Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Global Market Report - 14 January

Lewis Jackson  |  14 Jan 2022Text size  Decrease  Increase  |  
Email to Friend

Australia

Australian shares are set to fall in line with weakness in New York as US technology stocks continue the see-saw action that has characterised the new year.

ASX futures were down 42 points or 0.6% at 7324 as of 8.00 am AEST, suggesting a negative start to trading.

The S&P 500 and Nasdaq Composite both fell Thursday as declines in technology shares weighed on the stock market.

The broad US stock index dropped 1.4%, while the tech-heavy Nasdaq Composite lost 2.5%. The Dow Jones Industrial Average fell 0.5%, or about 176 points.

Technology stocks have come under pressure in the new year as government-bond yields have risen. Higher yields can reduce the appeal of the future earnings promised by many tech stocks. The S&P 500's tech sector dropped 2.2% on Thursday, bringing its year-to-date losses to 5.2%.

Locally, S&P/ASX 200 closed 0.5% higher at 7474.4, driven by gains in energy and materials stocks which ended 1.5% and 2.6% higher, respectively.

Miners were the beneficiaries of a rise in iron-ore prices with Rio Tinto adding 4.1%, and BHP closing 3.8% higher.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Crown Resorts was the biggest gainer for the day, putting on 8.8% after news that Blackstone had revised up its takeover bid for the company.

Polynovo was the session's worst performer, closing 10.1% lower days after it jumped more than 20% following a blockbuster second quarter update.

Overseas, the pan-continental Stoxx Europe 600 fell less than 0.1%. In Asia, most major benchmarks fell. The Shanghai Composite Index lost 1.2% on concerns about China's latest Covid-19 outbreak after the port city of Tianjin reported higher infections. Japan's Nikkei 225 retreated 1%.

Turning to commodities, gold futures slipped 0.4% to $US1820.60 an ounce; Brent crude lost 1% to $US83.87 a barrel; Iron ore fell 2.8% to US$127.95 a tonne.

In bond markets the yield on the Australian 10-year bond edged up to 1.86%, while the US 10-year Treasury yield ticked down to 1.70%.

The Australian dollar was buying 72.75 US cents near 8.00am AEST, down from the previous close of 72.81. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 88.94.

Asia

Chinese shares closed lower, tracking broad declines in other Asian stock markets. The Shanghai Composite Index fell 1.2%, the Shenzhen Composite Index declined 1.7% and the ChiNext Price Index was 1.7% lower. Chinese liquor makers were among the worst performers amid concerns over weaker sales in the upcoming Lunar New Year season due to China's coronavirus outbreak. Kweichow Moutai fell 4.6% and Wuliangye slipped 4.1%. Covid concerns will likely persist, after the Chinese port city of Tianjin reported higher infections Thursday despite efforts to rein in the outbreak.

Hong Kong stocks ended slightly higher, as the market's soaring momentum on Wednesday eased. The benchmark Hang Seng Index edged up 0.1%. Banks led gains, as the sector continued to track up amid hopes for a series of interest-rate increases this year. Both BOC Hong Kong and ICBC rose 2.0%, while HSBC Holdings added 1.7%. However, gains were somewhat offset by weakness in tech stocks, which came under profit-selling pressure after substantial increases the last session. Alibaba Health shed 7.0% and JD.com was down 3.9%.

Japan's Nikkei Stock Average fell 1.0% amid concerns about the spread of Covid-19 cases and the yen's strength. Japan's daily infections reportedly exceeded 10,000 on Wednesday for the first time in more than four months, while Prime Minister Fumio Kishida said earlier this week that strict border restrictions will be extended until end-February. Among the worst performers were electronics stocks such as Yaskawa Electric, down 6.1%, and Olympus, 5.0% lower. Meanwhile, Sumitomo Metal Mining climbed 5.5% and Nippon Steel added 5.0%.

Europe

European stocks closed flat, tracking a subdued morning on Wall Street. The pan-European Stoxx Europe 600 edged 0.05% lower.

Semiconductor makers and automotive stocks rise after Renault said it would become electric-only by 2030 and BMW said strong electric-car demand would boost full-year sales. "After two days of gains a more cautious tone appears to prevail across markets, in yet another sign that 2022 lacks 2021's swashbuckling attitude to risk-taking," IG analyst Chris Beauchamp says. With US earnings season approaching, equities are struggling to find upward traction, he says.

In London, the FTSE 100 climbed 0.2% as outperformance from financials helped offset a disappointing session for retailers. Shares in Barclays increased 2.5%, HSBC rose 2.4%, and NatWest was up 1.8%. Conversely, Tesco and Marks & Spencer fell after releasing trading updates. "It has in fact been a day of decent quarterly numbers for UK retail, not that you'd know it, with both Tesco and Marks & Spencer share prices slipping back, although this could simply be a case that expectations were perhaps a little bit too high," Michael Hewson from CMC Markets said.

North America

The S&P 500 and Nasdaq Composite both fell Thursday as declines in technology shares weighed on the stock market.

The broad US stock index dropped 1.4%, while the tech-heavy Nasdaq Composite lost 2.5%. The Dow Jones Industrial Average fell 0.5%, or about 176 points.

Technology stocks have come under pressure in the new year as government-bond yields have risen. Higher yields can reduce the appeal of the future earnings promised by many tech stocks. The S&P 500's tech sector dropped 2.2% on Thursday, bringing its year-to-date losses to 5.2%.

The largest US stocks helped pull the market lower, with Apple shares falling 1.5% and Microsoft shares sliding 3.8%. More economically sensitive parts of the stock market held up better, with the industrial sector of the S&P 500 gaining 0.3%.

The yield on the benchmark 10-year US Treasury ticked down to 1.708%, from 1.724% Wednesday. It remains well above the 1.496% at which it closed out 2021. Bond yields rise as prices fall.

When yields on longer-term bonds move higher, "you tend to reprice those growth stocks," said Tom Hainlin, national investment strategist at US Bank Wealth Management. "If you increase that interest rate, that puts pressure on your present value of those companies."

Trading has been choppy in recent days as investors consider the path forward for stocks. The S&P 500 closed Wednesday off 1.5% from its record after gaining 27% last year.

Investors are keeping a close watch on any developments that could affect the Federal Reserve's calculations about tightening monetary policy to counter inflation. Central bank officials have signalled that an interest-rate rise could come as soon as March. The Fed's James Bullard said Wednesday that four rises were likely in 2022.

Federal Reserve governor Lael Brainard told Congress on Thursday that efforts to reduce inflation are the central bank's "most important task." Ms. Brainard is the White House's nominee to serve as the Fed's No. 2 official.

The Fed's rate-setting committee "has projected several hikes over the course of the year," she said. "We will be in a position to do that as soon as asset purchases are terminated. And we will simply have to see what the data requires over the course of the year."

"The main story is the market view on the central bank's next steps. The market is balancing two things: less support from monetary policy, but overall the underlying economy is good, and we think the earnings figures that will start to come out now will be quite strong," said Luc Filip, head of investments at SYZ Private Banking.

Investors on Thursday examined data showing that filings for jobless claims rose to a seasonally adjusted 230,000 last week, higher than economists had expected. A tight US labour market has kept applications near pre-pandemic lows for the past two months.

Other data showed that the prices suppliers charge businesses and other customers cooled in December. The Labor Department said its producer-price index rose 0.2% in December from the prior month, the slowest pace since November 2020.

"It fits into a larger narrative that inflation is likely peaking this quarter," said Jack Ablin, founding partner and chief investment officer at Cresset Capital.

Earnings season kicks off this week, with major financial firms including BlackRock, Citigroup, JPMorgan and Wells Fargo set to report Friday. Investors are on edge after Jefferies Financial Group posted revenue and earnings that missed analysts' estimates Wednesday, said Jeffrey Meyers, a consultant at Market Securities.

Analysts expect that profits from companies in the S&P 500 rose 22% in the fourth quarter from a year earlier, according to FactSet.

In individual stocks, shares of Delta Air Lines rose 2.6%, despite the company posting a quarterly loss, after the airline's chief executive said he expected it to quickly recover from the effects of the Omicron variant. Shares of home builder KB Home climbed 16% after its earnings came in above analysts' expectations.

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

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend