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Global Market Report - 07 October

Lewis Jackson  |  07 Oct 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to follow Wall Street higher after an afternoon jump sent US shares into positive territory.

The Australian SPI 200 futures contract was up 23 points or 0.3 per cent at 7,200 near 7.00 am AEST on Thursday, suggesting a positive start to trading.

US stocks rose Wednesday, erasing losses after a morning marked by broad pullbacks across sectors.

The S&P 500 rose 0.4%. The Dow Jones Industrial Average gained 98 points, or about 0.3%. The tech-focused Nasdaq Composite Index was up 0.5%.

Stock trading has been bumpy lately as investors have grappled with soaring energy prices and a general shift higher in government bond yields. On Tuesday, the S&P 500 logged its 25th gain of at least 1% for the year. The market's momentum looked like it was fading early Wednesday when stocks opened lower, but major indexes managed to break into positive territory in the final few hours of the trading day.

The Australian dollar was buying 72.72 US cents near 7.00am AEST, down from the previous close of 72.89. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, rose to 88.58.

Locally, the S&P/ASX 200 closed 0.6% lower at 7206.5, fading after a strong start amid weakness in banking stocks. The ASX 200 had been up by as much as 0.4% in early trade.

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Lenders Westpac, NAB, ANZ and Commonwealth Bank lost between 0.6% and 2.0% after Australia's prudential regulator tightened serviceability standards on mortgage lending, attempting to take some of the heat out of the housing market. The financial sector, which represents about half of the ASX 200 by market capitalization, finished 0.9% lower.

Most other sectors also finished lower, although Afterpay's 3.0% rise pulled the tech sector into positive territory.

The banking regulator fired the first shot in a battle to cool off the super-heated housing market on Wednesday. APRA told banks it now expects mortgage applications to be assessed against a higher serviceability criteria. ANZ says the move is fairly modest and further tightening "seems more likely than not."

Gold futures rose 0.1% to $US1761.07 an ounce; Brent crude fell 1.8% to $US81.05 a barrel; Iron ore was down 13 cents US$116.71.

The yield on the Australian 10-year bond rose to 1.60%; The yield on the US 10-year note moved down to 1.52%.

Asia

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

Hong Kong shares ended the session lower, as the market extended a broad downturn since mid-September. The benchmark Hang Seng Index shed 0.6%. Chinese consumer-product makers led losses, with sportswear company Li Ning sliding 7.1% and restaurant operator Haidilao down 5.1%. Citi has warned of slowing retail sales in China this month due to local Covid-19 outbreaks and tightened movement restrictions.

Japanese shares ended lower, dragged by airline and auto stocks amid continuing concerns about higher costs of fuel, materials and borrowings. The Nikkei Stock Average fell 1.1%. Japan Airlines dropped 4.3% and Nissan Motor lost 5.6%. Investors are focusing on Prime Minister Fumio Kishida's fiscal stimulus and other economic initiatives.

Europe

European stocks fell Wednesday European stocks fall as concerns over soaring natural gas prices dampen market sentiment. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, was down 1%.

"News that Russia will boost gas supplies has steadied market nerves a little this afternoon and helped temper those record price hikes but businesses are worried, and investors are too," AJ Bell analyst Danni Hewson says.

In London, the FTSE 100 closed down 1.5%.

North America

US stocks rose Wednesday, erasing losses after a morning marked by broad pullbacks across sectors.

The S&P 500 rose 0.4% as of the 4 p.m. close of trading in New York. The Dow Jones Industrial Average gained 98 points, or about 0.3%. The tech-focused Nasdaq Composite Index was up 0.5%.

Stock trading has been bumpy lately as investors have grappled with soaring energy prices and a general shift higher in government bond yields. On Tuesday, the S&P 500 logged its 25th gain of at least 1% for the year. The market's momentum looked like it was fading early Wednesday when stocks opened lower, but major indexes managed to break into positive territory in the final few hours of the trading day.

It isn't unusual to see stocks oscillate between gains and losses. In fact, most of the stock market's big advances this year have come on the heels of significant losses, according to an analysis by Frank Cappelleri, a desk strategist at Instinet. Mr. Cappelleri added that he wouldn't be surprised to see more choppy trading action in the final quarter of the year.

Investors are currently weighing multiple issues. Oil and gas prices have jumped, which some analysts worry may further fuel inflation. Meanwhile, investors have been contending with rising bond yields, which can knock down technology stocks, whose future profits are generally worth less in today's currency when discount rates climb. Tech stocks have been among the biggest drivers of the overall market's gains in the past several years.

"At what point do central banks have to say, hang on, two years, maybe that does need some degree of policy adjustment?" said Jane Foley, head of foreign-exchange strategy at Rabobank. She pointed to the Bank of England, which has said it could raise rates in coming months as energy price inflation surges.

Corporate news drove swings among individual stocks Wednesday.

Shares of American Airlines lost 3.7% and JetBlue Airways fell 2.8% after Goldman Sachs analysts downgraded its ratings for both stocks, citing concerns about fuel costs and a slowdown in economic growth cutting into the airlines' profits.

Other airlines also slumped, with Delta Air Lines down 1.5% and United Airlines off 1.6%.

Meanwhile, Palantir Technologies jumped 2.5% after saying it won a data and analytics contract with the US Army.

Government bond yields were little changed Wednesday, although they remained near recent highs.

In commodities markets, natural gas prices whipsawed. Oil prices retreated but stayed within striking distance of multiyear highs.

Forecasts of colder weather and weak flows of gas from Russia caused the latest bout of volatility in natural gas prices, said Nick Boyes, senior analyst at Swiss energy producer and trader Axpo. Thin trading conditions also contributed, traders and analysts said, as some companies faced margin calls and others bumped up against their credit limits.

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

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