at the open of markets.

Wall Street's main indexes fell more than 1.5 per cent on Friday after US employment showed a worse-than-expected drop in jobs amid the COVID-19 pandemic.

CommSec chief economist Craig James said the US market, and the expected raft of news about COVID-19 on Monday, would continue to influence Australian shares.

IG Markets analyst Kyle Rodda said the key remains the trajectory of new coronavirus cases.

"Just as is the case for everyone currently, market participants' decision-making centres on what success health authorities—especially those in Europe and the US—are having in "flattening the curve" of new COVID-19 cases," Rodda said.

"Globally, the curve continues to rise, as the number of infections of the disease approached 1.2 million over the weekend. The United States has arguably become the epicentre for the virus now. Its caseload has jumped beyond 300,000, with new cases in the US still increasing exponentially."

The S&P/ASX200 benchmark index finished Friday down 86.8 points, or 1.68 per cent, having also been tipped to rise in early trade.

Despite recording back-to-back sessions in the red, the local bourse still rose 4.6 per cent over the five sessions for its best weekly gain since December 2011.

Oil prices rose after US President Donald Trump on Saturday said he will put tariffs on Saudi and Russian production, potentially accelerating a meeting between the two.

Gold is also higher—buying $US1,615.76 per ounce.

One Australian dollar was buying 59.98 US cents at 8am on Monday, down from 60.63 US cents at the close of market on Friday.

Asia

Shanghai shares eased on Friday to conclude the week lower, as risk-averse sentiment strengthened on continued spread of the coronavirus with infections surpassing one million globally.

At the close, the Shanghai Composite index was down 0.6 per cent at 2,763.99.

The blue-chip CSI300 index was down 0.57 per cent, with its financial sector sub-index falling 0.9 per cent, the consumer staples sector up 0.52 per cent, the real estate index down 0.18 per cent and the healthcare sub-index up 1.05 per cent.

Hong Kong stocks slipped on Friday to end the week lower, as risk-averse sentiment strengthened on continued spread of the coronavirus with infections surpassing one million globally.

At the close of trade, the Hang Seng index was down 43.95 points, or 0.19 per cent, at 23,236.11. The Hang Seng China Enterprises index fell 0.37 per cent to 9,491.1.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.46 per cent, while Japan's Nikkei index closed up 0.01 per cent.

Europe

European shares ended down on Friday, closing the week lower as dismal business activity data heralded a deep economic and earnings recession due to the novel coronavirus outbreak.

The pan-European STOXX 600 index closed 1 per cent in the red, with insurers dragging the most after a European Union regulator asked them to suspend dividends and share buybacks to shore up liquidity.

The index fell about 0.6 per cent for the week. Still, it appeared to have gained a measure of stability after sharp daily movements over the past month.

Composite data earlier in the day showed business activity in the euro zone contracted severely in March, with several analysts forecasting worse readings as most economies in the region shut down to curb the spread of the virus.

With more than 1 million people now infected around the world and countries extending national lockdowns, economists expect euro area real GDP to shrink as much as 43 per cent in the second quarter.

Bank stocks fell 2.2 per cent, and were the worst performing European sector for the week, shedding about 11 per cent. The sector looked vastly less attractive after several banking majors suspended their dividend payouts earlier in the week.

Energy stocks dragged on the STOXX 600, relinquishing most of their gains from Thursday after a record spike in oil prices on hopes that Saudi Arabia and Russia would end their price war.

“We doubt that the rally in oil prices of the past couple of days will last, even if Russia and Saudi Arabia agree a deal to cut output—we only expect lower supply to put a floor under prices,” Capital Economics said in a note.

The bump in prices, along with extremely low stock valuations in the sector, saw energy stocks outperforming other sectors for the week with a 9 per cent gain.

Healthcare stocks were among the few gainers for the day, as the sector continued to benefit from safe-haven demand. They added 5.8 per cent for the week.

Retail stocks also gained after data showed euro zone retail sales jumped by more than expected in February, the month before coronavirus measures spread across the continent, as shoppers stocked up on food and drink and sharply increased their online spending.

North America

Wall Street’s main indexes fell more than 1.5 per cent on Friday as the coronavirus abruptly ended a record US job growth streak of 113 months, intensifying fears of a deep economic slowdown.

Even the loss of 701,000 jobs that Labor Department data showed for March did not completely capture the economic damage from the virus. The survey considered data only until mid-March, before widespread US lockdowns put more people out of work.

The worldwide spread of the virus has forced billions of people to stay indoors and pushed entire sectors to the brink of collapse, triggering mass layoffs and dramatic steps by companies to raise cash.

The S&P 500 closed down almost 27 per cent from its mid-February record high close, or about $7 trillion in market value, and economists have cut their forecasts for US GDP, with Morgan Stanley now predicting a 38 per cent contraction in the second quarter.

The Dow Jones Industrial Average fell 360.91 points, or 1.69 per cent, to 21,052.53, the S&P 500 lost 38.25 points, or 1.51 per cent, to 2,488.65 and the Nasdaq Composite dropped 114.23 points, or 1.53 per cent, to 7,373.08.

Of the S&P 500’s 11 major sectors utilities was the biggest laggard, down 3.6 per cent, followed by materials and financials, with declines of more than 2 per cent.

Only consumer staples rose and ended the day up 0.5 per cent as the sector is seen as a defensive play, with consumers still needing to eat and buy household goods in a recession.

The energy sector was one of the best performers. US President Trump met with US oil company executives at the White House and said Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin both want something to happen to stabilise the global oil market, where prices have fallen by about two-thirds this year.

Walt Disney Co shares fell 3 per cent after it said it would furlough some US employees this month, while sources said luxury retailer Neiman Marcus was stepping up preparations to seek bankruptcy protection.

Raytheon Technologies Corp, formed by the merger of United Technologies and Raytheon Co, shed 7.75 per cent as it pulled its 2020 outlook for its aerospace units.

Tesla Inc rose 5.6 per cent after the electric-car maker said production and deliveries of its Model Y sport utility vehicle were ahead of schedule.

is content editor for Morningstar Australia

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