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Overseas Market Report

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Overseas Market Report - International Markets Roundup

Monday 16 May 2022 | Close

[Morningstar with Dow Jones]: US stocks finished mostly lower Monday, extending the markets recent selloff.

Monday 16 May 2022 | Close

Foreign Equities Close Change %Change
Dow Jones (US) 32223 27 0.08
S&P 500 4008 -16 -0.39
NASDAQ 11663 -142 -1.20
FTSE 100 Index 7465 47 0.63
DAX 30 13964 -64 -0.45
CAC 40 6348 -15 -0.23
Nikkei 225 (Japan) 26547 119 0.45
HKSE 19950 51 0.26
SSE Composite Index 3074 -11 -0.34
NZ 50 11172 14 0.13

Monday 16 May 2022 | Close

Commodities US$ Close Change %Change
Aluminium /t 2803 42 1.53
Copper /t 9256 71 0.77
Nickel /t 26450 -722 -2.66
Gold /oz 1823 14 0.75
Silver /oz 21.6 0.4 1.74
Oil - West Texas crude /bbl 114.2 3.7 3.36
Lead /t 2077 33 1.61
Zinc /t 3565 71 2.04

Monday 16 May 2022 | Close

Currency Close Pts Change % Change
$A vs $US 0.6972 0.0027 0.39
$A vs GBP 0.5659 -0.0007 -0.13
$A vs YEN 89.98 0.08 0.08
$A vs EUR 0.6683 0.0005 0.07
$A vs $NZ 1.1049 0.0008 0.07
$US vs Euro 0.9585 -0.0028 -0.29
$US vs UK 0.8117 -0.0040 -0.49
$US vs CHF 1.0020 -- --

[Morningstar with Dow Jones]: US stocks finished mostly lower Monday, extending the markets recent selloff.

Asia

China stocks ended lower, as investors digested weak April retail sales data, a proxy for the country's overall consumption. The metric fell 11% in the past month, marking its worst drop since March 2020. The benchmark Shanghai Composite Index fell 0.3% to settle at 3073.75, while the Shenzhen Composite Index was down 0.3% at 1926.01. The tech-heavy ChiNext Price Index fared the worst, losing 1.1% to 2331.23. Consumer goods companies, including condiment makers and dairy producers, led the downturn. Medical services providers, such as Covid-19 testing companies and drug developers, further weighed on the market.

In Hong Kong stocks ended the session higher, with the benchmark Hang Seng Index rising 0.3% to settle at 19950.21. Chinese property developers led gains, as investors welcomed news reports that three private real-estate companies, Longfor, Country Garden and Midea Real Estate, have been selected by regulators for onshore bond issuance as early as this week. Jefferies analysts said in a note today that the move could boost investor sentiment in the near term. Country Garden soared 10% to become the index's top performer, and Longfor was up 4.8%. Midea Real Estate, which is not a constituent of the index, jumped 7.9%.

Meanwhile in Japan, the Nikkei Stock Average closed 0.5% higher at 26547.05, supported by ongoing expectations for an earnings recovery from the pandemic. Warehouse-equipment maker Daifuku Co. advanced 11% after it projected a 10% rise in its FY net profit. Suntory Beverage & Food rose 5.0% following news that it planned to raise prices for nonalcoholic drinks in plastic bottles. Mining stocks were higher, with Nittetsu Mining adding 0.9% and Inpex Corp. gaining 0.4%.

Europe

European markets traded mixed on Monday after downbeat Chinese economic data and a lower open on Wall Street.

The pan-European Stoxx Europe 600 edged 0.1% lower, the French CAC 40 dropped 0.5% and the German DAX was 0.7% off.

"After an early dip prompted by a sharp slowdown in Chinese retail sales in April, European markets have recovered to some extent from their intraday lows," CMC Markets analyst Michael Hewson says in a note. "Sentiment remains cautious, with the DAX sliding as it becomes ever more apparent that the Chinese economy is likely to stay in the doldrums for a while yet," he says.

London's FTSE 100 bucked the downwards trend in Europe to close 0.6% higher after basic resources performed well despite weakness in commodity prices and on news that Abu Dhabi's Etisalat had bought a 9.8% stake UK telecoms group Vodafone. While Etisalat has said that it has no designs on getting a seat on the board, the move is likely to increase pressure on CEO Nick Read, Michael Hewson, chief market analyst at CMC Markets UK, says in a research note. Elsewhere, Ryanair said it expects to return to profitability in fiscal 2023 and warned of higher fares coming during the summer period.

North America

US stocks finished mostly lower Monday, extending the market's recent selloff.

The S&P 500 fell 0.4%, reversing modest gains in a bout of selling before the closing bell. The technology-heavy Nasdaq Composite Index dropped 1.2%, weighed by declines at Apple, Alphabet and Amazon. The Dow Jones Industrial Average, however, rose 26.76 points, or 0.1%, to 32223.42.

Even after rallying Friday, the S&P 500 has dropped for six consecutive weeks, its longest weekly losing streak since June 2011. The index is down 16% this year.

Among Monday's biggest decliners were shares of travel and casino companies. Expedia Group, Caesars Entertainment and Penn National Gaming all dropped more than 5%. The consumer discretionary and technology sectors led the index lower.

Investors, worried that the Federal Reserve has been too late to spot the risks from soaring inflation, fear the central bank will move too aggressively to fight it, a mistake that could tip the economy into a recession.

The resulting selloff, which has been compounded by the war in Ukraine and Covid-19 lockdowns in China, has been broad, affecting most assets from cryptocurrencies and stocks to government bonds, leaving investors unsure of where to seek safety.

After weeks of losses, some investors are holding on to stocks, or buying more, hoping declines are reaching their nadir. Others are settling in for a protracted period of volatility.

"We are moving into a more challenging time for markets. We need to see signs that inflation is not just peaking but actually decelerating before you find a sustainable bottom in the market. That is going to take at least a couple of months," said David Donabedian, chief investment officer at CIBC Private Wealth.

"That doesn't mean we won't have counter-rallies higher from day to day, but I think this is a long, drawn-out process and it is largely data-driven," he said.

Investors are grappling with so many issues -- the Russia-Ukraine war, Federal Reserve policy, inflation, China's economic slowdown -- it is hard for them to justify holding any assets for too long, said City Index market analyst Fawad Razaqzada. Most fundamentally, he said, investor confidence has been badly shaken by the selloff.

After Friday's rally, investors are hoping that at least a temporary bottom has been put in, several analysts said.

But from a broader perspective, the changes in monetary policy and the rise in inflation have fundamentally changed the dynamic between stocks and bonds, said Evercore ISI analyst Julian Emanuel.

Stocks can still go up, he said, but because of rising bond yields, the upside for equities will be "truncated" as opposed to "runaway."

Among individual stocks, Twitter shares fell $3.33, or 8.2%, to $37.39 on Monday after Elon Musk on Saturday said the company's legal team accused him of violating a nondisclosure agreement. Mr. Musk Friday said that his $44 billion acquisition of the social-media company was "on hold," sending the company's shares down nearly 10%.

Spirit Airlines jumped $2.29, or 13%, to $19.27 after The Wall Street Journal reported that JetBlue Airways plans to launch a hostile takeover attempt of the discount carrier. JetBlue shares lost 61 cents, or 6.1%, to $9.45.

McDonald's shares slipped $1, or 0.4%, to $244.04 after the company said it would quit Russia and sell its business there.

In bond markets, the yield on the benchmark 10-year US Treasury note edged down to 2.877% from 2.932% on Friday.

In commodities, US crude oil jumped 3.4% to $114.20 a barrel. The US national average price of regular gas at the pump rose to a high of $4.48 a gallon, according to AAA.

One signal investors are using to gauge a possible bottom is, surprisingly, bitcoin. The cryptocurrency careened last week amid a collapse in the stablecoin TerraUSD and is down about 35% year to date. But as bitcoin has become more tightly attached to the wider capital markets, some investors are using its movement as a gauge of speculative appetite, analysts said.

On Monday, bitcoin edged slightly lower, but after last week's carnage, investors were taking it as a sign of stabilization in the markets, according to some analysts. "Stock investors are definitely watching this," Stifel's chief equity strategist, Barry Bannister, said of bitcoin's moves.

Australian Market

Local Markets Are Expected To Open Higher

Ahead of the local open SPI futures were 20 points higher at 7100.

Monday 16 May 2022 - close [Morningstar with AAP]: The Australian share market has closed modestly higher, putting together a two-day winning streak for the first time this month.

The benchmark S&P/ASX200 index closed on Monday up 17.9 points, or 0.25 per cent, to 7,093 points, while the broader All Ordinaries gained 18.5 points, or 0.25 per cent, to 7,326.2.

"It's a decent bounce, but we're still very much on tenterhooks," said Ben Le Brun, a market analyst at the Australian Stock Report.

"The big three things at the moment are the China lockdowns, Russia/Ukraine war, and of course uncertainty about central banks.

"That's a vicious cocktail at the moment in the global markets, so if we can at least (get) one shoe to drop with some certainty around one of those issues, we might be in for a bit of a sustained relief rally," Mr Le Brun said.

"But we've learned this lesson many times, uncertainty, that's the worst thing possible for share markets, and we're getting that in spades at the moment. So, fingers crosses, we get a nice result from Wall Street tonight."

Brambles accounted for more than a quarter of the market's gains, climbing 11.2 per cent to an eight-month high of $11.60 after the pallets giant confirmed it had received an unsolicited tentative takeover offer from global private equity giant CVC Capital Partners.

The ASX50 blue chip has a market cap of $15 billion, so an acquisition would be one of Australia's biggest, although behind last year's Square/Afterpay merger and the buyout of Sydney Airport.

"It instils some market confidence," Mr Le Brun said of the offer, which reportedly values Brambles at $20 billion. "And that's really what it needs at the moment, a shot in the arm."

Brambles' gains helped lift the industrial sector 2.4 per cent; technology was the next-biggest gainer among the ASX's 11 official sectors, rising 2.1 per cent after last week's sell-off. Xero was up 4.4 per cent and Block climbed 3.8 per cent.

All four big banks gained ground, with Westpac leading the way with a 1.6 per cent rise to $24.38. ANZ climbed 0.8 per cent to $25.58, NAB rose 0.6 per cent to $31.32 and CBA added 1.0 per cent to $103.33.

Macquarie slid 1.9 per cent, while Suncorp added 1.5 per cent to a three-month high of $12.03.

The heavyweight mining sector was down 0.5 per cent, however, with losses for all the big iron ore giants.

BHP fell 1.2 per cent to $45.31, Rio Tinto dropped 1.1 per cent to $104.40 and Fortescue declined 2.2 per cent to $18.96.

Goldminers were up, with Northern Star, Newcrest and Evolution all rising by between 0.8 and 1.3 per cent.

Galileo Mining soared 58.3 per cent to an all-time high of 85c, after the junior explorer last week announced a "major" palladium-platinum discovery at its Norseman project in WA.

Step One Clothing plummeted 56 per cent to 21c, its lowest level since its debut on the ASX last November, after downgrading its full-year earnings guidance.

The direct-to-consumer bamboo underwear company said it now expected to earn $7 million to $8.5 million, down from $15 million previously forecast, in part because its expansion into the US market hasn't gone as expected.

Integrated Research fell 14.7 per cent to a 10-year low of 58c after the payment software company announced that while sales had been strong in the Asia Pacific, "the second half turnaround anticipated for the Americas is yet to materialise".

The Australian dollar was buying 69.06 US cents, from 68.94 US cents when the ASX closed on Friday.

ON THE ASX:

The benchmark S&P/ASX200 index finished up 17.9 points, or 0.25 per cent, to close at 7,093 on Monday.

The All Ordinaries index gained 18.5 points, or 0.25 per cent, to 7,326.2.

The NZX 50 added 16.44 points (0.15%) to 11174.1

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