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Global Market Report - 7 April

Lex Hall  |  07 Apr 2021Text size  Decrease  Increase  |  
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Australia

The Australian share market is set for a flat opening following a dip on Wall Street as earnings reports offset expectations of more healthy economic news.

The Australian SPI 200 futures contract was down 12 points, or 0.2 per cent, at 6848 points at 8.30am Sydney time on Wednesday, suggesting a negative start to trading.

The S&P 500 slipped on Tuesday but stayed near closing record highs posted in consecutive sessions, as investors weighed more strong US economic data against nervousness about upcoming quarterly earnings reports.

The Dow Jones Industrial Average fell 96.95 points, or 0.29 per cent, to 33,430.24, the S&P 500 lost 3.97 points, or 0.10 per cent, to 4,073.94 and the Nasdaq Composite dropped 7.21 points, or 0.05 per cent, to 13,698.38.

Locally, Australians are rushing to fly into New Zealand for a holiday after the nations opened their borders for a two-way travel bubble, a result of their remarkable dual achievement in conquering covid outbreaks, The Australian reports.

Technology and travel stocks have helped the Australian share market post a solid start to the holiday-shortened week.

The benchmark S&P/ASX200 index closed up 57.2 points, or 0.84 per cent, to 6885.9 on Tuesday, the first trading session after the Easter break.

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The All Ordinaries closed 69.7 points, or 0.99 per cent higher, at 7133.90.

Technology shares led the broad-based gains, while travel-focused stocks also jumped on news of a travel bubble between Australia and New Zealand.

Gold was up 0.8 per cent at $US1741.39 an ounce; Brent oil was up 1.0 per cent to $US62.76 a barrel; Iron ore was up 1.4 per cent to $US170.90 a tonne.

Meanwhile, the Australian dollar was buying 76.59 US cents at 8.30am, up from 76.55 US cents at Tuesday's close.

Asia

China's blue-chip index fell on Tuesday, pressured by healthcare and consumer companies, as upbeat economic data raised worries of policy tightening.

The blue-chip CSI300 index fell 0.4 per cent to 5,140.34, while the Shanghai Composite Index was flat at 3,482.97.

Japanese shares closed lower on Tuesday as investors booked profits from recent rallies, while worries about the economic impact from a possible fourth wave of the COVID-19 in the nation hurt sentiment.

Nikkei share average fell 1.3 per cent to close at 29,696.63, after hitting the 30,000 mark for the first time in more than two weeks on Monday. The broader Topix lost 1.47 per cent to close at 1,954.34.

Europe

Europe’s benchmark equity index closed at a record high on Tuesday, recovering all of its pandemic-driven losses as investors bet on a speedy global economic recovery, spurred by bumper stimulus spending and COVID-19 vaccination programmes.

European traders returned from a long weekend to push the STOXX 600 up 0.7 per cent to 435.36 points. It has climbed more than 60 per cent from last year’s lows and surpassed its previous all-time high of 433.90 points in February 2020.

The German DAX rose 0.7 per cent to add to its recent record-setting rally, France’s CAC 40 was up 0.5 per cent, also fully recovering from last year’s crash and Britain’s FTSE 100 jumped 1.3 per cent.

“European equity markets have a higher percentage tilt to the more distressed cyclical and value parts of the market that performed poorly not only in 2020, but for several years before as well,” Niall Gallagher, investment director for European equities at GAM wrote in a note.

“Any change in the economic environment that sees a pick-up in growth and a pick-up in inflation is likely to positively impact these sectors and as they are a higher weighting in the market, this explains the recent expectations that European equities may do better in the next few months.”

Economically sensitive sectors such as banking, commodity and automakers rebounded strongly this year, boosting European stocks.

However, it took the benchmark seven months more than the US S&P 500 to reclaim its pre-pandemic high, slowed down by a sluggish vaccination roll-out and a new wave of infections.

Miners were the top gainers on Tuesday, up 1.8 per cent, while travel & leisure stocks, automakers and food & beverage shares rose 1.0 per cent.

Data showed, euro zone unemployment was unchanged in February compared with an upwardly revised reading for January, as European furlough schemes limited the impact of the second wave of the pandemic in the fourth quarter on jobs.

“The euro-zone’s unemployment rate was unchanged at 8.3 per cent in February despite virus measures being tightened, highlighting the extent to which government policies have protected jobs during the pandemic,” said Jessica Hinds, Europe economist at Capital Economics.

Swiss bank Credit Suisse slipped 0.4 per cent after sharp losses last week, as it announced an estimated loss of 4.4 billion Swiss francs ($6.1 billion) from its relationship with Archegos Capital Management.

London stocks took cheer as British Prime Minister Boris Johnson said the next phase of a planned reopening of the economy could take place next week.

BP gained 3.2 per cent after the oil major said it expected to reach its $35 billion net debt target in the first quarter of 2021.

North America

The S&P 500 slipped on Tuesday but stayed near closing record highs posted in consecutive sessions, as investors weighed more strong US economic data against nervousness about upcoming quarterly earnings reports.

US job openings rose in February to a two-year high while hiring picked up. The data came on the heels of Friday’s strong payrolls report and a report on Monday showing activity in the service sector climbed to a record high in March.

The International Monetary Fund raised its global growth forecast to 6 per cent this year from 5.5 per cent, a rate not seen since the 1970s.

But with an upcoming earnings season expected to show S&P profit growth of 24.2 per cent from a year earlier, according to Refintiv data, investors may be waiting to see how strong the results will actually be.

“The big unanswered question is how open the economy is right now and how many people are out there,” said Stephen Massocca, Senior Vice President at Wedbush Securities in San Francisco.

“These security prices are reflecting an anticipation that the economy is going to get back to normal sooner rather than later and it is not exactly clear where we are in that process.”

The Dow Jones Industrial Average fell 96.95 points, or 0.29 per cent, to 33,430.24, the S&P 500 lost 3.97 points, or 0.10 per cent, to 4,073.94 and the Nasdaq Composite dropped 7.21 points, or 0.05 per cent, to 13,698.38.

The dip came a day after a rally sent the Dow and the S&P 500 to record highs. Investors were assessing the staying power of gains in economically sensitive sectors such as industrials and materials that have been leading the charge higher.

Shares of many economically sensitive companies are classified as value stocks. But growth, which includes many stocks in the technology and communication services sectors, has shown signs of life.

Large US fiscal and monetary stimulus measures and a swift rollout of vaccines have pushed the S&P 500 and Dow to record levels, with the CBOE volatility index retreating to pre-pandemic lows.

Still, some investors remained worried about the possibility of rising inflation and proposals for higher taxes. In addition, other countries continue to have difficulty containing the coronavirus. Canadian Prime Minister Justin Trudeau said on Tuesday the country is facing a very serious third wave.

Snap Inc jumped 5.12 per cent after Atlantic Equities upgraded its rating on the photo-messaging app owner’s shares to “overweight” from “neutral”.

Norwegian Cruise Line Holdings Ltd added 4.61 per cent as it said it would begin sailing outside the US from the Caribbean and Greek Isles in July, restarting trips after a year-long hiatus brought on by the pandemic.

With Reuters

is senior editor for Morningstar Australia

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