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Global Market Report - 05 October

Lewis Jackson  |  05 Oct 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to fall after Wall Street was dragged lower by technology stocks such as Facebook. The tech-heavy Nasdaq is now down more than 7% over the past month.

The Australian SPI 200 futures contract was down 68 points or 0.9 per cent at 7,176 near 7.45 am AEST on Tuesday, suggesting a negative start to trading.

A selloff in Facebook stock and other big technology companies rippled through the market Monday, pushing major US indexes toward steep declines to start the week.

Stocks opened with mild declines before losses quickly accelerated. The S&P 500 dropped 1.3%. The broad index closed last week down 2.2%. The tech-heavy Nasdaq Composite Index declined around 2.1%. The Dow Jones Industrial Average lost around 323 points, or 0.9%.

Monday's moves continued a recent trend of underperformance in big technology companies. Investors have fled shares of the highflying stocks as bond yields have quickly lurched higher. Higher yields make tech companies' outsize profits in the future less attractive.

The Australian dollar was buying 72.86 US cents near 7.45am AEST, up from the previous close of 72.62. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, fell to 88.27.

Locally, the S&P ASX-200 jumped 1.3% to close at 7278.50 on broad gains, including in banks, miners and energy stocks.

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Top gainers included stocks that are likely to benefit as economies reopen from pandemic-related restrictions. Travel-booking company Flight Centre surged 9.6% and IDP Education jumped 8.6%.

Oil prices above $70/barrel continued to benefit energy stocks, while banks and financial stocks continued to price in expectations for improved returns. Commonwealth Bank of Australia climbed 5.1% and ANZ rose 2.2%.

Turnover was below average due to a holiday in Sydney.

Gold futures rose 0.2% to $US1764 an ounce; Brent crude rose 2.9% at $US81.58 a barrel; Iron ore was down 1.1% US$117.12.

The yield on the Australian 10-year bond was flat at 1.48%; The yield on the US 10-year note moved up to 1.48%.

Asia

Chinese markets were closed Monday for a week-long national holiday.

Hong Kong's Hang Seng Index declined 1.8% to 24123.19. Sentiment is weighed by media reports that Biden's administration may announce that China is not complying with Phase One of the trade deal reached under Trump, KGI Securities said.

Tech stocks were lower, with Xiaomi declining 3.0%, Alibaba Health Information Technology slipping 3.4% and Meituan falling 1.4%. Property stocks were lower amid ongoing concerns over the Evergrande crisis. Longfor Group was down 4.6% and Country Garden was off 3.9%.

Shares of China Evergrande and its property-management unit halted trading in Hong Kong on Monday. The subsidiary said this was pending an announcement about a possible takeover bid.

Japanese stocks ended lower, dragged by falls in tech and shipping stocks, as the prospects of economic reopening lead to unwinding of bets for chip making and supply-chain disruption. The Nikkei Stock Average fell 1.1% to 28444.89. Investors are focused on policy-related developments after Fumio Kishida was elected Japan's new prime minister.

Europe

European stocks fell Monday as a jump in oil prices added to concerns about inflation pressures. Oil prices advanced after OPEC and its allies said it would stick to its plan for a gradual increase in crude output. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, was down 0.5%.

"This isn't quite the start to the fourth quarter many had hoped for, and certainly puts investors on notice for a volatile week, especially with US job numbers on Wednesday and Friday," IG analyst Chris Beauchamp said. The US ADP private payrolls report is due on Wednesday and the US nonfarm payrolls report is released on Friday.

In London, the FTSE 100 closed down 0.17%.

North America

A selloff in Facebook stock and other big technology companies rippled through the market, pushing major US indexes toward steep declines to start the week.

Stocks opened with mild declines before losses quickly accelerated. The S&P 500 dropped 1.3%. The broad index closed last week down 2.2%. The tech-heavy Nasdaq Composite Index declined around 2.1%. The Dow Jones Industrial Average lost around 323 points, or 0.9%.

Monday's moves continued a recent trend of underperformance in big technology companies. Investors have fled shares of the highflying stocks as bond yields have quickly lurched higher. Higher yields make tech companies' outsize profits in the future less attractive.

The so-called FAANG stocks—Facebook, Amazon, Apple, Netflix and Google-parent Alphabet—have shed $243 billion in market value today, on track for the biggest one-day loss in value since October 2020.

After notching big gains since early last year, tech has been particularly volatile in recent sessions. Monday's selloff puts the tech-heavy Nasdaq Composite on track for its third drop of at least 2% since early September.

Facebook shares were hit harder than other big tech companies on Monday, with the shares sliding around 5% for their worst day of 2021. Facebook entities WhatsApp, Instagram and Facebook weren't accessible to users Monday morning, with users receiving error messages when trying to access the sites. The company's whistleblower Frances Haugen is set to testify before Congress on Tuesday and has detailed vast problems with the social media giant.

Alphabet shares dropped 2%. Netflix lost 1.6%. All three have underperformed the S&P 500 over the past month and are among the biggest companies in the entire US stock market.

"They're just such a big piece" of the market, said Mark Stoeckle, chief executive officer at Adams Funds, of the tech stocks. "It's hard to offset that kind of a downdraft with the other 495 stocks in the S&P 500."

Major indexes have suffered bouts of volatility in recent sessions, and many investors said they were expecting more turbulence in the fall months. Investors are also watching negotiations in Congress closely, as lawmakers debate the debt ceiling ahead of a deadline this month to raise it so the government can pay its bills. Meanwhile, Democrats are considering scaling back the next spending package to improve its chances of being passed. The Biden administration is also set to unveil its China trade policy following a review of import tariffs.

"You've got a combination of uncertainty out of DC, continued headlines out of China about Evergrande and against a backdrop where you've seen bond yields rise," said David Stubbs, global head of investment strategy at J.P. Morgan Private Bank. "This should all eventually be manageable but this is the problem with policy uncertainty, especially about the world's two largest economies."

In corporate news, Tesla shares rose around 0.7% after the auto maker reported record deliveries in the third quarter. Merck climbed 1.7%, after the pharmaceutical company said its antiviral pill was effective against Covid-19 in a late-stage trial. Vaccine makers slipped, with Moderna declining around 4.5% and Novavax down 1.3%.

is a reporter and data journalist with Morningstar. Tweet him @lewjackk or get in touch via email

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