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Global Market Report - 9 April

Lex Hall  |  09 Apr 2020Text size  Decrease  Increase  |  
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Australia

The Australian sharemarket is set for an early boost after US stocks were buoyed by hopes the coronavirus outbreak has reached a peak.

The SPI200 futures contract was up 70 points, or 1.35 per cent, at 5248.0 points at 8am Sydney time on Thursday, suggesting local stocks will rise after back-to-back sessions in the red.

The S&P/ASX200 benchmark index looked set to close flat on Wednesday despite weakness in the financial sector, but lost 38.8 points in the final minute of trade as the eurozone failed to pass a stimulus measure after 16 hours of talks.

The major US indices jumped overnight after President Donald Trump and New York Governor Andrew Cuomo each expressed hopes Americans might be getting to the top of the coronavirus curve.

Health insurers received an additional lift from Bernie Sanders' decision to suspend his presidential campaign.

The Dow Jones Industrial Average rose 3.44 per cent, the S&P 500 gained 3.41 per cent, and the Nasdaq added 2.58 per cent.

The Australian dollar was buying 62.31 US cents at 8am, down from 61.32 US cents at the close of markets on Wednesday.

Asia

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Chinese shares pulled back on Wednesday after a doubling of new coronavirus infections in mainland China highlighted continued risks posed by the pandemic, even as Wuhan, the Chinese city at the heart of the outbreak, ended its lockdown.

The Shanghai Composite index closed 0.19 per cent lower at 2,815.37. The index had gained more than 2 per cent on Tuesday.

The blue-chip CSI300 index ended 0.47 per cent lower, after having closed 2.3 per cent higher in the previous session.

In Hong Kong, the Hang Seng index was down 282.92 points, or 1.17 per cent, at 23,970.37.

Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.72 per cent, while Japan's Nikkei index closed up 2.13 per cent.

Europe

European stock markets inched higher to post a third straight day of gains on Wednesday, tracking a rally on Wall Street, but sentiment remained fragile with all eyes on whether euro zone finance ministers will agree on an economic rescue package.

The pan-European STOXX 600 index ended up 0.02 per cent, reversing earlier losses of as much as 1.5 per cent. Equities posted a strong start to the week on hopes that the rate of coronavirus infections was plateauing in western Europe and the US.

While the daily death toll rose again in Spain, and France became the fourth country to register more than 10,000 deaths from the virus, Wall Street rallied on hopes that the outbreak was close to its peak in the US.

London shares closed down 0.5 per cent, paring earlier losses of up to 2 per cent, while the main index in Paris finished 0.1 per cent higher.

Eurozone finance ministers have struggled to agree a coordinated economic support package despite several calls for common debt issuance to back businesses impacted by the outbreak.

Energy, mining, insurers and bank stocks were among the biggest decliners. Defensive real estate stocks gained 1.4 per cent, while travel and leisure led with a 3.3 per cent rise.

UK insurers, including Direct Line and Aviva, were among the biggest decliners on the STOXX 600 after they cancelled more than £1 billion ($2 billion) of dividends on Wednesday to conserve funds to tackle the fallout from the pandemic.

Sources said carmaker Renault’s board might also consider suspending its dividend while miner Rio Tinto said it would press ahead with its own payout.

The pan-region benchmark index has gained about 20 per cent since hitting an eight-year low on 16 March, boosted by aggressive global stimulus measures, but remains 25 per cent below its all-time high.

The chairman of the eurozone finance ministers, Mario Centeno, suspended talks on a half a trillion euro package until Thursday, sending the 10-year Italian bond yield to its highest since 19 March.

With countries doubling down on lockdowns to curb the spread of the virus, analysts have further cut profit estimates for STOXX 600 firms, with first-quarter earnings now expected to slide 15.7 per cent compared with the 1 January forecast of a 10.5 per cent rise.

North America

US stock markets jumped on Wednesday on hopeful signs that the coronavirus outbreak in the US was close to a peak, with health insurers getting an additional lift from Bernie Sanders’ decision to suspend his presidential campaign.

Stocks opened higher after President Donald Trump said Americans might be getting to the top of the “curve” in relation to the outbreak. New York Governor Andrew Cuomo said the state’s efforts at social distancing were working in getting the virus under control in one of the biggest hotspots in the country.

The Dow Jones Industrial Average rose 779.71 points, or 3.44 per cent, to 23,433.57, the S&P 500 gained 90.57 points, or 3.41 per cent, to 2,749.98 and the Nasdaq Composite added 203.64 points, or 2.58 per cent, to 8,090.90.

After the worst March performance for the S&P 500 in decades, the benchmark index has bounced back by nearly 23 per cent the past two weeks, although its main indicator of future volatility remains historically high.

Stocks gained an additional lift as the healthcare sector gained ground in the wake of Sanders’ decision to drop his campaign for the White House. Sanders’ embrace of a Medicare for All healthcare policy would have essentially abolished private insurance and had cast a shadow over healthcare stocks for months.

UnitedHealth Group jumped 7.98 per cent in the biggest boost to the Dow, while Anthem climbed 10.25 per cent.

Even with the big gains in recent weeks, in part due to massive fiscal and monetary stimulus measures, the S&P 500 is still down almost 19 per cent from its record high in mid-February, as measures to contain the virus brought the US economy to a virtual halt.

The Federal Reserve on Wednesday released the minutes from last month’s two emergency meetings. These showed officials grew increasingly concerned by the swiftness with which the pandemic was harming the US economy and disrupting financial markets, prompting them to take “forceful action.”

The energy sector, up 6.74 per cent, was also a bright spot as one of the best performing sectors on the day, as WTI crude settled up more than 6 per cent on hopes of a production cut by OPEC and its allies on Thursday.

Tesla Inc and Boeing Co supplier Spirit AeroSystems became the latest companies to temporarily lay off workers.

Spirit’s shares jumped 16.01 per cent, while Tesla edged up 0.62 per cent.

is senior editor for Morningstar Australia

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