Global Market Report - 25 February
Australian stocks are set to dive again after fears about the spread of the coronavirus sparked a major sell off on global markets overnight.
Australia
Australian stocks are set to dive again after fears about the spread of the coronavirus sparked a major sell off on global markets overnight.
The SPI200 futures contract was down 167 points, or 2.41 per cent, at 6,762 at 8am Sydney time on Tuesday, pointing to big falls when the local market opens.
The Australian securities exchange suffered losses across the board on Monday, with $60 billion in value wiped out in its worst day in six months.
Fears about the extent of the spread of the Corona Virus in South Korea, into Europe and numerous other countries, then drove a major fallout in markets overnight.
Wall Street’s three major stock indexes tumbled on Monday as investors looked for safety on intensifying fears about the global economic impact of the coronavirus after a surge in cases outside China fanned worries about a pandemic.
The Dow Jones Industrial Average fell 1,029.5 points, or 3.55 per cent, to 27,962.91, the S&P 500 lost 3.35 per cent, and the Nasdaq Composite dropped 3.71 per cent.
The Australian dollar was buying 66.01 US cents at 8am on Tuesday, up from 65.97 US cents as the local share market closed on Monday.
Asia
China's main stock indexes retreated on Monday, as a spike in coronavirus infections and deaths beyond mainland China overshadowed assurances from Beijing that it would step up efforts to help cushion the blow to its economy, while small-caps extended their bullish run.
The blue-chip CSI300 index fell 0.4 per cent to 4,132.84, while the Shanghai Composite Index dipped 0.3 per cent to 3,031.23 points.
In Hong Kong, The Hang Seng index fell 1.8 per cent, to 26,820.88, while the China Enterprises Index lost 2.1 per cent, to 10,568.33.
Europe
A rush of coronavirus cases outside China wiped nearly $474 billion off the value of European stock markets on Monday, as investors reassessed the likely impact of the outbreak turning into a pandemic.
A 5.4 per cent slump saw Milan shares marking their worst day since mid-2016, as Italy reported the biggest flare-up of the virus in Europe with at least six deaths and more than 200 infections, which is likely to further upset the country’s already ailing economy.
The pan-European STOXX 600 dropped 3.8 per cent to 411.86, posting its biggest intra-day percentage slump since Britain voted to exit the European Union in June 2016.
A surge in infections in South Korea and Iran prompted widespread moves out of equities and into safe havens.
Both European and US stock markets have been on a decade-long bull run since the financial crisis, and the benchmark European index was trading at record highs as recently as last Wednesday, confident that the outbreak’s impact would be limited to China.
Airlines were among the worst performers on the STOXX 600, with EasyJet, Ryanair, Air France and Lufthansa down between 7.4 per cent and 12.6 per cent. Europe’s travel & leisure index tumbled 6 per cent and was the weakest regional sector.
Broad-based declines on the index sent luxury goods makers, miners, automakers, chipmakers and banking shares - which all tend to be tightly sensitive to expectations of global growth - down between 4 per cent and 6 per cent.
Fears of the economic impact from the outbreak bolstered expectations - already at 50 per cent - that the European Central Bank will cut interest rates by 10 basis points in July.
German shares fell 4 per cent, shrugging off an Ifo survey that showed business morale rose unexpectedly in February.
Juventus slumped 11.8 per cent after the Serie A leader posted a net loss of 50.3 million euros in the first half, compared to a profit a year earlier.
Bank of Ireland fell 5.2 per cent after its underlying pretax profit fell for the fourth successive year and the lender added it would take longer than forecast to hit a return on tangible equity above 10 per cent.
Only six stocks on the STOXX 600 ended higher for the day, led by educational services provider Pearson Plc as it bounced back from a steep fall on Friday
North America
Wall Street’s three major averages plunged on Monday as investors ran for safety after a surge in coronavirus cases outside China fanned worries about the global economic impact of a potential pandemic.
Investors sold riskier assets and rushed to traditionally safer bets such as gold and U.S. Treasuries after countries including Iran, Italy and South Korea reported a rise in virus cases over the weekend even as China eased curbs with no new cases reported in Beijing and other cities.
The benchmark S&P 500 index and the blue-chip Dow turned negative for the year to date and the Dow dropped more than 1,000 points, only the third time in its history for such a large decline in one day. Both the Dow and the S&P clocked their biggest one-day percentage declines since February 2018.
The technology heavy Nasdaq had the biggest percentage drop, down 3.71 per cent.
The Dow Jones Industrial Average fell 1,031.61 points, or 3.56 per cent, to 27,960.8, the S&P 500 lost 111.86 points, or 3.35 per cent, to 3,225.89 and the Nasdaq Composite dropped 355.31 points, or 3.71 per cent, to 9,221.28.All of the 11 major S&P sectors closed in the red, led by the energy sector’s 4.7 per cent decline and followed by a 4.2 per cent drop in technology stocks.
Apple Inc slid 4.8 per cent as data showed sales of smartphones in China tumbled by more than a third in January.
China-exposed chipmakers fell, with the Philadelphia SE Semiconductor index dropping 4.8 per cent, while concerns about growing travel curbs dragged the NYSE Arca Airline Index down 6 per cent.
Of the S&P’s sectors, the defensive utilities, real estate and consumer staples indexes fell the least on the day.
Treasury yields fell to their lowest levels since 2016 as investors sought safety in government bonds, while the yield curve inversion between the 3-month and 10-year U.S. Treasuries deepened in what is often viewed as a recession predictor.
Adding to worries, Goldman Sachs slashed its U.S. growth forecast on Sunday and predicted a more severe impact from the epidemic.
The CBOE Volatility Index, a gauge of investor anxiety, registered its biggest one-day jump since February 2018 and ended the day at 25.03, its highest closing level since January 2019.
Wall Street’s three main indexes had notched record highs last week, partly on optimism that the global economy, supported by central banks, would be able to snap back after short-term weakness related to the virus.
The S&P 500 fell below its 50-day moving average and the Dow slipped below its 100-day moving average, all closely watched technical indicators.
Health insurers such as UnitedHealth Group Inc and Cigna Corp dropped almost 8 per cent after Senator Bernie Sanders, who backs the elimination of private health insurance, strengthened his position for the Democratic presidential nomination with a victory in the Nevada caucuses.
In a rare bright spot, Gilead Sciences Inc, whose antiviral remdesivir has shown promise in monkeys infected by a related coronavirus, rose 4.6 per cent.