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Global Market Report - 8 December

Lex Hall  |  08 Dec 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to dip despite strong gains on Wall St as investors piled into growth stocks, pushing the Nasdaq to a record.

The Australian SPI 200 futures contract was down 14 points, or 0.2 per cent, to 6,657 points at 8.30am Sydney time on Tuesday, suggesting a negative start to trading.

The Nasdaq closed at a record high on Monday after investors moved into mega-cap growth stocks even as a new round of covid-19 restrictions underscored the continuing economic impact of the pandemic on the US.

The Dow Jones Industrial Average fell 149.59 points, or 0.5 per cent, to 30,068.67, the S&P 500 lost 6.4 points, or 0.17 per cent, to 3,692.72 and the Nasdaq Composite added 56.02 points, or 0.45 per cent, to 12,520.25.

Locally, NSW and Victoria have been stripped of their coveted AAA credit ratings after ratcheting up debt levels in big-spending budgets, forcing S&P to deliver the first downgrades for the two states in more than 30 years and triggering expectations the commonwealth could follow suit.

Iron ore miners powered the Australian share market higher yesterday, despite investors getting nervous about a report Donald Trump will put sanctions on Chinese officials.

The S&P/ASX200 benchmark index closed up 40.9 points, or 0.62 per cent, to 6,675.0 on Monday.

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The All Ordinaries added 43.6 points, or 0.64 per cent, to 6,908.9.

The materials sector finished 1.53 per cent higher as iron ore prices remain high due to strong demand from China.

Gold was up 1.4 per cent at $US1,863.90 an ounce; Brent oil was up 0.1 per cent to $US49.29 a barrel; Iron ore was up 1.3 per cent to $US146.93 a tonne.

Meanwhile, the Australian dollar was buying 74.41 US cents at 8.30am, up from 74.30 US cents at Monday’s close.

Asia

China stocks fell on Monday, dragged down by financials, due to worries over heightened Sino-US tensions, although upbeat trade data narrowed losses.

The blue-chip CSI300 index fell 0.9 per cent, to 5,022.24, while the Shanghai Composite Index declined 0.8 per cent to 3,416.60.

In Hong Kong, the Hang Seng index dropped 1.7 per cent to 26,382.06, while the Hong Kong China Enterprises Index lost 1.8 per cent to 10,437.22, after sliding 2.2 per cent and 2.3 per cent, respectively.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.83 per cent, while Japan's Nikkei index closed down 0.76 per cent.

Europe

European shares slipped on Monday as rising tension between the US and China sapped some appetite for risky assets, while a battered pound on growing fears of Brexit without a trade deal buoyed London’s blue-chip index.

After adding about 14 per cent over the last five weeks, the pan-European STOXX 600 index fell 0.7 per cent with banks leading losses as euro zone bonds yields fell.

Finance-heavy indexes in Spain and Italy slipped more than 0.8 per cent, while France’s CAC 40 fell 1 per cent after scaling a more than nine-month high on Friday.

Germany’s trade-sensitive DAX index lost 0.8 per cent after Reuters exclusively reported that the US was preparing to impose sanctions on at least a dozen Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong.

“US-China relations was the hot topic last year and at the start of this year, so any return to that... is going to weigh on markets as they pull back from some very high levels,” said Connor Campbell, a financial analyst at Spreadex.

The news cast a shadow on data that showed German industrial output rose much more than expected in October. Adding to the gloom, the Ifo institute said production expectations for Europe’s largest economy have deteriorated for the coming months.

With Britain preparing to roll out the Pfizer/BioNTech covid-19 vaccine this week, London’s FTSE 100 rose 0.3 per cent after swinging between losses and gains in early trade. Consumer and healthcare stocks led gains.

The pound took a beating as negotiators struggled to reach consensus on a post-Brexit trade deal.

British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen are due to hold another call on Monday evening in the hope that stubborn differences over fishing rights in UK waters, fair competition and ways to solve future disputes will have narrowed by then.

“If we don’t get a signal by the end of today, there are talks that it’s sort of a de-facto no-deal Brexit,” Campbell said.

Failure to secure a deal would clog borders, upset financial markets and disrupt delicate supply chains across Europe and beyond.

Investors also await the outcome of a European Central Bank meeting on Thursday, with more emergency bond buying and cheap liquidity for banks eyed.

Among individual stocks, upbeat trading updates from Games Workshop and Pandora sent their shares to the top of STOXX 600, while UK homebuilders led declines.

Oil stocks slipped 1.3 per cent. A continued surge in coronavirus cases globally pressured crude prices as it forced a series of renewed lockdowns.

North America

The Nasdaq closed at a record high on Monday after investors moved into mega-cap growth stocks even as a new round of covid-19 restrictions underscored the continuing economic impact of the pandemic on the United States.

The tech-heavy Nasdaq advanced to close at a record, as several of its largest constituents, including Apple and Facebook, rose. Still, a decline in names such as Alphabet and Microsoft kept major averages in check.

Large-cap growth stocks, which had underperformed value stocks in recent weeks as investors looked to names likely to benefit from a reopened economy, edged up while value lost ground.

Authorities in California, the most populous state in the country, on Monday compelled much of its residents to close shop and stay at home the day after it reported a record 30,000-plus new coronavirus cases.

Recent economic data indicating the economy has slowed as previous fiscal stimulus has dried up has highlighted the need for a new congressional relief package, with Friday eyed as a possible deadline when a funding measure for the government expires.

“It is just kind of a waiting game, we are waiting to see if there is going to be any stimulus attached to this funding bill,” said Ross Mayfield, investment strategy analyst at Baird.

“Even though we know the vaccine is imminent, it is kind of this weird period where we are waiting on emergency use approval and possible rollout by the end of the week,” said Mayfield.

The Dow Jones Industrial Average fell 149.59 points, or 0.5 per cent, to 30,068.67, the S&P 500 lost 6.4 points, or 0.17 per cent, to 3,692.72 and the Nasdaq Composite added 56.02 points, or 0.45 per cent, to 12,520.25.

Weighing heavily on value names were energy stocks, as the S&P 500 energy index was the worst performing among the 11 major sectors as oil prices slipped. The sector had been the best performer this quarter, climbing nearly 30 per cent.

Investors are closely tracking developments on the passage of a long-awaited coronavirus relief bill, after months of deadlocked negotiations between Republicans and Democrats.

The US Congress is likely to consider a one-week stopgap funding bill to provide more time for lawmakers to reach agreements in talks aimed at delivering covid-19 relief and an overarching spending bill to avoid a government shutdown, Democratic aides said on Monday.

Promising vaccine updates from major drugmakers have raised investor hopes for an economic recovery next year and have eased worries over a surge in US infections, powering Wall Street’s main indexes to record highs recently.

Wall Street followed a more cautious move in global stocks earlier in the session after Washington imposed financial sanctions and a travel ban on some Chinese officials over their alleged role in Beijing’s disqualification of elected opposition legislators in Hong Kong last month.

But with President-elect Joe Biden due to take office on 20 January, analysts see fresh stimulus and a vaccine rollout as a more pressing concern in the near term.

Intel Corp fell and was the biggest drag on the S&P 500 after Bloomberg News reported Apple was planning a series of new Mac processors for introduction as early as 2021 that are aimed at outperforming Intel’s fastest processors.

is senior editor for Morningstar Australia

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