Global Market Report - 7 October

Australia

Australian shares are set to fall as investors digest the budget and following losses on Wall St after Donald Trump called off covid relief talks.

The Australian SPI 200 futures contract was up 43 points, or 0.7 per cent, to 5,992 points at 8.30am Sydney time on Wednesday, suggesting a positive start to trading.

US stocks fell sharply on Tuesday to close lower after President Donald Trump said he was calling off negotiations with Democratic lawmakers on coronavirus relief legislation until after the election.

The Dow Jones Industrial Average fell 381.15 points, or 1.35 per cent, to 27,767.49, the S&P 500 lost 48.15 points, or 1.41 per cent, to 3,360.48 and the Nasdaq Composite  dropped 179.31 points, or 1.58 per cent, to 11,153.18.

Locally, the coalition's budget has thrown $507bn in tax cuts, cash payments and wage subsidies to drive business investment and protect the health of Australians in a bid to restore the economy to pre-covid growth levels by the end of next year and create almost a million jobs by 2024.

The S&P/ASX200 benchmark index closed higher by 20.5 points, or 0.35 per cent, to 5,962.1 on Tuesday. The index was slightly down at 5,938.2 just four minutes after the RBA decision to keep the rate at 0.25 per cent. Yet it soon rose to a session high of 5,963.9 before easing. The All Ordinaries index finished up by 29.1 points, or 0.47 per cent, to 6,164.2.

Gold was down 0.6 per cent at $US1,901.73 an ounce; Brent oil was up 3.5 per cent to $US42.72 a barrel; Iron ore: Markets are closed for Chinese Golden Week holiday.

Meanwhile, the Australian dollar was buying 71.55 US cents at 8.30am, down from 71.81 US cents at Tuesday’s close.

Asia

Japanese stocks ended at a near one-week high on Tuesday, as risk sentiment improved after US President Donald Trump returned to the White House following treatment at a hospital for covid-19, easing fears over political uncertainty.

The benchmark Nikkei share average rose 0.52 per cent to 23,433.73, while the broader Topix gained 0.52 per cent to 1,645.75. Both indexes hit levels unseen since 30 September.

Chinese markets were closed for a week-long holiday.  

Europe

European stocks stretched their gains for a fourth session on Tuesday, with banks surging more than 3 per cent over growing hopes for a US stimulus package, a Brexit trade deal as well as upbeat German data.

After shedding as much as 0.5 per cent at one point, the pan-European STOXX 600 index gradually erased the losses to close 0.1 per cent higher.

Europe's banking index hit its highest level in almost three weeks, as rising US Treasury yields—a benchmark for global borrowing costs—hit multi-month highs, supporting lenders on both sides of the Atlantic.

Aside from banks, sectors considered more exposed to the economic cycle, namely travel & leisure, oil & gas, automakers and insurers, rose between 1 per cent and 2.9 per cent.

Global markets saw a relief rally on Monday on reassurances about US President Donald Trump’s improving health after he tested positive for covid-19 last week, as well as political progress towards more fiscal stimulus measures.

“Stock markets have been dominated by indecision this week, with the US indices following their European counterparts in what looks like a distinct end to the ‘Trump left hospital’ bounce,” wrote IG’s Joshua Mahony.

Technology and healthcare stocks, among the top performers in Europe this year, slid about 0.9 per cent, weighing on the STOXX 600.

Wall Street technology majors also came under pressure after news that the US House of Representatives’ antitrust report on Big Tech firms contained a “thinly veiled call to break up” the companies.

Germany's DAX jumped 0.6 per cent as data showed orders for German-made goods rose 4.5 per cent in August, more than expected, boosting hopes for a robust third quarter in Europe's largest economy after the coronavirus shock.

Britain's midcap index, composed of stocks exposed to the UK economy, jumped 1.2 per cent after sources told Reuters that Britain and the EU were close to agreement on reciprocal social security rights for their citizens after Brexit.

Puma slid 1.1 per cent after French luxury group Kering said it had completed the sale of a 5.9 per cent stake in the German sportswear group.

Swiss technology accessories maker Logitech fell 5.1 per cent after Apple stopped selling headphones and wireless speakers from rivals.

French waste and water firm Suez jumped 4.6 per cent after rival Veolia succeeded in buying a large stake in the company from power group Engie. 

North America

Stocks were higher before the Trump remarks, but reversed course after he made the comments on Twitter.

Stocks fell to a session low shortly after the tweet, taking the S&P 500 down more than 2 per cent from its session high.

“Much of the rally we’ve seen in the last week in particular was based on hopes for an additional stimulus package,” said Robert Phipps, director at Per Stirling Capital Management in Austin, Texas. “There’s now a whole lot less reason to put money to work before the election.”

Earlier in the session, Federal Reserve Chair Jerome Powell warned that the US economic recovery remained far from complete.

Powell said the domestic rebound could still slip into a downward spiral if the coronavirus is not effectively controlled and growth sustained.

Hopes that a stimulus deal was still possible had helped to recoup losses from last week that were sparked by the news that Trump had contracted covid-19.

Consumer discretionary shares were among the biggest weights on the S&P 500.