Global Market Report - 5 November
Australian shares are set to rise after Wall Street surged overnight as investors cheered the possibility of congressional gridlock curbing policy changes.
Australia
Australian shares are set to rise after Wall Street surged overnight as investors cheered the possibility of congressional gridlock curbing policy changes.
The Australian SPI 200 futures contract was up 53 points, or 0.9 per cent, to 6,107 points at 8.30am Sydney time on Thursday, suggesting a positive start to trading.
US stocks surged on Wednesday as the race for the White House remained undecided and the likelihood of gridlock in Congress gave investors optimism that major policy changes would be hard to enact.
The Dow Jones Industrial Average rose 605.68 points, or 2.2 per cent, to 28,085.71, the S&P 500 gained 96.07 points, or 2.85 per cent, to 3,465.23 and the Nasdaq Composite added 441.61 points, or 3.96 per cent, to 11,602.18.
Locally, ABS data suggests that the total number of jobs nationwide fell by 0.8 per cent over the fortnight to 17 October. This followed the first reduction in fortnightly payments under the JobKeeper wage subsidy scheme.
The S&P/ASX200 benchmark index closed lower by 4.3 points, or 0.07 per cent, to 6,062.1 on Wednesday. The index fell to a session low of 5,986 at about 1230 AEDT, but improved to a session high of 6,096.4 with about 90 minutes remaining. The All Ordinaries closed higher by 2.2 points, or 0.04 per cent, to 6,265.
Gold was down 0.7 per cent at $US1,896.51 an ounce; Brent oil was up 3.7 per cent to $US41.17 a barrel; Iron ore was down 0.2 per cent to $US116.91 a tonne.
Meanwhile, the Australian dollar was buying 71.84 US cents at 8.30am, up from 71.21 US cents at Wednesday’s close.
Asia
China’s blue-chip CSI300 index rose on Wednesday, boosted by banking shares, as investors appeared to take in stride the suspension of Ant Group’s closely watched mega-listing, with a strong services activity survey aiding sentiment.
The US presidential election was also on investors’ radar as early results indicated a nail-biting finish to the race.
The CSI300 index rose 0.76 per cent to 4,813.66. The Shanghai Composite Index rose 0.19 per cent to close at 3,277.44.
China on Tuesday suspended Ant Group’s $37 billion listing, thwarting the world’s biggest stock market debut, with analysts saying the move could bode well for Chinese banks as it could mean decreased competition from the tech giant.
Europe
European stocks closed with strong gains on Wednesday as investors unwound bets of a Democratic sweep in the US presidential election as the race proved far closer than polls had predicted.
The healthcare sector, typically considered more stable during times of economic uncertainty, rallied 4.9 per cent, while technology stocks that have powered a rebound in global equities since the pandemic lows, surged 3.0 per cent.
Global markets were whipsawed earlier as US Republican President Donald Trump took the lead over Democratic rival Joe Biden in a number of vital swing states, while opinion polls had given Biden a strong lead nationwide for months.
Adding to concerns, Trump falsely claimed he had won the election with millions of votes still uncounted, and said he would go to the US Supreme Court to fight for the win if needed.
After falling as much as 1.3 per cent at one point, the pan-European STOXX 600 index swung 2.1 per cent higher, while the German DAX gained 2 per cent and UK's FTSE rose 1.7 per cent.
European markets gained earlier this week on anticipation a Biden win would bring better trade ties with Washington and a bigger fiscal package for the coronavirus-hit US economy.
Economically sensitive banking, oil & gas and mining stocks fell into the red after leading a surge this week on hopes of more stimulus.
Wind turbine makers Vestas and Siemens Gamesa, which were expected to benefit from Biden's clean energy plan, fell 3.5 per cent and 1.6 per cent respectively.
“Markets are to some extent reversing the pricing in of the ‘blue wave’. We have better support for likes of healthcare and technology,” said Jonathan Stubbs, equity strategist at Berenberg.
On Wall Street, the technology-heavy Nasdaq index surged 4.1 per cent as investors said chances faded for Democrats to score a big win in the US Senate, lowering bets of higher antitrust scrutiny and capital gains taxes.
“We would interpret the outperformance of the Nasdaq as possibly a divided government, less fiscal stimulus, and more stay-at-home environment as covid-19 cases rise,” said Matthias Scheiber, global head of multi asset portfolio management at Wells Fargo Asset Management.
European equities, which lean on “value” sectors such as banks and energy, trade at a record low relative to US stocks which count big on “growth” sectors like technology.
Among individual movers, German online fashion retailer Zalando jumped 4 per cent after it confirmed the increased guidance it gave last month.
Britain's Marks & Spencer surged almost 5 per cent after encouraging performance in its food business but reported the first loss in its 94 years as a publicly listed company.
North America
US stocks surged on Wednesday as the race for the White House remained undecided and the likelihood of gridlock in Congress gave investors optimism that major policy changes would be hard to enact.
Both President Donald Trump and Democratic nominee Joe Biden still had paths to reach the 270 Electoral College votes needed to win as states kept counting mail-in ballots.
A surprise win by Republican Senator Susan Collins in Maine also dimmed hopes by Democrats that they could get control of the US Senate.
“The divided congress means nothing major or extreme from a policy standpoint is likely going to happen anytime soon, be it increased taxes, more restrictive energy policy, more stimulus, things like that look like they got pulled right off the table,” said Shawn Cruz, Senior Market Strategist at TD Ameritrade in Jersey City, New Jersey.
The Dow Jones Industrial Average rose 605.68 points, or 2.2 per cent, to 28,085.71, the S&P 500 gained 96.07 points, or 2.85 per cent, to 3,465.23 and the Nasdaq Composite added 441.61 points, or 3.96 per cent, to 11,602.18.
The S&P healthcare index jumped 5.20 per cent to a record high, while the information technology sector rose 4.01 per cent, as a divided Congress lowered the odds of higher antitrust scrutiny, capital gains taxes and a restoration of parts of the Affordable Care Act. The healthcare index was on track for its biggest daily percentage gain in about five months.
Still, with the rising possibility of a contested presidential election, investors have said they favour a definitive, swift resolution that would clear the way for a deal on a stimulus package to help revive the economy.
The NYSE FANG+TM Index, which includes the core FAANG stocks such as Apple and Amazon jumped 4.18 per cent.
Shares of defence contractors Northrop Grumman, Lockheed Martin and Raytheon all rose on receding chances of a cut in the defence budget.
Big Pharma Pfizer, Merck & Co and Johnson & Johnson also jumped as the potential split Congress was likely to shield the industry from sweeping reform. The NYSE Arca pharmaceutical index shot up 5.52 per cent.
The CBOE volatility index, a gauge for short-term volatility, slipped to a two-week low after spiking to a four-month high in the run-up to the election.
Despite the rally in stocks, the potential for political uncertainty also sent investors to US Treasuries, sparking the biggest one-day drop in 10- and 30-year bond yields since June. Shares of US banks, which typically track Treasury yields, slumped 2.58 per cent.