Global Market Report - 15 December

Australia

Australian shares are set to fall at the open as Wall Street faded overnight despite the launch of a covid-19 vaccine campaign.

The Australian SPI 200 futures contract was down 18 points, or 0.29 per cent, to 6,644 points at 8.30am Sydney time on Tuesday, suggesting a negative start to trading.

The S&P 500 ended lower on Monday after the launch of a covid-19 vaccine campaign in the US, while Alexion Pharmaceuticals jumped on a US$39 billion ($52 billion) buyout offer from AstraZeneca in one of the year’s biggest deals.

The Dow Jones Industrial Average fell 0.62 per cent to end at 29,859.97 points, while the S&P 500 lost 0.44 per cent to 3,647.33. The Nasdaq Composite climbed 0.5 per cent to 12,440.04.

Locally, the Morrison government was urgently seeking answers from China on Monday night after reports Beijing had formally banned $14 billion of Australian coal exports in its latest trade strike, the Australian Financial Review reports.

The S&P/ASX200 benchmark index closed higher by 17.6 points, or 0.26 per cent, to 6,660.2 on Monday. The All Ordinaries closed higher by 13.9 points, or 0.2 per cent, to 6,900.3.

Gold was down 0.7 per cent at $US1,826.58 an ounce; Brent oil was up 0.5 per cent to $US50.23 a barrel; Iron ore was down 3.6 per cent to $US154.37 a tonne.

Meanwhile, the Australian dollar was buying 75.40 US cents at 8.30am, up from 75.39 US cents at Monday’s close.

Asia

China stocks rebounded on Monday, underpinned by hopes of more policy support to shore up the world’s second-largest economy hit by the covid-19 pandemic.

The blue-chip CSI300 index rose 0.9 per cent to 4,934.84, while the Shanghai Composite Index added 0.7 per cent to 3,369.12.

Hong Kong stocks ended lower on Monday, weighed down by tech firms after China fined tech players for not reporting deals properly for anti-trust reviews, though prospects of further policy support in Beijing limited losses.

The Hang Seng index fell 0.4 per cent to 26,389.52, while the China Enterprises Index lost 0.1 per cent to 10,443.12 points.

Japanese shares closed higher on Monday as progress on covid-19 vaccine roll-outs globally lifted risk sentiment, while a Bank of Japan survey showed business sentiment in December improved at the fastest pace in nearly two decades.

The Nikkei share average rose 0.3 per cent to 26,732.44, rebounding from its first weekly loss in six. The broader Topix gained 0.48 per cent to 1,790.52, its highest close since October 2018.

Europe

European shares rose on Monday as a decision to extend trade talks between Britain and the European Union kept hopes of an eventual deal alive, but gains in London’s blue-chips lagged a higher pound and a near 6 per cent drop in AstraZeneca weighed.

With banks in the lead, Europe’s benchmark STOXX 600 index rose 0.4 per cent after breaking a five-week winning streak to end 1 per cent lower last week.

Optimism also stemmed from hopes of an end to the covid-19 pandemic as the US was set on Monday to begin inoculating its citizens with the Pfizer-BioNtech vaccine. Last week, Britain became the first Western nation to begin mass vaccinations.

EU Brexit negotiator Michel Barnier said a new trade pact to govern around $1 trillion in trade with Britain, currently free from tariffs and quotas, was still possible as leaders from both sides decided to extend talks beyond a Sunday deadline.

But as fishing in UK waters and how to safeguard fair competition remained sticking points, UK Prime Minister Boris Johnson sounded sceptical of a breakthrough less than three weeks ahead of the five-year finale to Britain’s exit from the bloc.

“While a deal still feels (narrowly) more likely than not, the timing remains up in the air,” said James Smith, developed markets economist at ING.

“Politically speaking, there’s not much to stop talks running very close to the New Year’s deadline.”

London’s FTSE 100 was range-bound, and ended the session 0.2 per cent lower as a rising pound, declining energy shares and AstraZeneca restrained the market.

AstraZeneca posted its worst session in nine months as investors priced in the British drugmaker’s move to buy US drugmaker Alexion Pharmaceuticals for US$39 billion.

German stay-at-home stocks gained after a new lockdown was announced to rein in the spread of covid-19. Most stores will be closed in Germany from Wednesday until at least 10 January, Chancellor Angela Merkel said on Sunday, cutting short the busy Christmas shopping season.

Shares in online fashion retailer Zalando and food delivery firm Delivery Hero surged 6.7 per cent and 4.7 per cent, respectively. The blue-chip DAX index was up 0.8 per cent, logging its best session in three weeks.

“In the short term (the lockdown) will be a blow to activity and confidence even if the damage will be limited by knowledge of the imminent vaccine roll-out,” said strategists at Deutsche Bank (DB) led by Jim Reid.

North America

The S&P 500 ended lower on Monday after the launch of a covid-19 vaccine campaign in the US, while Alexion Pharmaceuticals jumped on a US$39 billion buyout offer from AstraZeneca in one of the year’s biggest deals.

The Dow Jones Industrial Average hit a record high before ending lower, weighed down by Walt Disney.

Administration of the vaccine developed by Pfizer and its German partner BioNTech began on Monday following emergency-use approval from federal regulators last week.

The S&P 500 consumer discretionary index was one of the strongest gainers among sector indexes, lifted by a rise in Amazon. The energy index tumbled.

The S&P 500 gave up earlier gains of almost 1 per cent. The index has surged about 13 per cent to record highs in 2020, despite the pandemic, which has wrought economic devastation and killed more than a million people.

“While the entire market is pleased, is optimistic, is bullish about the arrival of the vaccine this morning into the US, I think the average investor is realising that this rollout, this distribution of the vaccine is not going to be a silver bullet, is not going to go as fast as one hopes,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

Alexion Pharmaceuticals Inc was among the top boosts to the S&P 500 and the Nasdaq, surging to a 4½-year high after British drugmaker AstraZeneca said it would buy the US biotech firm. AstraZeneca’s US-listed shares dropped.

Walt Disney fell after BMO Capital Markets downgraded the stock.

The Dow Jones Industrial Average fell 0.62 per cent to end at 29,859.97 points, while the S&P 500 lost 0.44 per cent to 3,647.33. The Nasdaq Composite climbed 0.5 per cent to 12,440.04.

Investors were also watching the outlook for additional coronavirus relief after the Senate last week approved a one-week extension of federal funding to avoid a government shutdown and allow more time for negotiations.

Investors were also focused on early voting in a pair of US Senate races in Georgia that will determine control of the chamber and heavily influence lawmaking.

E-commerce company Alibaba Group Holding dipped after China warned its internet majors of more anti-trust scrutiny, imposed fines and announced probes into deals involving Alibaba and Tencent Holdings Ltd.

Electric-car maker Tesla rallied as anticipation of its addition to the S&P 500 benchmark next week offset a report of production delays.