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Global Market Report - 9 March

Lex Hall  |  09 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to climb despite a mixed night on Wall St in which tech stocks sold off as others firmed on stimulus certainty. 

The Australian SPI 200 futures contract was up 71 points, or 1.1 per cent, at 6,805 points at 8.30am Sydney time on Tuesday, suggesting a positive start to trading.

The Dow climbed on Monday, led by stocks poised to benefit the most from an economic rebound as the US$1.9 trillion ($2.5 trillion) covid-19 relief bill awaited a final congressional vote this week, but heavyweight tech-related stocks sold off in a big downturn.

The Dow Jones Industrial Average rose 305.61 points, or 0.97 per cent, to 31,801.91, the S&P 500 lost 20.72 points, or 0.54 per cent, to 3,821.22 and the Nasdaq Composite dropped 310.99 points, or 2.41 per cent, to 12,609.16.

Locally, a savings war chest of more than $120 billion accumulated during the pandemic is driving resurgent property and retail markets and increasing confidence among economists that the end of JobKeeper this month will not spark a significant downturn, The Australian reports.

After surging early, Australia's share market has eased and closed with modest gains.

The S&P/ASX200 benchmark index closed higher by 28.8 points, or 0.43 per cent, to 6,739.6 on Monday.

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The index was 1.7 per cent higher at midday, and prior to that reached a high of 6,835.6.

The All Ordinaries closed higher by 28.6 points, or 0.41 per cent, at 6,971.6.

Materials was the top sector and closed higher by 1.65 per cent.

There were big falls during the session for information technology and health, which closed lower by 1.14 per cent and 0.84 per cent.

Gold was down 1.1 per cent at $US1,681.71 an ounce; Brent oil was down 1.9 per cent to $US68.06 a barrel; Iron ore was up 0.1 per cent to $US174.34 a tonne.

Meanwhile, the Australian dollar was buying 76.66 US cents at 8.30am, down from 77.01 US cents at Monday’s close.

Asia

Chinese and Hong Kong and markets fell sharply after rising at the open, amid growing concern about rising bond yields and high valuation of technology stocks.

In China, the Shanghai Composite fell 2.3 per cent to 3,421.41, after gaining as much as 1.2 per cent, for its biggest single day decline since 24 July.

The CSI 300 fell 3.5 per cent to 5,080.02

In Hong Kong, the Hang Seng Index eased 1.9 per cent to 28,540.83, after rising as much as 1 per cent at the open. It rose 0.4 per cent last week.

In Japan, the Nikkei 225 fell 0.4 per cent.

Europe

Shares of banks and automakers lifted European shares on Monday as investors continued to move into economy-linked sectors on hopes of a solid economic rebound from the coronavirus downturn.

The pan-European STOXX 600 index gained 2.22 per cent, its best one-day performance since early November. The banking sector gained 3.73 per cent to hit a fresh one-year high.

Spain’s Banco de Sabadell jumped 7.1 per cent, while HSBC, Banco Santander and ING Groep rose more than 2 per cent.

Automakers and insurers also rose about 3 per cent, while sectors considered bond-proxies like utilities and personal & household goods were among the laggards.

“The reflationary trade is being more supportive of European stocks in general because they’re not as weighted towards growth and tech that the US is,” said Neil Wilson, chief market analyst at Markets.com.

“You’ve got some progress on trade with Europe and the US and that’s good for some of the companies like Rolls-Royce.”

Aero engines-maker Rolls-Royce rose 7.3 per cent to top gains on UK’s blue-chip FTSE 100. The European Union and the US agreed on Friday to suspend tariffs imposed on billions of dollars of imports in a 16-year-old dispute over aircraft subsidies.

Meanwhile, England’s schools reopened to all pupils on Monday, marking the first step back towards normality as covid-19 infection rates fall.

Data also came in positive, with the Ifo economic institute saying the mood in the German manufacturing sector improved for the third month in a row in February.

On the radar, a European Central Bank meeting later this week will show if policymakers have decided to step up the pace of emergency bond purchases to calm skittish financial markets.

“What they won’t welcome is the rise in borrowing costs that has come about as a result of the recent surge higher in global bond yields,” said Michael Hewson, chief market analyst at CMC Markets.

Pearson’s jumped 6.4 per cent as its new boss set out his plan for the British education group to grow beyond schools and colleges with a strategy to build a lifelong direct connection to consumers by helping workers to learn new skills and retrain.

German meal kit delivery company HelloFresh sank 5.0 per cent after BNP Paribas downgraded the stock to “underperform”.

London Stock Exchange fell 6.7 per cent, extending its slide from Friday when it forecast higher costs for integrating data and analytics company Refinitiv, which it acquired in January for $27 billion.

North America

The Dow climbed on Monday, led by stocks poised to benefit the most from an economic rebound as the US$1.9 trillion ($2.5 trillion) covid-19 relief bill awaited a final congressional vote this week, but heavyweight tech-related stocks sold off in a big downturn.

After the legislation won US Senate approval on Saturday, President Joe Biden said he hoped for a quick passage of the revised coronavirus relief package by the Democrat-controlled House of Representatives so he could sign it and send $1,400 direct payments to Americans.

Prospects of more government spending and faster economic growth have stoked fears of a spike in inflation, sending the benchmark 10-year Treasury yield to near one-year highs.

US Treasury Secretary Janet Yellen, however, said on Monday the package would fuel a “very strong” US recovery and she did not expect the economy to run too hot because of the increased spending.

In the S&P 500, the financial sector was the biggest boost, hitting a record as higher interest rates and a steeper yield curve helped banks. Industrials were right behind, also reaching a record high, while the materials sector neared an all-time peak. The technology sector was deepest in the red.

As bond yields have moved higher, concerns about equity valuations for growth-oriented stocks and tech stocks specifically have weighed on the Nasdaq relentlessly the last three weeks, said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

Financials, along with restaurant and travel-related stocks that will do well as the economy reopens, have been leading the charge higher, James said.

“People have been reallocating assets into those sectors. It’s been coming out of growth-tech to fund those purchases,” he said.

The Dow Jones Industrial Average rose 305.61 points, or 0.97 per cent, to 31,801.91, the S&P 500 lost 20.72 points, or 0.54 per cent, to 3,821.22 and the Nasdaq Composite dropped 310.99 points, or 2.41 per cent, to 12,609.16.

A slide in the big tech stocks that have driven the rally in equities since pandemic-induced lows of last March continued, with Apple Inc, Nvidia Corp, Tesla Inc and Alphabet Inc’s Google leading declining shares on Nasdaq.

Tech stocks are particularly sensitive to rising yields because their value rests heavily on earnings in the future, which are discounted more deeply when bond returns go up.

The divergence between the tech stocks and non-tech stocks explains trading today, said Joe Saluzzi, partner and co-founder of Themis Trading in Chatham, New Jersey.

“The stimulus package will be certainly helping the bigger cap names,” Saluzzi said, referring to non-tech stocks. “The get-out and non-stay at home stocks are doing better now,” he said.

Banks added about 2 per cent as the yield on the benchmark 10-year note stood near a 13-month high, while airlines jumped about 5 per cent.

Walt Disney Co jumped about 6 per cent as California health officials set new rules that would allow Disneyland and other theme parks, stadiums and outdoor entertainment venues to reopen as early as April 1.

GameStop Corp surged about 42 per cent after the company said it had tapped shareholder Ryan Cohen to lead a transition to an e-commerce business.

With Reuters

is senior editor for Morningstar Australia

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