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Global Market Report - 14 October

Lewis Jackson  |  14 Oct 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to follow the S&P 500 higher after US markets mostly shook off a higher-than-expected inflation reading.

The Australian SPI 200 futures contract was up 50 points or 0.69 per cent at 7,282 near 8.00 am AEST on Thursday, suggesting a positive start to trading.

The S&P 500 rose in choppy trading, with the broad US stock index snapping a three-session losing streak.

The S&P 500 added 0.3%, while the Dow Jones Industrial Average was flat. The tech-heavy Nasdaq Composite gained 0.7%. Traders seemed to shrug off a hotter-than-expected inflation reading and confirmation of the Federal Reserve's plans to begin reducing its bond-buying stimulus program.

Several household-name companies reported earnings. BlackRock shares rose 3.8% after the money-management company reported revenue and profit that beat analysts' expectations. JPMorgan's earnings per share came in above Wall Street's projections but the bank's shares fell 2.8%.

The Australian dollar was buying 73.76 US cents near 8.00am AEST, up from the previous close of 73.49. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 88.49.

Locally, the S&P/ASX 200 closed 0.1% lower at 7272.5 after a session spent bouncing between narrow losses and gains. Weakness among heavyweight mining and banking stocks offset strength in all other sectors as the benchmark posted a third consecutive loss for the first time since mid-August.

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BHP, Rio Tinto and Fortescue Metals lost between 1.0% and 5.3%, with Fortescue's decline making it the worst-performing ASX 200 component.

ANZ, Westpac and Commonwealth Bank shed between 0.4% and 1.6%, while Bank of Queensland dropped 4.3% after reporting annual results.

Shares of property trusts and tech companies rose, with Afterpay and Xero adding 0.75% and 1.6%, respectively.

Australian casino operator Star's latest response to a media article about alleged issues with its anti-money-laundering program should allay investor concerns about possible management changes at the company, Jefferies says.

Australia's economy likely contracted 3.0% or more in the third quarter from the second quarter as the cost of pandemic lockdowns in eastern states since midyear mounted, Treasurer Josh Frydenberg said Wednesday.

Gold futures rose 2% to $US1794.70 an ounce; Brent crude fell 0.6% to $US82.92 a barrel; Iron ore was down 3.7% US$124.17.

The yield on the Australian 10-year bond fell to 1.69%; The US 10-year Treasury note fell to 1.54.

Asia

Chinese stocks ended Wednesday sharply higher, rebounding from a broad downturn since last month. The benchmark Shanghai Composite Index rose 0.4%, while the Shenzhen Composite Index added 1.3%. The ChiNext Price Index gained 2.3%, its biggest one-day jump in more than a month. Consumer companies, including hotel operators and food and beverage makers, led the recovery. Metal suppliers and mining firms lent further support.

Stock markets in Hong Kong were closed due to a typhoon.

Japanese stocks ended lower, dragged by declines in steel and chemical stocks as concerns about higher raw-material costs weighed. The Nikkei Stock Average fell 0.3%.

Europe

European markets moved higher Wednesday as gains for tech and renewable energy-related stocks offset losses for banks. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, was up 0.7%.

In London, the FTSE 100 closed 0.2% higher.

North America

The S&P 500 rose in choppy trading Wednesday, with the broad US stock index snapping a three-session losing streak.

Traders seemed to shrug off a hotter-than-expected inflation reading and confirmation of the Federal Reserve's plans to begin reducing its bond-buying stimulus program.

The S&P 500 added 0.3%, while the Dow Jones Industrial Average was about flat. The tech-heavy Nasdaq Composite gained 0.7%.

Fresh consumer-price data showed US inflation accelerated slightly in September, rising a seasonally adjusted 0.4% from the previous month and at a 5.4% annual rate as labor shortages and supply-chain snarls kept prices high. Economists had projected a 0.3% increase from August and a 5.3% annual rate.

"I think the Fed might be forced to raise rates quicker than they want to," said Carter Henderson, portfolio manager at Fort Pitt Capital Group. "Inflation, in my eyes, is not transitory."

The central bank signalled last month that it was prepared to begin reversing its pandemic stimulus programs in November and could raise interest rates next year. Meeting minutes released Wednesday showed Fed officials reviewed plans to possibly end their asset purchases by the middle of 2022.

Stocks have been weighed down in recent days by fears about inflation, stoked by rising energy prices and continued supply bottlenecks. Investors are trying to gauge how inflation will affect central bank support for the economy and whether the higher costs for raw materials and energy will erode profits as third-quarter earnings season kicks off.

"Equity markets need to incorporate the higher uncertainty on central banks' approaches and the uncertainties on the earnings side," said Antonio Cavarero, head of investments at Generali Insurance Asset Management. "This doesn't mean the tide has turned, but some higher caution is probably the way to go for the next few weeks."

Several household-name companies reported earnings early Wednesday. BlackRock shares rose 3.8% after the money-management company reported revenue and profit that beat analysts' expectations. JPMorgan's earnings per share came in above Wall Street's projections but the bank's shares fell 2.8%.

Delta Air Lines shares dropped 6% after the company posted a quarterly profit but said it faced pressure from rising fuel prices.

"Have we passed the point of the sweet spot—low costs and explosive demand, to a point where demand is softening and costs are picking up? We do expect to see some signs of that starting to emerge," said Sebastian Mackay, a multiasset fund manager at Invesco. "I do believe we'll be in a more rocky patch for equities, where they will be moving sideways or possibly down a little bit."

The oil-price rally halted following a report that suggested Iran nuclear talks could recommence as soon as this week, prompting some traders to price in a potential higher supply of crude to the market.

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

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