Global Market Report - 2 March
Australian stocks are poised to slide when the market opens as the coronavirus spreads and China reports sluggish business activity.
Australian stocks are poised to slide when the market opens as the coronavirus spreads.
The SPI200 futures contract was down 40 points, or 0.63 per cent, at 6334 at 8am Sydney time on Monday, pointing to a moderate fall when the local market opens.
But IG market analyst Kyle Rodda says that does not take into account new coronavirus news, nor the Chinese economic data, received at the weekend.
"Italy, Iran and South Korea reported another spike in coronavirus cases, with several countries announcing an expanding travel blacklist," he said.
"The first death from the disease was reported in the United States, and in Australia.
"And in what's probably the most impactful news from a markets perspective, China released its latest PMI surveys, with the data showing business activity in the Chinese economy fell to an all-time low last month."
On Wall Street, the major indices fell while the tech-heavy benchmark was flat. The Dow Jones Industrial Average fell 357.28 points, or 1.39 per cent, to 25,409.36; the S&P 500 lost 0.82 per cent and the Nasdaq Composite added 0.01 per cent.
The Australian dollar was buying 64.69 US cents at 8am on Monday, down from 65.22 US cents as the market closed on Friday.
China stocks slumped on Friday to cap the worst month since May last year, as fears of the coronavirus outbreak turning pandemic sent global markets tumbling.
The Shanghai Composite index's 3.2 per cent fall for February, though, is modest by comparison with other major markets thanks to a mid-month rally powered by policy support.
For the day, the Shanghai Composite Index and the blue-chip CSI300 index both fell more than 3.5 per cent, marking the biggest daily fall since Feb. 3, when infections were rapidly spreading in China.
Hong Kong stocks fell on Friday, posting their worst week in a month, as the rapid spread of the coronavirus across the world sparked fears of contagion and sent global markets reeling.
At the close of trade, the Hang Seng index was down 2.4 per cent at 26,129.93. The index is down 4.3 per cent week-on-week and 0.7 per cent from the previous month.
Japanese shares plummeted in heavy volume on Friday to their lowest in nearly six months as global markets sold off on the rising possibility the coronavirus outbreak would become a pandemic.
The benchmark Nikkei average tumbled 3.7 per cent to 21,142.96, its lowest closing level since 5 September.
European shares ended the week down roughly $1.5 trillion in their worst weekly performance since the 2008 financial crisis as the rapid spread of coronavirus outside China saw sustained selling on fears of a recession.
The pan-regional STOXX 600 index fell 3.5 per cent on Friday, deepening its slide into correction territory with a 13.2 per cent plunge from a record high hit on Wednesday last week.
“The move today, and the week-over-week move is driven by systematic, self-enforcing flows. We have seen a significant amount of position reduction (this week),” said Philipp Brugger, head of investment strategy at Union Investment.
All European sub-sectors were well in the red, with chemicals, insurance and telecom leading losses for the day, shedding more than 4 per cent each.
Germany’s BASF was among the biggest percentage losers in the chemical subindex after it warned that earnings could drop further this year.
Travel and leisure stocks underperformed their peers by a wide margin over the week, dropping about 18 per cent.
Airlines were the worst hit, with the situation intensified after British Airways owner IAG said its earnings would take a hit this year as passenger numbers tumbled.
The stock fell 8.4 per cent on the day, while other airlines Easyjet, Air France, and Lufthansa dropping between 0.9 per cent to 6.4 per cent.
Milan-listed shares fell 3.6 per cent. The number of people infected in Italy, Europe's worst hit country, surpassed 850 on Friday.
German stocks dropped 3.9 per cent as the number of cases in the country rose to 60. Insurer Munich Re was among the worst performers for the day after its fourth-quarter profit dropped.
French publisher Lagardere SCA bottomed out the STOXX 600 after reporting lower 2019 revenue. The firm also appointed former French president Nicolas Sarkozy to its advisory board.
Engines and automobile maker Rolls-Royce was among the few gainers, ending up 3.2 per cent after saying it was well placed to deal with disruptions caused by the epidemic.
While investors have ramped up expectations for a eurozone rate cut as soon as June in response to the virus, two ECB policymakers said on Friday that the bank does not need to take immediate action in response to the epidemic.
“The ECB situation has the additional challenge that they do not have so much powder left, and in general the threshold for them to move on an interest rate side is really high,” Union Investment’s Brugger added.
The World Health Organisation warned that the virus had pandemic potential, and ratings agency Moody’s saying it would trigger a global recession in the first half of the year.
The S&P 500 fell for the seventh straight day on Friday and the benchmark index suffered its biggest weekly drop since the 2008 global financial crisis on growing fears the fast-spreading coronavirus could push the economy into recession, although stocks regained some ground right at the end of a volatile session.
The Dow and the Nasdaq also registered their deepest weekly percentage losses since October 2008.
The Nasdaq managed to eke out an 0.01 per cent gain after plunging as much as 3.5 per cent during the session. After falling as much as 4.2 per cent - more than 1,000 points - the Dow ended the day down 1.4 per cent.
But, after the bell, S&P 500 e-mini futures EScv1 were up about 1 per cent and the Invesco QQQ Trust ETF was up 1.3 per cent in extended trade.
On Thursday, all three indexes had confirmed corrections by finishing more than 10 per cent below their closing record highs.
Equities found some support after US Federal Reserve chair Jerome Powell said the fundamentals of the American economy remained strong and that the central bank would act as appropriate to provide support.
But investors had spent most of the day dumping equities for the safety of US Treasuries, pushing 10-year yields to their fourth record low this week.
The virus spread further on Friday, with cases reported for the first time in at least six countries across four continents, battering markets and leading the WHO to raise its impact risk alert to “very high.”
The Dow Jones Industrial Average fell 357.28 points, or 1.39 per cent, to 25,409.36; the S&P 500 lost 24.54 points, or 0.82 per cent, to 2954.22; and the Nasdaq Composite added 0.89 point, or 0.01 per cent, to 8,567.37.
The CBOE volatility index, also known as Wall Street’s fear gauge ended the day near its session low, up 0.95 point at 40.11, after rising as high as 49.48.
Of the S&P’s 11 major sectors, the rate-sensitive financial index weighed the most on the benchmark S&P 500 index, ending the day down 2.6 per cent. The utilities sector was the S&P’s biggest percentage loser with a 3.3 per cent drop. Real estate and consumer staples also rate-sensitive sectors that are often seen as safe havens - both fell more than 2 per cent.
Yet the energy, technology and communications services index all showed gains for the day.