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Global Market Report - 6 November

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

Australian shares are set to rise following a rally on Wall Street as investors welcomed the idea of a Republican Senate blocking Biden policies.

The Australian SPI 200 futures contract was up 34 points, or 0.6 per cent, to 6,158 points at 8.30am Sydney time on Friday, suggesting a positive start to trading.

US stocks jumped on Thursday as investors bet that Republicans would retain control of the Senate and block any major policy changes under a possible Joe Biden White House that could dampen corporate profits.

The Dow Jones Industrial Average rose 575.05 points, or 2.06 per cent, to 28,422.71, the S&P 500 gained 77.76 points, or 2.26 per cent, to 3,521.2 and the Nasdaq Composite added 310.07 points, or 2.68 per cent, to 11,900.85.

Locally, the investor behind the potential listing of coupon company Cashrewards is understood to be ANZ Bank, the AFR reports. Cashrewards postponed its IPO bookbuild on Thursday when it told potential investors a strategic investor had committed to take a 19 per cent stake in the company as part of its float.

The S&P/ASX200 benchmark index closed up 77.5 points, or 1.28 per cent, to 6,139.6 on Thursday, as Democrat challenger Joe Biden edged closer to victory and vote counting continued. The All Ordinaries closed higher by 79 points, or 1.26 per cent, to 6,344.

Gold was up 2.4 per cent at $US1,948.17 an ounce; Brent oil was down 0.6 per cent to $US40.99 a barrel; Iron ore was flat at $US116.95 a tonne.

Meanwhile, the Australian dollar was buying 72.77 US cents at 8.30am, up from 71.12 US cents at Thursday’s close.

Asia

China shares ended higher on Thursday as US election results showed a firming lead for Democratic challenger Joe Biden, who is seen as favouring a less confrontational approach than President Donald Trump in Sino-US relations.

With financial markets braced for days or even weeks of uncertainty as Trump has opened a multi-pronged attack on vote counts in several states by pursuing lawsuits and a recount, investors have welcomed any indication of a clear winner.

At the close, the Shanghai Composite index was up 1.3 per cent at 3,320.13.

The blue-chip CSI300 index gained 1.48 per cent, led by the consumer staples sector, which added 1.61 per cent.

In Hong Kong, the Hang Seng finished up 2.99 per cent at 25,630.81.

Europe

European stocks hit a more than two-week high on Thursday, as strong quarterly earnings, fresh stimulus for Britain’s coronavirus-hit economy and post-election gains for Wall Street lifted investor spirits.

The pan-European STOXX 600 index gained 1.1 per cent to touch its highest level since 19 October and was on track for its best weekly showing in more than six months.

Technology stocks jumped 2.5 per cent as did their US peers, but gains were broad-based in Europe with media, automakers and chemical companies surging over 2 per cent.

While the outcome of the US presidential election is still unclear, Democratic challenger Joe Biden was edging closer to victory over Republican President Donald Trump, who has alleged voting fraud, filed lawsuits and called for at least one state recount.

Investors were counting on Republicans to maintain control of the US Senate, which dims prospects for a large new stimulus package but makes it harder to enact tighter regulation or raise corporate taxes on American firms.

“From a market perspective, the uncertainty we are seeing does little to hurt sentiment, with the prospect of a split Congress limiting the possibility of higher taxes under Biden,” Joshua Mahony, senior market analyst at IG said in a note.

A handful of upbeat corporate results also lifted European markets, with Munich-based broadcaster ProSiebenSat.1 Media jumping 8.9 per cent after it returned to profit in the third quarter and reinstated its outlook for the full year.

French lender Societe Generale gained 3.7 per cent after a recovery in its equity trading business helped it swing back to a quarterly profit.

British insurer RSA soared 45.7 per cent as it said England's second national lockdown is unlikely to have much impact on its business.

Wind turbine maker Siemens Gamesa, which would benefit from Biden's clean energy push, rose 5.1 per cent after it confirmed forecasts for a steady rise in margins until 2023.

Its shares, along with those of rival Vestas, took a hit on Wednesday amid uncertainty over the US election outcome.

Markets also took heart from new economic stimulus to cushion the impact of the coronavirus crisis, with the UK's FTSE up 0.4 per cent after the Bank of England increased its already huge bond-buying stimulus and Finance Minister Rishi Sunak extended his costly coronavirus furlough scheme

Banks came under pressure, with Dutch bank ING Groep NV falling 4.8 per cent after reporting lower-than-expected pre-tax profit.

Germany's Commerzbank dropped 5.8 per cent after it reported a quarterly loss.

North America

US stocks jumped on Thursday as investors bet that Republicans would retain control of the Senate and block any major policy changes under a possible Joe Biden White House that could dampen corporate profits.

With votes still being counted in battleground states, investors were abandoning cautious pre-election positioning, driving all of Wall Street’s main indexes up for a fourth straight session.

While a fiscal stimulus package is now widely expected, the size of any deal reached in a divided Congress is likely to be much smaller than anticipated. This in turn will pressure the US Federal Reserve to pump more funds into the financial system, supporting more buying of stocks.

Stocks got a brief additional boost from the Fed’s statement on Thursday. The central bank kept its loose monetary policy intact and again pledged to do whatever it can to sustain an economy severely damaged by the coronavirus pandemic.

Biden was edging closer to victory after winning Michigan and Wisconsin, but his Democratic party appeared unlikely to win the Senate. This eased investor worries about tighter regulations on Big Tech and a corporate tax hike.

“Long live the rally, it works for me but in some ways investors may be setting themselves up for some disappointment here along the margins,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

“Things are never as good or as bad as they seem, but markets seem to be rallying pretty strongly in this post-election environment.”

Arone cautioned that it was not yet certain that Congress will remain split, so there is a slim chance markets could be in for a shock.

The Dow Jones Industrial Average rose 575.05 points, or 2.06 per cent, to 28,422.71, the S&P 500 gained 77.76 points, or 2.26 per cent, to 3,521.2 and the Nasdaq Composite added 310.07 points, or 2.68 per cent, to 11,900.85.

The tech-heavy Nasdaq, packed with “stay-at-home” corporate winners under this year’s lockdowns, gained over 2 per cent and was within striking distance of its 2 September record closing high.

The Philadelphia SE semiconductor index surged 4.38 per cent to hit an all-time high, while technology and communication services led gainers among S&P indexes.

All 11 of the major S&P 500 sectors moved higher in a broad rally, and the VIX volatility index, which has risen in recent months as investors feared the vote might spark falls in shares, retreated to its lowest in three weeks.

The materials index also touched a record, boosted by a 6.55 per cent rise in shares of US-German industrial gas producer Linde.

Qualcomm surged 13.08 per cent after the chipmaker forecast fiscal first-quarter revenue above estimates as it predicted solid growth in 5G smart phones sales next year.

is content editor for Morningstar Australia

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