Global Fundamental Analysis 28/05/2020

OPENING CALL: The Australian share market is expected to open higher. The SPI200 futures contract expected to open 50 points up.


The State Department has officially determined that Hong Kong is no longer autonomous from China, Secretary of State Mike Pompeo said in a statement that holds implications for the future of economic ties and could lead to sanctions against China.


EU Plans $2 Trillion Coronavirus Response Effort – The bloc proposed an $824 billion recovery plan and a $1.2 trillion budget over the next seven years, which, if approved, would deepen its economic union in a way that even the eurozone debt crisis failed to achieve.


Overnight Summary




Australian Market

Australian shares edged 0.1% lower to 5775.0 despite surging bank stocks.  The heavyweight financial sector logged its best session since March 30 as the benchmark S&P/ASX 200 index swung from losses to gains and back again.  Financials jumped 5.3% after National Australia Bank increased the size of its share-purchase plan by A$750 million to A$1.25 billion due to the level of interest from eligible shareholders. NAB advanced 7.8%.

Eight of the 12 other sectors fell as investors took cash off the table following two days of strong gains. Eight of the nine biggest losers among ASX 200 stocks were gold


US Market

The Dow Jones Industrial Average climbed on optimism that economic activity is gathering steam and authorities may offer more stimulus to bolster the recovery.  The blue-chip index climbed about 350 points, or 1.4%, setting it on track to close above the 25000 mark for the first time since early March. The index was powered by gains in American Express, Goldman Sachs and JPMorgan Chase, all of which climbed more than 4%.

Economically sensitive cyclical stocks, including those in the financials and industrials sectors, have been staging a comeback over the past week, erasing some of the punishing losses they suffered for much of the coronavirus pandemic. Optimism has been building in recent days that the White House and Congress are considering more measures to blunt the impact of historic levels of unemployment on the economy. The Trump administration is examining proposals to provide cash incentives to
encourage unemployed Americans to return to work, a top economic adviser said in an interview on Fox News.

Stocks were also buoyed by signs that consumers are beginning to venture out into communities and spend again. Restaurant bookings and spending on hotels and airlines
appear to be picking up. The Conference Board’s consumer confidence index also stabilized in May.



Gold futures pared earlier losses to finish off the session’s lows, as tensions between the U.S. and China worsened after U.S. Secretary of State Mike Pompeo announced that Hong Kong is no longer considered autonomous from China.  August gold , which is now the most-active contract, fell by $1.40, or 0.08%, to settle
at $1,726.80 an ounce, off the day’s low of $1,701.60.  July silver ended the near session high, up 16.2 cents, or 0.9%, at $17.757 an ounce.


Oil Futures

U.S. oil prices ended 4.5% lower at $32.81 a barrel as Russia suggested it may not want to extend any output cut deals agreed to with OPEC.   The analysts also said U.S. shale producers may start to crank up output before long, which is also bearish.



The dollar should continue to weaken in coming months as the easing of coronavirus lockdowns worldwide drives investors back towards risk asset


European Markets

European stocks rose as lockdown easing boosted travel-related stocks and banks climbed after the European Commission laid out plans for a EUR750B recovery fund, boosting the euro. The Stoxx Europe 600 increased 0.2%, the FTSE 100 advanced 1.3%, the CAC-40 was up 1.8% and the DAX climbed 1.3% after tour operator TUI and cruise-ship group Carnival gained.


Asian Markets

Mainland China stocks ended the session lower as the market eased after two days of gains this week. The benchmark Shanghai Composite Index closed 0.3% lower to settle at 2836.80, while the Shenzhen Composite Index fell 0.9% to 1774.22. The ChiNext Price Index, which measures the performance of emerging industries and startups, declined the most, closing 2.0% lower at 2071.47. Electronics, telecom and computer stocks led the losses, after tracking higher in recent days, on strong signals from Beijing that the government will lend more support to the digital industries.

Hong Kong shares ended lower, in line with its mainland counterparts amid tensions over China’s proposed national security legislation. The benchmark Hang Seng Index fell 0.4% to settle at 23301.36, with technology companies leading the losses as the sector came under profit-taking pressure after strong share price rises in recent days.

Japanese stocks rise, led by gains in financial stocks, in hopes for resumption of ordinary economic activities. Dai-ichi Life Holdings gains 6.3%, Nomura Holdings advances 5.6% and Mizuho Financial Group adds 3.7%. The Nikkei Stock Average rises 0.7% to 21419.23. Earnings remain in focus as the season winds down.

South Korean stocks edged up in choppy trade, with the benchmark index Kospi closing 0.1% higher at 2031.20. Investors flitted between fears over escalating U.S.-China
tensions and hopes for a pickup in business activities as economies reopen globally. Stocks were mixed, with shipbuilding and airline firms higher while internet and chemical companies fell.

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