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Global Market Report - 12 November

Lewis Jackson  |  12 Nov 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to rise after Wall Street ended mixed and iron ore moved higher.

The Australian SPI 200 futures contract was up 31 points or 0.4 per cent at 7,402 near 8.00 am AEST on Friday, suggesting a positive start to trading.

US stocks rose Thursday, rebounding from Wednesday's selloff that came after an inflation reading hit a three-decade high.

The S&P 500 gained about 0.1%, reversing direction after finishing Wednesday with its largest one-day decline in more than a month. The technology-heavy Nasdaq Composite rose 0.5%.

The Dow Jones Industrial Average, in contrast, lost 0.4%, pulled down, in part, by Walt Disney's worst daily performance in more than a year.

The Australian dollar was buying 72.87 US cents near 8.00am AEST, down from the previous close of 73.30. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 89.21.

Locally, the S&P/ASX 200 closed 0.6% lower at 7381.9, posting a fourth consecutive loss after a larger-than-expected rise in the country's unemployment rate.

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The benchmark was already about 0.25% lower but dropped by as much as 1.3% after data showed the unemployment rate hit 5.2% in October, compared with the 4.7% anticipated by economists.

Australia's weaker-than-anticipated October jobs data most likely reflects lagged recognition of Covid-19 lockdowns across the prior three months, JPMorgan says.

It clawed back some of its losses but is now 1.0% lower so far this week.

The tech, health and energy sectors were the biggest losers, while the heavyweight financials slipped 0.9%.

Commonwealth and NAB, the two biggest banks by market capitalization, both dropped 1.6%.

Gold futures rose 0.9% to $US1864.90 an ounce; Brent crude fell 0.2% to $US82.50 a barrel; Iron ore was up 4.1% US$92.57.

The yield on the Australian 10-year bond rose to 1.80%; The US bond market was closed for a public holiday.

Asia

Chinese stocks finished higher on Thursday, as property developers rebounded on signs that Beijing could ease its policy on the sector, while China Evergrande Group made a set of last-minute bond payments to avoid default. The Shanghai Composite Index added 1.2%, the Shenzhen Composite Index climbed 1.1% and the ChiNext Price Index was 1.0% higher.

Hong Kong stocks ended higher, extending their winning streak for the third straight day. The benchmark Hang Seng Index rose 1.0%. Chinese developers continued to lead gains after reports Beijing may relax financing policies in the property sector.

The Nikkei Stock Average closed 0.6% higher, led by financial stocks which rose on prospects of higher interest rates after stronger-than-expected US inflation data.

Europe

European markets gained as rising precious and base-metal prices boosted miners. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies rose 0.3%.

In London, The FTSE 100 index climbed 0.6%, with BHP’s UK listing jumping 3.9% on stronger commodity prices.

North America

US stocks rose Thursday, rebounding from Wednesday's selloff that came after an inflation reading hit a three-decade high.

The S&P 500 gained about 0.1%, reversing direction after finishing Wednesday with its largest one-day decline in more than a month. The technology-heavy Nasdaq Composite rose 0.5%.

The Dow Jones Industrial Average, in contrast, lost 0.4%, pulled down, in part, by Walt Disney's worst daily performance in more than a year.

Investors for months have been digesting signs of mounting inflation, but on Wednesday new data presented the most staggering figures yet. The Labor Department said the consumer-price index -- which measures what consumers pay for goods and services -- increased 6.2% in October year-over-year. That marked the quickest 12-month pace since 1990 and the fifth consecutive month of inflation above 5%.

It was the biggest challenge so far to the idea that rising prices will be temporary and concentrated. Wednesday's data showed that price increases were broad-based. Stocks fell, with technology companies in particular taking losses. In the bond market, the yield on the 10-year US Treasury note posted its largest rise in a year. Yields rise when bond prices decline.

On Thursday, however, there were signs that investors were once again taking the inflation reading in stride. Growth and technology stocks, which tend to perform poorly in an inflationary environment, rebounded. Netflix gained 2.5%, while Advanced Micro Devices jumped 4.1%.

Financial companies, which tend to benefit from higher interest rates, rallied. Energy and materials stocks also posted strong performances. The Russell 2000 index of small-cap stocks rose 0.9%.

Wednesday's slide was a "well-deserved pullback" after an autumn stock-market rally that pushed the S&P 500 to a stretch of repeated records, said Ryan Detrick, chief market strategist at LPL Financial. "Economic growth is still quite solid, and that's going to drive longer-term stock-market gains. We think the underlying fundamentals that got us here are still in place, and that's what investors need to keep in mind."

Even as pricing pressures remain top of mind for strategists and investors, many say they have a bullish outlook for the rest of the year. Stocks are coming out of a strong earnings season, during which about 81% of reporting S&P 500 companies beat earnings expectations, according to FactSet data through Thursday morning. Investors say commentary in recent earnings calls gave them confidence that many companies can navigate inflationary pressures.

Meanwhile, the market is also entering a seasonally strong period around the holidays. Some investors also believe that current price pressures will abate.

"I still think there's a significant cohort of investors who believe that if this [CPI] number is not the peak, it's likely going to peak out soon," said Cliff Hodge, chief investment officer for North Carolina-based Cornerstone Wealth.

In the meantime, some investors are rotating into cyclical stocks that can benefit from economic growth and rising inflation. Many money managers still see the US stock market as one of the best places for sizable and steady returns.

In corporate news, Rivian Automotive rallied 18% Thursday, adding to its 29% jump when the electric-vehicle company started trading Wednesday.

Tesla pulled back 0.4%. Regulatory filings showed Elon Musk sold $5 billion of shares in the auto maker earlier in the week. Twitter users directed the chief executive to sell 10% of his stake in the company, valued at $21 billion, in an online poll last weekend.

Walt Disney fell 6.9% after it reported a slowdown in subscriber growth as lockdowns eased Wednesday. Plant-based meat company Beyond Meat lost 14% after it posted a disappointing revenue forecast, citing pandemic-related uncertainty on demand.

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

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