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Global Market Report - 7 April

Lex Hall  |  07 Apr 2020Text size  Decrease  Increase  |  
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The Australian sharemarket is tipped to continue its strong start to the week after global equities were encouraged by early signs the coronavirus death toll is slowing.

The SPI200 futures contract was up 124 points, or 2.35 per cent, at 5397.0 points at 8am Sydney time on Tuesday, suggesting local stocks will rise again at the start of trade.

Global markets jumped overnight as coronavirus-related deaths showed signs of slowing in certain major cities.

The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite added more than 7 per cent each after a decline in the daily death toll in New York, the biggest coronavirus hot spot in the US.

"Whether mere perception, or reality, signs that the virus' spread could be peaking—that the 'curve is flattening'—emboldened market participants to buy into the notion that the worst of the COVID-19 crisis is passing," IG Markets analyst Kyle Rodda said in a note.

US officials had earlier braced the country for a dire week, with the death toll topping 10,000.

The S&P/ASX200 benchmark index finished Monday up 219.3 points, or 4.33 per cent, to 5286.8, while the All Ordinaries index rose 216.7 points, or 4.24 per cent, to 5323.6 points.

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The rally snapped a two-day losing streak, with the ASX200 closing at its best level since 17 March.

The Reserve Bank board will consider today whether its bond-buying program needs tweaking when it holds its first monetary policy meeting since unveiling a historic suite of stimulus measures to combat the impact of the coronavirus pandemic.

Westpac's economists are among those who do not expect the RBA to touch the cash rate on Tuesday as board members have already signalled it will likely remain lower bound at 0.25 per cent "for some time".

"As such, the focus of RBA meetings will be on how the board assesses its QE measures and whether they may require adjusting," Westpac said in a note on Monday.

The Australian dollar was buying 60.83 US cents at 8am, up from 60.50 US cents at the close of markets on Monday.


In China, markets were closed due to the Ching Ming Festival.

In Hong Kong, the Hang Seng Index closed ahead by 2.2 per cent at 23,749.12.

HSBC rose 2.8 per cent while Standard Chartered shot up 4.3 per cent. Both suffered steep falls after announcing they were cancelling their dividends last Wednesday.

Index heavyweight Tencent rose 1.3 per cent. E-commerce giant Alibaba gained 2.7 per cent.

Insurers Ping An and AIA both increased 0.9 per cent.

In Japan, the Nikkei 225 increased 756.11 points or 4.24 per cent to 18,576.30.


German shares jumped 5.8 per cent on Monday to lead a strong bounce in European shares as a slowdown in coronavirus deaths raised hopes that nationwide lockdowns may gradually be eased.

While all major sectors were well in the black, the travel and leisure sector—worst hit by the lockdowns—rallied 8.2 per cent breaking a three-day losing streak, while the German-focused auto sector led gains with its near 9.5 per cent jump.

Frankfurt's DAX marked its best session in two weeks, while all other major European bourses closed up between 2.3 per cent and 4.9 per cent.

Italy, which has the highest coronavirus death tally in the world, reported its lowest daily death toll in more than two weeks, while in Spain, the pace of new deaths slowed for the fourth day. France’s daily death toll also dropped and admissions into intensive care slowed.

Wall Street stock indexes got a boost after President Donald Trump expressed hope that the health crisis was “levelling-off” in some of the hardest-hit US states.

“Signs that coronavirus may be peaking in parts of mainland Europe have given some hope that the economic hit will be short-lived,” said Russ Mould, investment director at AJ Bell.

The volatility gauge for euro-zone stocks, widely known as Europe’s fear index, dropped to a one month low of 42.92, nearly halving from its peak of 95.02 in mid-March.

The pan-European benchmark STOXX 600 index also posted its biggest one-day gain in two weeks, ending 3.7 per cent higher. It had logged its sixth weekly decline in seven last week as the health crisis stalled business activity and prompted firms to suspend dividends and share buybacks.

The STOXX 600 index has lost more than $3 trillion in market value since February on fears of a global recession despite extraordinary fiscal and monetary stimulus globally, with Goldman Sachs predicting a 38.4 per cent slump in euro area real GDP in the second quarter.

Ladbrokes owner GVC surged almost 18 per cent to top the regional and travel index after it halved its estimate for a monthly hit to profits from the coronavirus-driven shutdown in international sports.

But gains for UK's FTSE 100 were capped by oil firm BP PLC as a delay in an OPEC+ meeting regarding oil output pressured crude prices.

News that British Prime Minister Boris Johnson was in hospital due to persistent COVID-19 symptoms also weighed

North America

US stocks rocketed higher on Monday, with each of the major indexes rallying at least 7 per cent, after a fall in the daily death toll in New York, the country’s biggest coronavirus hot spot, fuelled optimism a levelling off of the pandemic was on the horizon.

On Sunday, New York reported virus-related deaths had fallen slightly from the previous day, the first instance in a week.

New York Governor Andrew Cuomo said on Monday that hospitalisations of coronavirus patients are down and the rate of the rise in deaths has levelled off in the hardest-hit state. But he cautioned against complacency.

“Seeing the market soar the way it is, even though the fundamentals continue to be in free fall, the market is looking across the valley and saying ‘six months from now things will be on the ascent,’” said Sam Stovall, chief investment strategist at CFRA Research in New York.

“They are looking across the valley and seeing a lot of scary news but are basically saying ‘We will get past this.’”

Even with the positive signs, US officials have braced the country for a “peak death week” from the pandemic, with the death toll topping 10,000.

The Dow Jones Industrial Average rose 1627.46 points, or 7.73 per cent, to 22,679.99, the S&P 500 gained 175.03 points, or 7.03 per cent, to 2,663.68 and the Nasdaq Composite added 540.16 points, or 7.33 per cent, to 7,913.24.

The gains marked the biggest daily percentage rise for each index since 24 March.

All 30 Dow components were in positive territory, led by a gain of 19.47 per cent in Boeing shares, while the technology and defensive utilities sectors, among the best-performing for the year, climbed more than 8 per cent.

The S&P 500 banking index jumped 8.21 per cent and notched its best day in just over a week.

Wall Street’s fear gauge fell to its lowest in two weeks, but remained at elevated levels. During the financial crisis of 2007–08, the S&P 500 took months to establish a bottom even after the volatility index plummeted.

Despite Monday's bounce, the S&P 500 remains down more than 21 per cent from its mid-February record close.

S&P 500 companies are expected to enter an earnings recession in 2020, with declines in profit in the first and second quarters, according to IBES data from Refinitiv, as demand evaporates across sectors such as airlines, luxury goods and industrials. First-quarter expectations now call for an earnings decline of 6 per cent from the year-ago period.

Versace owner Capri Holdings surged 25.9 per cent after saying it expects to open its stores after June 1 and that it would furlough all its 7,000 employees in North America.

Video conferencing app Zoom fell 4.1 per cent on concerns over its data-privacy practices and increased competition from deep-pocketed rivals.

is senior editor for Morningstar Australia

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