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Global Market Report - 7 May

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

The Australian share market appears set for a second consecutive morning of early losses after US markets fell overnight.

The benchmark SPI 200 futures contract was down 48 points, or 0.89 per cent, to 5,348.0 at 8am Sydney time on Thursday.

The S&P 500 and the Dow fell overnight as declines in financials and defensive groups countered gains in tech shares.

Data showed US private employers laid off 20 million workers in April, underscoring the economic fallout of the coronavirus outbreak.

In Australia, attention will be on miner Rio Tinto and insurer QBE when the companies hold their annual general meetings.

The March international trade balance will be published by the Australian Bureau of Statistics.

Westpac economists expect the surplus to widen to $6.8 billion, led by a sharp rebound in exports.

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The benchmark S&P/ASX200 index on Wednesday closed up 22.5 points, or 0.42 per cent, at 5,384.6 points.

The All Ordinaries closed down 13.3 points, or 0.24 per cent, at 5,464.8 points.

One Australian dollar buys 64 US cents at 8am, down from 64.45 US cents on Wednesday's close.

Asia

China shares settled higher on Wednesday as trading resumed after a week-long holiday, with investors awaiting follow-up supportive policies ahead of the annual parliament meeting to counter the economic fallout from the coronavirus outbreak.

At the close, the Shanghai Composite index was up 0.63 per cent at 2,878.14, reversing early losses.

Stocks are rebounding since late March from the coronavirus-fuelled sell-off, helped by massive monetary and fiscal stimulus. Investors are now watching efforts by a number of countries trying to recharge their economies by easing restrictions put in place to fight the outbreak.

Hong Kong shares ended higher on Wednesday, as investors saw China’s yuan fixing offering some relief, amid a resurgence in Sino-US trade tensions.

At the close of trade, the Hang Seng index was up 268.82 points, or 1.13 per cent, at 24,137.48.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.76 per cent.

Europe

European shares ended slightly lower on Wednesday as a chilling GDP forecast undercut optimism about a swift economic recovery, even as several countries began easing coronavirus-related curbs.

The pan-European STOXX 600 index ended down 0.4 per cent, having stuck to a tight range as the European Commission forecast the euro zone economy would contract by a record 7.7 per cent this year.

Adding to pressure were concerns over future asset purchase programmes by the European Central Bank after a ruling by Germany’s highest court on Tuesday gave the ECB three months to justify its stimulus schemes.

Energy stocks were the worst performers of the day, ending 3 per cent lower after marking their biggest one-day gain in more than a month on Tuesday.

Swedish oil firm Lundin Energy led sector losses after Norwegian rival Equinor offered to sell its 4.88 per cent stake in the firm.

Norwegian oil firm Aker BP also dropped after announcing a cut in its quarterly dividend payments by two-thirds due to the pandemic and the plunge in crude prices.

While European shares have climbed from lows touched in March, the STOXX 600 has been largely range-bound over the past three weeks as investors look for tangible signs of the coronavirus pandemic slowing down.

The threat of a renewed Sino-US trade spat has also weighed on sentiment.

Travel and leisure stocks fell 1.8 per cent, while bank stocks shed more than 1.6 per cent.

UK-listed AstraZeneca jumped 3.8 per cent after the US FDA approved its diabetes drug as a treatment for heart failure.

The broader healthcare sector gained on the back of better-than-expected quarterly results from Denmark’s Novo Nordisk and German dialysis specialist Fresenius Medical Care.

Still, earnings for companies listed on the STOXX 600 index are expected to drop by 30.6 per cent in the first quarter and a sharper 44.9 per cent in the second quarter, according to Refinitiv data.

In further signs of how the pandemic is causing economic damage, data showed orders for German industrial goods collapsed in March, while euro zone business activity plummeted in April.

North America

The S&P 500 and the Dow fell on Wednesday as declines in financials and defensive groups countered gains in tech shares and as data showed US private employers laid off 20 million workers in April, underscoring the economic fallout of the coronavirus outbreak.

The tech-heavy Nasdaq ended higher, although indexes pulled back late in the session especially after US President Donald Trump said China may or may not keep a trade deal between the two countries.

Financials and other cyclical groups, which often outperform when the economic outlook improves, declined. Only two of the 11 major S&P sectors were positive, with tech leading.

Stocks have rebounded sharply since late March from the coronavirus-fuelled sell-off, helped by massive monetary and fiscal stimulus.

The Dow Jones Industrial Average fell 218.45 points, or 0.91 per cent, to 23,664.64, the S&P 500 lost 20.02 points, or 0.70 per cent, to 2,848.42 and the Nasdaq Composite added 45.27 points, or 0.51 per cent, to 8,854.39.

US private employers laid off a record 20.236 million workers in April as mandatory business closures in response to the novel coronavirus outbreak savaged the economy.

The Labor Department’s more comprehensive report for April is due on Friday.

Investors are now watching efforts by a number of states to spark their economies by easing restrictions put in place to fight the outbreak.

In company news, General Motors Co jumped 3.0 per cent after the automaker topped first-quarter profit expectations and outlined plans for a May 18 restart of most of its North American plants.

Occidental Petroleum Corp shares fell 12.5 per cent after the company said it was looking to raise new cash or swap debt for stock, a day after it posted a large first-quarter loss.

is senior editor for Morningstar Australia

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