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Global Market Report - 8 January

Lex Hall  |  08 Jan 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise as Wall Street notched another high, buoyed by the prospect of more stimulus under a Biden government.

The Australian SPI 200 futures contract was up 11 points, or 0.2 per cent, at 6662 points at 8.30am Sydney time on Friday, suggesting a positive start to trading.

Stocks on Wall Street hit record levels on Thursday as investors bet a Democrat-controlled Congress will deliver more stimulus spending to help the US economy overcome a steep pandemic-induced downturn.

The Dow Jones Industrial Average rose 211.66 points, or 0.69 per cent, to 31,041.06, the S&P 500 gained 55.69 points, or 1.49 per cent, to 3,803.83 and the Nasdaq Composite added 325.78 points, or 2.56 per cent, to 13,066.57.

Bitcoin topped US$40,000 ($51,470) for the first time on Thursday, as it continues a rally that has seen the digital currency climb more than 700 per cent from a 12 March closing low.

The S&P/ASX200 benchmark index closed higher by 104.9 points, or 1.59 per cent, to 6712 on Thursday.

The gain was the best for the index since the 1.72 per cent rise of 11 November.

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The All Ordinaries closed better by 99.1 points, or 1.44 per cent, at 6980.5.

Gold was down 0.2 per cent to $US1914.57 an ounce; Oil was up 0.3 per cent to $US54.44 a barrel; Iron ore was up 1.8 per cent to $US171.69 a tonne.

Meanwhile, the Australian dollar was buying 77.54 US cents at 8.30am, down from 77.90 US cents at  Thursday's close.

Asia

China stocks extended gains into a sixth session on Thursday, with the blue-chip index settling at a 13-year high, underpinned by the consumer and financial sectors.

At the close, the Shanghai Composite index was up 0.71 per cent at 3,576.20. The blue-chip CSI300 index was up 1.77 per cent at 5,513.66, the strongest close since January 2008. Gains were led by the consumer and financial sectors, with the sub-indexes climbing 1.58 per cent and 1.02 per cent, respectively.

Hong Kong's main Hang Seng index ended Thursday lower, after the New York Stock Exchange moved to delist Chinese telecoms firms again.

At the close of trade, the Hang Seng index was down 143.78 points or 0.52 per cent at 27,548.52. The Hang Seng China Enterprises index fell 0.95 per cent to 10,796.73.

Europe

European stocks climbed for a second straight session on Thursday as construction stocks gained on upbeat sales forecast from Saint Gobain and commodity-linked shares rose on hopes of larger US stimulus after Democrats won Senate control.

The pan-European STOXX 600 index advanced 0.5 per cent to near February 2020 highs, while London’s blue-chip FTSE 100 gained 0.2 per cent and Germany’s DAX index was up 0.6 per cent.

Construction & material stocks were the top gainers, led by a 2.3 per cent rise in France’s Saint Gobain after it said fourth-quarter results would significantly exceed expectations.

Meanwhile, economically sensitive sectors such as mining , energy and industrials extended their rally on the prospects of more US stimulus after Democrats won control of the Senate.

“While a Blue Wave could pave the way for stricter regulations and tax hikes, investors try to see it from a positive side... and further stimulus measures are likely to follow and without a months-long stalemate,” said Milan Cutkovic, market analyst at Axi.

Gains in Swedish industrial companies Atlas Copco, Sandvik and Volvo drove Stockholm stocks to all-time highs.

“We highlight that Basic Resources, Construction & Materials have underperformed since the beginning of December and, given their sensitivity to fiscal policy in general through infrastructure investment, they have catch-up potential,” Unicredit analysts said in a note.

European wind turbine makers Vestas, Orsted and Siemens Gamesa all extended gains from the previous session.

Renewable stocks are widely considered as winners of a Joe Biden administration, given the US president-elect’s proposed $2 trillion climate plan.

Sentiment was also boosted by European approval for a second covid-19 vaccine developed by Moderna Inc.

Meanwhile, demand for German-made goods defied expectations, rising 2.3 per cent in November, the latest in a string of data points showing Europe’s largest economy being unexpectedly resilient in the face of the pandemic.

Among other movers, LafargeHolcim rose 2.4 per cent after the world’s biggest cement maker said it would buy Firestone Building Products from Bridgestone Americas in a deal worth US$3.4 billion ($4.4 billion).

Delivery Hero slipped 2.9 per cent after the German food delivery firm said it raised around 1.2 billion euros ($1.9 billion) by issuing new shares to fund growth.

Mitchells & Butlers dropped 3.2 per cent after the British pub operator said it was exploring an equity capital raise as a new national lockdown shut its sites across England.

North America

Stocks on Wall Street hit record levels on Thursday as investors bet a Democrat-controlled Congress will deliver more stimulus spending to help the US economy overcome a steep pandemic-induced downturn.

The Dow, S&P 500 and Nasdaq all set new highs amid growing calls for President Donald Trump’s removal, one day after Trump supporters stormed the US Capitol in a harrowing assault on American democracy.

US House Speaker Nancy Pelosi urged Trump’s immediate removal from office through the 25th Amendment. President-elect Joe Biden accused Trump of fomenting violence and said Wednesday was one of the darkest days in US history.

“The market is now looking past Trump and it’s looking forward to a Biden presidency, more structure and stimulus,” said Dennis Dick, a trader at Bright Trading LLC.

“A Democratic Congress is going to obviously be more concerned about the small businesses, and the Main Street.”

Economy-linked financials jumped while industrial and materials sectors hit new records on expectations Biden will line up a bigger fiscal package and boost infrastructure spending with Congress under Democrat control.

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

Plain vanilla growth stocks, relatively speaking, are less likely to benefit from more stimulus spending, said David Bahnsen, chief investment officer of The Bahnsen Group in Newport Beach, California.

“Overall value-type stocks probably do better than growth,” Bahnsen said. “On the margin, if they’re going to go get another US$1 trillion and push bond yields higher and the slope of the yield curve steeper, banks are going to benefit.”

The S&P 500 technology index more than made up for its losses from a day earlier, when shares of some of the biggest technology companies dropped on fears of increased regulation.

The NYSE FANG+TM index, which includes the core FAANG group of stocks that have led the Wall Street rally from pandemic lows, gained more than 2 per cent.

The Dow Jones Industrial Average rose 211.66 points, or 0.69 per cent, to 31,041.06, the S&P 500 gained 55.69 points, or 1.49 per cent, to 3,803.83 and the Nasdaq Composite added 325.78 points, or 2.56 per cent, to 13,066.57.

The number of Americans filing for jobless benefits unexpectedly dipped last week, while staying elevated, a Labor Department report showed, with the job market recovery appearing to stall as the covid-19 pandemic threatens to overwhelm the country.

“With more stimulus coming, even if we do have a miss on claims, it’s going to be a little bit less severe, because we know there’s going to be a bigger back up for those who are recently unemployed,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors in Newport Beach, California.

Investors are now awaiting a comprehensive December jobs report, which is expected on Friday.

DXC Technology Co surged as France’s IT consulting group Atos SE made a more than $10 billion takeover approach for its US rival, according to two sources with knowledge of the matter.

Electric-car maker Tesla Inc jumped to a record high, with its chief and billionaire entrepreneur Elon Musk surpassing Amazon.com’s top boss Jeff Bezos to become the world’s richest man, according to a report.

is senior editor for Morningstar Australia

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