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Global Market Report - 08 September

Lewis Jackson  |  08 Sep 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to start lower after a mixed day of trading on Wall Street saw most sectors slip and tech stocks rise as investors grappled with Delta.

The Australian SPI 200 futures contract was down 29 points or 0.4 per cent at 7,535 near 7.50 am Sydney time on Wednesday, suggesting a negative start to trading.

The S&P 500 declined Tuesday as investors worried that the spread of Covid-19 would weigh on economic growth.

The S&P 500 fell 0.3%, while the Dow Jones Industrial Average retreated 0.8%. The tech-heavy Nasdaq Composite added 0.1%.

The increase in US Covid-19 cases has prompted many employers to postpone plans to return to the office. The travel industry's hopes for a resurgence in business trips also appears to be on hold.

In a fresh sign that the surge of the Delta variant is hindering the economic recovery, the US Labor Department's employment report on Friday showed the pace of hiring in the US slowed significantly in August.

The Australian dollar was buying 73.86 US cents near 7.50am AEST, down from the daily low of 74.38. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, rose to 87.23.

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Locally, the S&P/ASX 200 closed flat at 7530.3, as weakness in materials stocks offset strength elsewhere. The index closed 1.8 points higher, up by less than 0.1% so far this week.

BHP, Rio Tinto and Fortescue Metals lost between 0.4% and 3.1% as lower iron-ore prices weighed on the materials sector. IGO, Iluka and BlueScope Steel gave up between 1.0% and 2.5% as they traded ex-dividend. The financial sector closed flat, while gains by online advertisers Seek and REA helped lift the telecoms sector 0.9%.

Among the big movers on the ASX were Flight Centre, up 6.2%, SEEK, up 3.3%, and Appen, down 4.3%.

The Reserve Bank of Australia Tuesday reduced its weekly government bond purchases but also acknowledged a sharp economic deterioration by pushing out a planned review of its bond-buying program from November to February next year.

RBA Governor Philip Lowe reaffirmed his stance that raises are unlikely to rise until 2024, setting up a coming clash with market hawks, some of whom expect the central bank might increase rate in late 2022. 

Gold futures fell 1.9% to $US1798.50 an ounce; Brent crude was down 0.7% at $US71.69 a barrel; Iron ore was up 4.2% to $US137.97.

The yield on the Australian 10-year bond was flat at 1.25%; The yield on the US 10-year note rose to 1.37%.

Asia

Chinese stocks climbed Tuesday, as the Shanghai Composite Index continued its advance with a 1.5% gain to a new six-month high.

Cyclical sectors including steelmakers, petrochemical companies and miners led gains, driven by the bright outlook for commodities and anticipation that these sectors' performance will continue to be strong in 3Q, Huaan Securities said. The Shenzhen Composite Index added 1.1% and the ChiNext Price Index was 0.7% higher.

Hong Kong shares also closed higher as technology companies and oil-and-gas majors rose. The benchmark Hang Seng Index ended the day 0.7% higher, while the Hang Seng Tech Index advanced 1.6%.

Tencent was up 2.1% amid investor optimism over the company’s upcoming mobile games. Other winners included Meituan, up 4.0%, and Alibaba Group, which added 1.2%.

Japan's Nikkei Stock Average rose 0.9%, led by gains in tech and electronics stocks thanks in part to growing hopes that more economic stimulus is on the way. Investors are focusing on any developments in the leadership election of Japan's ruling party.

Europe

London’s FTSE 100 fell 0.53% to 7149.37 on Tuesday.

The pan-European STOXX Europe 600 index, which tracks the return of the largest listed companies across 17 European countries, closed 0.49% lower to 472.87.

North America

US stocks fell with the S&P 500 in the red Tuesday as investors worried that the spread of Covid-19 will weigh on economic growth.

Emerging evidence suggests the US economy is losing steam as the summer winds down, with consumers pulling back, employers easing up on hiring and businesses adapting to changing health requirements.

The broad S&P 500 index fell 15.40 points, or 0.3%, to 4520.03. The Dow Jones Industrial Average retreated 269.09 points, or 0.8%, to 35100.00. The tech-heavy Nasdaq Composite added 10.81 points, or 0.1%, to 15374.33, a record close.

Investors are watching closely as the increase in Covid-19 cases this summer prompts many employers to postpone plans to return to the office. The travel industry's hopes for a resurgence in business trips also appear to be on hold.

In a fresh sign that the surge of the Delta variant is hindering the economic recovery, the Labor Department's employment report on Friday showed the pace of hiring in the US slowed significantly in August.

"The Delta variant is starting to show up," said Brad McMillan, chief investment officer at Commonwealth Financial Network. "The markets are kind of reassessing where growth is going to be and what that's going to mean for earnings."

Stocks have ground higher in recent weeks, propelled by a strong corporate earnings season and robust economic recovery. With the second-quarter earnings season nearly complete, profits for companies in the S&P 500 are expected to have risen 92% from a year earlier, according to FactSet.

It is the latest stage in a rally that has lifted the S&P 500 to more than twice its level at its March 2020 low, when the arrival of the Covid-19 pandemic was constraining business in the US and injecting deep uncertainty into the economic outlook.

Investors credit supportive monetary policy and extensive government spending, along with the rollout of effective Covid-19 vaccines, with fueling the stock market's ascent. But with new Covid-19 outbreaks and concerns that growth may cool, analysts are waiting to see if the Federal Reserve may delay plans to begin scaling back its easy-money policies.

"People are seeing the slowdown in the economy and the outlook becoming somewhat more opaque and therefore it is understandable that people wouldn't want to jump in and put money to work," said Willem Sels, global chief investment officer at HSBC Private Bank.

"There are valid concerns about Delta, about Chinese and global growth and inflation, and it is natural that people want more visibility."

Data on Tuesday showed that China's exports unexpectedly jumped in August. Economists had been bracing for a slowdown in shipments after an outbreak of Covid-19 cases closed coastal ports and created new bottlenecks for shippers during the peak late-summer season.

Most sectors of the S&P 500 declined Tuesday, with the industrials, utilities, consumer staples and real estate groups retreating more than 1%.

Some of the biggest US stocks defied the broader market decline: Apple shares gained 1.5%, Amazon.com shares rose 0.9% and Facebook shares advanced 1.6%.

"Right now people are sort of going back to growth and durable secular growth that isn't necessarily reliant on the economic cycle," said Nick Frelinghuysen, an equities portfolio manager at Chilton Trust.

Among individual stocks, Match Group rose $11.17, or 7.5%, to $159.36 after S&P Dow Jones Indices said the online-dating company would be included in the S&P 500 index.

Shares of AMC Entertainment Holdings gained $3.81, or 8.7%, to $47.83 after the movie-theater company said Labor Day weekend was the first weekend with higher attendance than the same weekend pre-pandemic.

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

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