Global Fundamental Analysis 02/04/2020

OPENING CALL: The Australian share market is expected to open lower. The SPI200 futures contract expected to open 189 points down.

 

Factories across the U.S., Asia and Europe cut output and jobs at the fastest pace since the global financial crisis, a sign the global economy has entered a deep freeze as
governments lock down their populations.

 

Saudi Arabia is ramping up its oil output, boosting production capacity and hiring new tankers to fight its price war with Russia despite the coronavirus pandemic’s erosion of crude demand.

 

Overnight Summary

 
 

EACH MARKET IN FOCUS

 

Australian Market

Australian shares ended higher, with the benchmark S&P/ASX 200 rising 3.6% to 5258.6 to touch a roughly two-week high on the first trading day of the second quarter.
Analysts attributed the increase to strong manufacturing data out of China, suggesting the country’s coronavirus containment measures have been effective, as well as the
Australian government’s stimulus package rollout last week.  Energy shares surged nearly 8%, while telecom and property shares each rose more than 5%.

 

US Market

Stocks fell intraday after President Trump issued a stark new warning on the spread of the novel coronavirus, putting investors on edge about the damage that the pandemic could inflict on the world’s largest economy.
The Dow Jones Industrial Average dropped 930 points, or 4.2%, in afternoon trading, a day after the index closed out its worst quarter since 1987. The S&P 500 fell 4.4%, while the Nasdaq Composite was down 4.2%.

The White House warned that the U.S. could face as many as 240,000 deaths, with Mr. Trump asking Americans to brace for an unprecedented crisis in the days ahead. The U.S. has more confirmed cases than any other country, with more than 200,000 infections. Projections from the University of Washington show the illness could result in 2,214 deaths a day at the peak in two weeks.

 

Commodities

Gold futures started the month with a loss, stretching their decline to a fourth straight session, as traders cast a wary eye on the latest U.S. economic data amid the spread of the COVID-19 pandemic, which has helped to partly support gold buying or at least limited downside for the precious metal.

U.S. economic data Wednesday came in better than expected, but analysts said they don’t include much of the impact from the COVID-19 pandemic.
June gold on Comex fell $5.20, or 0.3%, to settle at $1,591.40 an ounce. That marked a fourth decline in a row for the contract. Based on the most-active contracts, gold
futures rose 1.9% in March and gained 4.8% for the quarter, according to Dow Jones Market Data.

 

Oil Futures

U.S. oil prices slid below $20 toward a fresh 18-year-low after EIA said U.S. crude-oil and gasoline inventories climbed by a combined 21 million barrels last week as efforts to reduce the spread of the coronavirus caused a collapse in consumption.

EIA said oil inventories rose 13.8 million barrels vs forecasts in a WSJ survey for a 4.5 million barrel rise, while gasoline stockpiles rose 7.5 million.
However, distillates inventories, which includes diesel fuel used in the trucking industry, fell by 2.2 million barrels as deliveries of food and other household products
remain active.
Distillates inventories are now 13% below the five-year average. U.S. oil production bearishly remained at a near-record 13M bpd.  WTI fell 2.3% to $19.99/bbl.

 

Forex

Funding pressures in the dollar market showed signs of further easing after the Fed said it will allow foreign central banks to convert their holdings of Treasury securities
into dollars.  The cost of borrowing dollars using euros or yen as collateral has eased this week, indicating a relief in stress in international dollar markets.

The ICE Dollar Index climbed, gaining 0.6% intraday.  Despite easing access to dollars, analysts still expect the dollar to continue to gain
so long as investors search for safety as they assess the economic impact or coronavirus and the implications of the Saudi-Russia oil price war.

 

European Markets

European stocks fell as a White House warning about the coronavirus pandemic eclipsed better-than-feared U.S. economic data.
The Stoxx Europe 600 dropped 2.9%, the FTSE 100 retreated 3.8%, the CAC-40 was down 4.3% and the DAX shed 3.9%, led lower by travel and financial stocks after European central banks urged banking groups to cancel dividends.

 

Asian Markets

Hong Kong stocks extended their earlier weakness to close lower, mainly dragged by banks and auto makers as the coronavirus pandemic continues to hurt operations. The Hang Seng Index slipped 2.2% to 23085.79. HSBC and Standard Chartered tumbled 9.5% and 7.6%, respectively, after they scrapped their dividends at the request of the Bank of England.

Japanese stocks ended lower, extending losses during the final hour of trading due to persistent concerns about the coronavirus pandemic and a stronger yen. The Nikkei Stock Average fell 4.5% at 18065.41. USD/JPY is at 107.38, down from 107.56 late Tuesday in New York.

South Korea’s benchmark Kospi closed 3.9% lower at 1685.46, led by declines in construction, tech and retail stocks. The index turned sharply lower toward the end of
the session after U.S. stock futures fell, erasing earlier gains. Fears over a prolonged economic impact from the pandemic weighed on investor sentiment despite stimulus hopes.

India’s benchmark Sensex fell 4.1% to 28265.31, dragged mostly by banking and tech stocks. Among the prominent losers were Kotak Mahindra Bank, down 8.8%, Axis Bank, 5.5% lower, and State Bank of India, off 5.3%.




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