Global Market Report - 4 March
The Australian stock market is heading for another fall after US stocks tumbled overnight despite a rate cut.
Australia
The Australian stock market is heading for another fall after US stocks tumbled overnight despite a rate cut.
The SPI200 futures contract was down 84 points, or 1.32 per cent, at 6284 at 8am Sydney time on Wednesday, suggesting local stocks will be heading south once more.
US stocks fell overnight after the US Federal Reserve announced a rate cut, saying the COVID-19 virus is an evolving risk to the economy.
On Wall Street, the Dow Jones Industrial Average dropped 2.94 per cent to end at 25,917.41 points, while the S&P 500 lost 2.81 per cent. The Nasdaq Composite descended 2.99 per cent.
The Australian dollar was buying 65.98 US cents, up from 65.45 US cents at Tuesday's market close.
Asia
China shares closed higher on Tuesday as new coronavirus cases in the country fell, while hopes of global policy action to limit the economic hit from the epidemic also aided sentiment.
The Shanghai Composite index closed up 0.7 per cent at 2,992.90, while the blue-chip CSI300 index ended 0.5 per cent higher. Both indexes jumped more than 3 per cent on Monday.
Hong Kong stocks erased earlier gains to end flat on Tuesday, as worries over the fast-spreading coronavirus offset expectations of global policy support to tackle the economic hit from the epidemic.
At the close of trade, the Hang Seng index was down 6.86 points, or 0.03 per cent, at 26,284.82. The Hang Seng China Enterprises index was steady at 10,485.16.
Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.8 per cent, while Japan’s Nikkei index closed down 1.2 per cent.
Europe
European shares rose on Tuesday, as investors counted on further monetary stimulus by central banks after the US Federal Reserve cut interest rates in an emergency move to cushion the economic impact of the coronavirus epidemic.
The Fed was among the first G7 countries to reduce borrowing costs by half a percentage point, shortly after the group said it was ready to take action, including fiscal measures where appropriate.
The pan-European STOXX 600 index closed up 1.4 per cent after surging as high as 3.3 per cent immediately after the rate cut.
Central banks in Britain, Japan and France have also signalled willingness to ease policy measures after a worldwide sell-off last week that erased more than $5 trillion from equity markets.
Growth-linked travel and leisure stocks .SXTP ended 1.5 per cent higher, after eight straight days of declines as widespread travel curbs to contain the outbreak crushed passenger numbers and dented demand at hotels.
Of the 21 European sub-sectors, only banks closed out the session lower. Financial services companies tend to outperform in a higher interest rate environment.
The benchmark index is still about 12 per cent shy of a February peak, reflecting the scale of the hit investors expect from the virus.
After a decade of cash injections from central banks, analysts also question if monetary stimulus will be enough this time round.
Spanish banks powered a 0.8 per cent rise for the Madrid bourse .IBEX after the European Court of Justice ruled that it would be up to local judges to decide on a case-by-case basis if IRPH mortgage clauses were abusive.
Caixabank and Bankia rose 0.6 per cent and 3.7 per cent, respectively, on relief that the court did not decide on a blanket rejection of the clause.
Among individual movers, German wholesaler Metro soared 19.2 per cent to the top of the STOXX 600 after US food distributor Sysco contacted the company about a potential takeover, a person familiar with the matter told Reuters on Tuesday.
Qiagen NV jumped 17 per cent after US firm Thermo Fisher Scientific launched a 10.4 billion euro ($11.6 billion) bid for the German genetic testing company.
North America
Wall Street tumbled in a volatile session on Tuesday after the US Federal Reserve surprised investors with a half percentage-point cut in interest rates, amplifying fears about the magnitude of the coronavirus’ impact on the economy.
All three major US stock market indexes closed nearly 3 per cent lower after the Fed’s first emergency rate cut since the 2008 financial crisis.
The rate reduction underscored the US central bank’s concern about the new coronavirus, which has spread around the world after emerging late last year in China. It came two weeks ahead of a scheduled policy meeting, where traders had fully priced in a 50-basis-point cut.
Stocks had initially jumped more than 1 per cent, but then dropped as traders worried whether pumping more money into financial markets would address the central problem - a drop in business activity as workers and consumers stay home.
The 10-year Treasury yield fell below 1 per cent for the first time ever as nervous investors moved money out of the stock market.
The S&P financials index tumbled 3.7 per cent, reflecting banks’ difficulty in making profits in low-interest rate environments.
Wall Street on Friday had its biggest weekly decline in more than a decade as growing cases of the flu-like virus outside China fanned fears of a global recession.
Earlier on Tuesday, Group of Seven finance ministers and central bank governors pledged appropriate actions to support their economies.
The Dow Jones Industrial Average dropped 2.94 per cent to end at 25,917.41 points, while the S&P 500 lost 2.81 per cent to finish at 3003.37.
The Nasdaq Composite descended 2.99 per cent to 8,684.09.
Like other recent sessions, volume was heavy on US exchanges, with 14.7 billion shares changing hands compared with a 9.8 billion-share average for the last 20 days.
All of the 11 major S&P sectors fell, with the information technology index slumping 3.8 per cent. Apple and Microsoft fell 3.2 per cent and 4.8 per cent, respectively.
Tuesday’s sell-off left the S&P 500 down about 11 per cent from its record high close on Feb 19.
Healthcare equipment maker Thermo Fisher Scientific, rose 1.8 per cent after it launched an $11.6 billion bid for German genetic testing company Qiagen.
Protective mask maker Alpha Pro Tech jumped nearly 20 per cent.