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Global Market Report - 7 January

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

Australian shares are set to soar following gains on Wall Street, which were later pared by Trump supporters storming the Capitol building in Washington DC.

The Australian SPI 200 futures contract was up 124 points, or 1.9 per cent, at 6668 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.

The Dow and the S&P 500 ended higher, soaring to all-time highs on Wednesday, as investors piled into financial and industrial stocks on bets a Democratic sweep in Georgia would lead to more fiscal stimulus and infrastructure spending.

The Dow Jones Industrial Average rose 437.8 points, or 1.44 per cent, to 30,829.4, the S&P 500 gained 21.34 points, or 0.57 per cent, to 3,748.2 and the Nasdaq Composite dropped 78.17 points, or 0.61 per cent, to 12,740.79.

Police in the US Capitol on Wednesday responded with drawn guns and teargas as hundreds of protesters stormed the building and sought to force Congress to undo President Donald Trump’s election loss shortly after some of Trump’s fellow Republicans launched a last-ditch effort to throw out the results.

The S&P/ASX200 benchmark index closed lower by 74.8 points, or 1.12 per cent, to 6607.1 on Wednesday.

The All Ordinaries was down 74.3 points, or 1.07 per cent, at 6881.4.

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The ASX followed US futures lower as early voting results for two seats in the US Senate showed the Democrats ahead.

Gold was down 2.1 per cent to $US1908.79 an ounce; Oil was up 1.8 per cent to $US54.58 a barrel; Iron ore was up 0.5 per cent to $US168.72 a tonne.

Meanwhile, the Australian dollar was buying 78.02 US cents at 8.30am, up from 77.80 US cents at  Wednesday's close.

Asia

China's blue-chip index closed on Wednesday at its highest level in nearly 13 years after rising for five consecutive sessions, as investors expect the government to sustain policy supports to counter COVID-19's persisting impact on the economy.

At the close, the blue-chip CSI300 index was up 0.92 per cent to 5,417.68, its highest since January 16, 2008, while the Shanghai Composite index was up 0.63 per cent at 3,550.88.

Hong Kong shares extended gains on Wednesday after rising for six consecutive sessions, led by energy and tech shares, as investors expected the government to sustain supportive policies to counter persisting impact from COVID0-19.

At the close of trade, the Hang Seng index was up 42.44 points, or 0.15 per cent, at 27,692.30, its highest since last February.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 1.41 per cent, while Japan's Nikkei index closed down 0.38 per cent.

Europe

European stocks jumped on Wednesday after a second COVID-19 vaccine won regulatory approval in the region, while bets rose for bigger US fiscal stimulus as Democrats closed in on a Senate victory.

The pan-European STOXX 600 index rose 1.4 per cent to its highest level since late February 2020, while the UK’s FTSE 100 rose 3.5 per cent and Germany’s DAX gained 1.8 per cent.

Moderna Inc’s vaccine, which won approval from the European Medicines Authority (EMA) and later the European Commission, is seen as a big boost for European hopes of containing the coronavirus.

“Eurozone stocks were already in recovery mode this morning and then the European Medicines Agency approved Moderna’s coronavirus vaccine for EU use so that added to the optimistic sentiment,” said David Madden, market analyst at CMC Markets in London.

Economically-sensitive banks surged 5.5 per cent, logging their best day in two months, with the UK’s HSBC, Spain’s Santander and France’s BNP Paribas providing the biggest boosts.

Oil majors BP, Royal Dutch Shell and Total rose almost 6.5 per cent as crude prices hit their highest since February 2020 following Saudi Arabia’s pledge to cut output in a meeting with allied producers.

Democrats won one US Senate race in Georgia and led in another, moving closer to a surprise sweep in a former Republican stronghold that could usher in larger fiscal stimulus and pave the way for President-elect Joe Biden to push through greater corporate regulation and higher taxes.

Construction & material stocks such as CRH and HeidelbergCement also outperformed on hopes of more infrastructure spending under a Democrat-controlled Senate.

Germany is extending its lockdown until the end of the month, while a third national lockdown should not be ruled out in France, a senior medical expert said.

Meanwhile, IHS Markit’s survey showed economic activity in the euro zone contracted more sharply than thought at the end of 2020 and could get worse as renewed lockdowns hit the bloc’s dominant service industry.

In company news, French artificial heart maker Carmat gained 9.5 per cent after it said it was preparing to start selling its products in the second quarter of this year.

British baker and fast-food retailer Greggs jumped 7.9 per cent as it slowed a sales decline caused by the coronavirus crisis in the fourth quarter.

North America

The Dow and the S&P 500 ended higher, soaring to all-time highs on Wednesday, as investors piled into financial and industrial stocks on bets a Democratic sweep in Georgia would lead to more fiscal stimulus and infrastructure spending.

But Wall Street pared gains and the Nasdaq index closed lower after swarms of protesters stormed the US Capitol on Wednesday as they sought to force Congress to undo President Donald Trump’s election loss to Joe Biden. Police in the US Capitol on responded with drawn guns and some tear gas.

“It hasn’t been a sharp market drop. There have been buyers coming in as well. This is a bit shocking visually to see this unfold on television for investors,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Before the pro-Trump protests, financials hit a 1-year high and were still higher on the day, while materials, industrial and energy sectors held their gains.

Rate-sensitive bank shares also rose, tracking a surge in the benchmark 10-year US Treasury yield above 1 per cent.

Democrats won one US Senate race in Georgia and led in another, moving closer to a surprise sweep in a former Republican stronghold that would give them control of Congress and the power to advance President-elect Joe Biden’s policy goals. A final outcome is not expected until later on Wednesday.

As this developed, US Vice President Mike Pence opened a joint session of Congress to formally certify Democratic President-elect Joe Biden’s victory, rejecting President Donald Trump’s demand that he unilaterally reject electoral votes.

A Democrat-controlled Senate, meanwhile, typically ushers in increased fiscal spending while raising the chances of tax hikes and tougher regulation, and would be a net positive for economic growth globally and thus for most risk assets.

“People are focused on the stimulus that will come,” said Tom Martin, senior portfolio manager, at GLOBALT Investments in Atlanta. “The question is how big will that be and what would be contained in it. But anytime you have additional money to be spent, that’s a positive for the markets.”

The Russell 1000 value index, which is heavily weighted toward cyclical sectors, rose, while the growth index, with a large tech company weighting, was down.

Increased risk of antitrust scrutiny of Big Tech pressured shares of companies, with Apple Inc, Microsoft Corp, Amazon.com Inc, Google-parent Alphabet Inc and Facebook Inc falling.

Tesla Inc was the only major technology stock trading higher.

The Dow Jones Industrial Average rose 437.8 points, or 1.44 per cent, to 30,829.4, the S&P 500 gained 21.34 points, or 0.57 per cent, to 3,748.2 and the Nasdaq Composite dropped 78.17 points, or 0.61 per cent, to 12,740.79.

The small-cap Russell 2000 index jumped after earlier hitting a record high.

Hopes of a vaccine-powered economic recovery in 2021 pushed Wall Street’s main indexes to record highs in late-December, with sectors that had previously lagged, including banks, industrials and energy, fuelling the rally.

AmerisourceBergen Corp gained after the US drug wholesaler said it would buy Walgreens Boots Alliance’s drug distribution business for US$6.5 billion to expand in Europe. Dow component Walgreens rose.

is senior editor for Morningstar Australia

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