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Global Market Report - 07 September

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

The ASX is set to rise as investors wait on whether the Reserve Bank will continue with its plans to reduce stimulus when it meets today. US markets were closed for Labor Day.

The Australian SPI 200 futures contract was up 13 points or 0.1 per cent at 7,535 near 7.30 am Sydney time on Tuesday, suggesting a positive start to trading.

US stock futures and major overseas markets rose Monday in quiet trading, with American stock and bond markets closed for Labor Day.

Futures on the S&P 500 ticked up 0.3%, suggesting that the benchmark will edge toward its all-time high when markets reopen after the Labor Day holiday. Contracts for the Dow Jones Industrial Average also rose 0.2% by noon New York time. Futures for the technology-focused Nasdaq-100 rose 0.3%.

The Australian dollar was buying 74.33 US cents near 7.50am AEST, up from the daily low of 74.26. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, rose to 86.92.

Locally, the S&P/ASX 200 closed flat on Monday, wiping out early losses despite falls for commodity stocks. The ASX 200 fell 1.1% in the first 30 minutes of trade before grinding back to finish 5.6 points up on last week's close.

Fortescue Metals slid 11% as the iron-ore miner traded ex-dividend, weighing on the materials sector, which fell 1.1%. Energy was the worst-performing sector, dropping 1.7% as Santos and Oil Search fell 1.8% and 2.3%, respectively, after extending due diligence on their proposed merger.

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Most other sectors rose, with tech stocks following a positive lead from the Nasdaq Composite. Appen added 4.6%, while Xero and Afterpay gained 1.2% and 1.7%, respectively.

Ahead of the Reserve Bank’s policy meeting today, prolonged monetary stimulus remains a risk for Australian banks, Citibank says. "More stimulus delays rate rises, weighs on borrowing and hedging demand and ultimately weighs on core earnings, which will inevitably manifest in share prices," Citi says.

Gold futures fell 0.2% to $US1823.47an ounce; Brent crude was down 0.5% at $US72.22 a barrel; Iron ore was down 8.5% to $US132.32.

Aluminium forwards on the London Metal Exchange rose 1.3% to a fresh decade high of $2,768 a metric ton after a faction of the military claimed to have taken control of mineral-rich Guinea. Guinea supplies 55% of Chinese imports of bauxite, a raw material used to make the industrial metal, according to analysts at brokerage StoneX Group.

The yield on the Australian 10-year bond was up at 1.25%; The yield on the US 10-year note fell to 1.32%.

Asia

Chinese stocks finished higher, with the Shanghai Composite Index surging 1.1% to 3621.86, its highest close in more than three months, supported by healthcare and auto sectors.

Investors are still cautious about Chinese tech stocks, though some may start to buy selected shares whose prices have probably bottomed out, said Zhikai Chen, head of Asian equities at BNP Paribas Asset Management. "I don't think anyone is looking to be a hero right now," he said.

Money managers are also scrambling to figure out what the government's new focus on social equality, or "common prosperity," means for companies, said David Chao, global market strategist for Asia Pacific ex-Japan at Invesco.

Hong Kong shares close higher as gains by auto makers and tech outweighed declines by property developers. The benchmark Hang Seng Index finished up 1.0% at 26163.63. Tencent Holdings climbed 3.5% and Alibaba Group Holding gained 1.9%. After falling heavily starting in mid-February, the tech sector has rebounded somewhat in the past two weeks.

Japanese stocks end higher, led by gains in shipping, tech and brokerage stocks, as hopes grow that a new ruling-party leader will pursue economic stimulus. The Nikkei Stock Average rises 1.8% to 29659.89. Any developments over the ruling-party leadership election are being closely watched.

Europe

European stocks rose Monday following gains in Asia, as Friday's weaker-than-expected US nonfarm payrolls report takes pressure off the Federal Reserve to reduce stimulus. "A poorer outlook for US jobs would most likely prompt a significant delay for the Fed's tapering program, keeping support measures in place and providing a rationale for further equity inflows," IG analyst Chris Beauchamp says.

London’s FTSE 100 rose 0.68% to 7187.18 on Monday.

The pan-European STOXX Europe 600 index, which tracks the return of the largest listed companies across 17 European countries, closed 0.69% higher to 475.19.

North America

US stock futures and major overseas markets rose Monday in quiet trading, with American stock and bond markets closed for Labor Day.

Futures on the S&P 500 ticked up 0.3%, suggesting that the benchmark will edge toward its all-time high when markets reopen after the Labor Day holiday.

Contracts for the Dow Jones Industrial Average also rose 0.2% by noon New York time. Futures for the technology-focused Nasdaq-100 rose 0.3%.

Stocks have climbed in a calm stretch for the market, propelled by robust earnings growth and the economic recovery from the shock of Covid-19. Investors are however cautious about the potential for more volatility this fall, pointing to factors such as a reduction in stimulus efforts by central banks and slowing momentum in the US economic growth.

Later this week, investors will parse remarks by New York Federal Reserve President John Williams on the economic outlook and monetary policy. The European Central Bank could set out plans to reduce bond purchases under an emergency stimulus program on Thursday, some analysts say.

High case numbers for the Delta variant of the coronavirus, global supply-chain disruptions and US labor-market weakness have raised concerns that growth is peaking, said Kerry Craig, global market strategist at J.P. Morgan Asset Management. On Friday, US government data showed 235,000 jobs were added in August, undershooting the forecast of 720,000.

"The markets are waiting and waiting for a clear signal in a shift in the economy and the corresponding policy shifts," Mr. Craig said. If the supply-chain and labor-market disruptions prove temporary, then central bankers will remain on track to dial back easy-money policies, he added.

Pandemic unemployment benefits expire on or by Monday for an estimated 7.5 million Americans, including enhanced federal benefits of $300 a week, programs for gig, freelance, and part-time workers, and emergency aid for those who had exhausted their state benefits. Although the Biden administration has encouraged states to use their emergency coronavirus relief funds to extend benefits or provide additional benefits to jobless workers beyond Monday, state labor departments seem unlikely to do so, CNBC reported.

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

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