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Global Market Report - 7 August

Lex Hall  |  07 Aug 2020Text size  Decrease  Increase  |  
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Australia

Australian stocks are set for a slightly weaker open, despite solid rises on Wall Street.

The Australian SPI 200 futures contract was down 15 points, or 0.25 per cent, to 5,986 points at 8.30am Sydney time on Friday, suggesting a fall in trading.

Shares on Wall Street shrugged off a sluggish start and closed higher on Thursday, with the Nasdaq ending the session above 11,000 for the first time as investors hoped for a new fiscal stimulus package.

The Dow Jones Industrial Average rose 185.46 points, or 0.68 per cent, to 27,386.98, the S&P 500 gained 21.39 points, or 0.64 per cent, to 3,349.16 and the Nasdaq Composite added 109.67 points, or 1 per cent, to 11,108.07.

The S&P/ASX200 benchmark index closed higher by 40.9 points, or 0.68 per cent, at 6,042.2 points on Thursday, while the All Ordinaries index closed higher by 44.4 points, or 0.72 per cent, at 6,180.3.

Gold was up 1.2 per cent to $US2,061.76 an ounce. Brent oil was flat at $US45.19 a barrel. And iron ore was up 2.7 per cent to $US121.27 a tonne.

Meanwhile, the Australian dollar is buying 72.35 US cents, at 8.30am, up from 72.12 US cents at Thursday’s close.

Asia

China’s benchmark Shanghai Composite Index ended higher for a fifth straight session on Thursday, as a rally in financial and materials stocks offset worries about rising Sino-US tensions that had earlier weighed on the index.

At the close, the Shanghai Composite index was up 0.26 per cent at 3,386.46, ending higher for a fifth straight day.

Hong Kong shares ended lower on Thursday as Sino-US tensions added to the existing woes about economic fallout, with US Fed policymakers saying a rise in covid-19 cases in the US is slowing recovery in the world’s largest economy.

US President Donald Trump’s administration said on Wednesday it was stepping up efforts to purge “untrusted” Chinese apps from US digital networks and called the Chinese-owned short-video app TikTok and messenger app WeChat “significant threats”. The news pulled index heavyweight Tencent Holdings, WeChat’s developer, down 0.98 per cent, weighing on the broader index.

At the close of trade, the Hang Seng index was down 171.96 points or 0.69 per cent at 24,930.58. The Hang Seng China Enterprises index fell 0.53 per cent to 10,202.41.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.25 per cent, while Japan’s Nikkei index closed down 0.43 per cent.

Europe

European equities declined on Thursday as London stocks were sapped after Glencore scrapped its dividend and oil stocks slid, while investors kept a close eye on Washington for progress on US stimulus.

The pan-European STOXX 600 index closed 0.7 per cent lower, with London's FTSE 100 falling 1.3 per cent and the German DAX down 0.5 per cent.

Europe’s mining index, which rallied earlier this week, shed 2.5 per cent after Glencore became the first major mining company to scrap its dividend and said that it would prioritise cutting debt.

Its shares slumped 8.1 per cent, while energy majors BP, Royal Dutch Shell and Total fell between 2 per cent and 3.8 per cent after strong gains on Wednesday.

London’s exporter-heavy FTSE 100 also took a hit from a stronger pound after the Bank of England saw no immediate case to cut interest rates below zero even as it said the economy would take longer to recover from its covid slump than it previously forecast.

German stocks posted relatively small losses as engineering group Siemens rose 1.6 per cent after forecasting a modest improvement in orders and revenue in the months ahead.

Adidas gained 1.9 per cent as it expects a rebound in profits in the third quarter.

Among the fallers, French insurer AXA slid 3.5 per cent after it dropped its 2020 earnings target and said it would not make additional payouts to shareholders in the fourth quarter.

UniCredit was down 3.9 per cent as it vowed to stay out of a possible merger wave in Italy after reporting higher than forecast quarterly results.

Lufthansa slipped 1.2 per cent after saying it did not expect air travel demand to return to pre-crisis levels before 2024.

Of the 65 per cent of the STOXX 600 companies that have reported results so far, nearly 60 per cent have exceeded dramatically lowered estimates, Refinitiv Eikon data shows.

North America

Tech and tech-related heavyweight stocks such as Apple, which rose 3.49 per cent and Facebook, up 6.49 per cent helped pace gains on the indexes.

The tech-heavy Nasdaq clinched a new record high in early trading, and closed above the 11,000-mark for the first time after initially climbing above it on Wednesday.

The benchmark S&P 500 and blue-chip Dow were about 1 per cent and 7 per cent away from their own peaks in February.

Economic data released on Thursday painted a mixed picture as US Labor Department numbers showed a first fall in jobless claims in three weeks, although a separate report showed a 54 per cent surge in job cuts announced by employers in July. The data comes ahead of the government payrolls report on Friday.

Investors are looking to the next fiscal aid package to further cope with fallout from the covid-19 pandemic. But Senate Majority Leader Mitch McConnell said on Thursday Republicans and Democrats remained far apart over what to include in another wave of relief.

Senate Republicans have been told that negotiators have until Friday to reach agreement. “If there’s not a deal by Friday, there won’t be a deal,” Republican Senator Roy Blunt told reporters on Wednesday.

The Dow Jones Industrial Average rose 185.46 points, or 0.68 per cent, to 27,386.98, the S&P 500 gained 21.39 points, or 0.64 per cent, to 3,349.16 and the Nasdaq Composite added 109.67 points, or 1 per cent, to 11,108.07.

Ahead of the deadline for a new stimulus package, the focus now shifts to the July jobs report Friday morning, with analysts forecasting a rise of 1.58 million new jobs last month and a decline in the unemployment rate to 10.5 per cent.

As major averages continue to rally off their March lows, powered by heaps of fiscal and monetary stimulus and better-than-feared second-quarter earnings, the Dow and S&P notched their fifth straight daily gain, with the Nasdaq climbing for a seventh consecutive session.

The corporate results season is now in its final stretch, with about 424 S&P 500 firms having reported so far. Earnings have been about 22.5 per cent above analyst expectations, according to IBES Refinitiv data, the highest on record since 1994.

Communication services and technology were the best performing of the 11 major S&P sectors on the day.

Among individual shares, Becton Dickinson and Co dropped 8.40 per cent after posting quarterly revenue below estimates as delayed elective procedures during coronavirus-led lockdowns squeezed demand for some of its devices.

Western Digital sank 16.12 per cent after the hard drive maker reported weaker-than-expected fourth-quarter revenue and forecast a soft current quarter.

Bristol-Myers Squibb Co gained 2.75 per cent after the drugmaker raised its annual profit forecast on hopes of a recovery in demand for its hospital-administered drugs.

ViacomCBS climbed 3.35 per cent after beating analysts’ estimates for quarterly revenue due to high demand for streaming.

is content editor for Morningstar Australia

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