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Global Market Report - 7 July

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

Shares on the Australian market are likely to rise early in trade after solid gains on Wall Street overnight following a rebound in US services industry activity and hopes of a revival for China's economy.

The Australian SPI 200 futures contract was higher by 31.0 points, or 0.52 per cent, to 6,019.0 points at 8am Sydney time on Tuesday.

The positive lead comes after data for US non-manufacturing activity showed a jump in June to almost return to its pre-COVID-19 pandemic levels.

Investors also bet on an improving Chinese economy and its impact on global growth as the yuan led commodity currencies higher against the US dollar.

The Dow Jones Industrial Average rose 459.67 points, or 1.78 per cent, to 26,287.03, the S&P 500 gained 49.71 points, or 1.59 per cent, to 3,179.72 and the Nasdaq Composite added 226.02 points, or 2.21 per cent, to 10,433.65.

The gains came despite a record surge in new COVID-19 cases in 16 US states that could further hamper reopening plans and create a risk to the economic recovery.

In Australia on Tuesday, the main event of interest will be the Reserve Bank board meeting.

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The central bank isn't expected to make changes to the cash rate but economists will be watching closely to see what the central bank says about the economy, jobs and the Aussie dollar.

Investors will also be monitoring the coronavirus infection rate in Victoria after the state on Monday recorded its highest daily increase in cases, 127, and two deaths. New South Wales will close the border with Victoria tonight as the nation tries to keep the outbreak spreading to other states.

The Australian dollar was buying 69.75 US cents at 8am, barely changed from 69.72 US cents at the close of trade on Monday.

Asia

China stocks closed higher for a fifth straight session on Monday, extending a robust rally, led by financial shares on hopes of a quick economic recovery, Beijing’s continued reforms in the capital markets and ample liquidity.

The blue-chip CSI300 index closed up 5.7 per cent at 4,670.09 points, its highest since June 25, 2015, while the Shanghai Composite Index climbed 5.7 per cent to 3,332.88 points, its highest since March 2018.

Hong Kong shares closed at a more than four-month high on Monday, tracking equities in the mainland that rose on hopes of a faster economic recovery, Beijing’s continued reforms in the capital markets and ample liquidity.

The Hang Seng index rose 3.8 per cent to 26,339.16, while the China Enterprises Index gained 4.7 per cent, to 10,726.83. Both the indexes closed at their highest level since March 5.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.73 per cent, while Japan’s Nikkei index closed up 1.83 per cent.

Europe

European shares closed at their highest in nearly a month on Monday, as upbeat economic data tied in with a rally in China’s markets on hopes of recovery from a coronavirus-induced slump.

The pan-European STOXX 600 climbed 1.6 per cent on broad-based gains, with Asia-focused lender HSBC jumping 6.6 per cent to lead Europe’s battered banks index almost 4 per cent higher.

Other stocks exposed to China, including carmakers, industrials, energy firms and luxury goods makers, gained strongly.

London's FTSE 100 and Spain's IBEX ended 2 per cent higher, while Germany's DAX rose 1.6 per cent.

Data showing a record rebound in euro zone retail sales in May following a pandemic-driven historic slump in the previous two months, and an unexpected growth in the US services sector last month further bolstered sentiment.

Globally, the appetite for risk rose after mainland China stocks jumped more than 5 per cent, as investors stocked up on cheap funding to invest in an economy that analysts predict will recover faster and better than other major countries battling new waves of infections.

But industrial orders data suggesting Germany’s recovery from the pandemic will be slow and painful gave some a pause for thought.

Europe’s STOXX 600 has recovered about 37 per cent since March lows driven in part by large stimulus measures and vaccine hopes, but it still remains about 10 per cent lower for the year.

Among individual stocks, sensor maker AMS climbed 4 per cent on getting EU antitrust clearance for its 4.6 billion-euro ($7.5 billion) acquisition of German lighting group Osram.

Swiss speciality chemicals group Clariant slumped 12.6 per cent to the bottom of STOXX 600 on trading ex-dividend.

UK homebuilders Persimmon, Taylor Wimpey and Barratt Developments rallied on reports that British Finance Minister Rishi Sunak planned to raise a property tax threshold, among other steps to reduce the economic toll of the health crisis.

Barratt said it was starting the new financial year with “cautious optimism” as its forward order book improved.

North America

US stocks rose sharply on Monday as a rebound in US services industry activity in June and expectations of a revival in China’s economy boosted optimism, helping investors look past a surge in new coronavirus cases in the US.

The Institute for Supply Management’s (ISM) non-manufacturing activity index almost returned to its pre-COVID-19 pandemic levels last month, jumping to a reading of 57.1, the highest since February, from 45.4 in May, a report showed.

Investors also bet on an improving Chinese economy and its impact on global growth as the yuan led commodity currencies higher against the dollar. Earlier, Chinese stocks jumped more than 5 per cent.

A slew of upbeat US data recently, including a record rise in monthly payrolls, has powered the Nasdaq to all-time highs and has driven the S&P 500 up more than 40 per cent from its 23 March closing low.

The gains came despite a record surge in new COVID-19 cases in 16 states in the US this month that could further hamper reopening plans and create a risk to the economic recovery.

Over the Independence Day weekend, several states reported a record increase in new infections, with Florida surpassing the highest daily tally reported by any European country during the peak of the outbreak there.

The Dow Jones Industrial Average rose 459.67 points, or 1.78 per cent, to 26,287.03, the S&P 500 gained 49.71 points, or 1.59 per cent, to 3,179.72 and the Nasdaq Composite added 226.02 points, or 2.21 per cent, to 10,433.65.

Online retail giant Amazon.com crossed $3,000 for the first time and provided the biggest boost to the S&P 500 and the Nasdaq. The stock rose 5.8 per cent to end at $3,057.04.

Tesla Inc shares jumped 13.5 per cent, rising for the fifth session as JPMorgan bumped up its price target for the electric carmaker’s stock following better-than-expected quarterly deliveries.

Uber Technologies Inc climbed 6 per cent after the ride-sharing company agreed to buy food-delivery app Postmates Inc in a US$2.65 billion ($3.8 billion) all-stock deal.

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