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Global Market Report - 15 September

Lewis Jackson  |  15 Sep 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to open lower as Wall Street slumped and new data showed the pace of US inflation may be slowing.

The Australian SPI 200 futures contract was down 42 points or 0.6 per cent at 7,391 near 8.00 am Sydney time on Wednesday, suggesting a negative start to trading.

US stocks fell Tuesday continuing their recent pullback even after fresh data showed that inflation climbed at a slower pace than economists expected in August.

The S&P 500 declined 0.6%, while the Dow Jones Industrial Average shed 0.8%. The technology-heavy Nasdaq Composite fell around 0.5%. Through Monday, the S&P 500 fell in five of the past six trading sessions.

The Labor Department's consumer-price index rose a seasonally adjusted 0.3% in August from July, lower than the 0.4% expected by economists.

Investors have been closely following inflation data for signs of whether the Federal Reserve might begin to scale back its easy-money policies. Tuesday's inflation reading appeared unlikely to change the Fed's plans.

The Australian dollar was buying 73.19 US cents near 8.00am AEST, up from the daily low of 73.18. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, rose to 87.29.

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Locally, the S&P/ASX 200 closed 0.2% higher at 7437.3 on surging energy stocks and strength among heavyweight financials.

The energy sector jumped 4.4% for its largest gain since 23 Feb, as Santos, Oil Search, Woodside and Beach put on between 5.2% and 7.2% amid higher oil prices. Macquarie rose 1.9%, while major lenders NAB, Commonwealth, Westpac and ANZ added between 0.2% and 0.3%. Industrial, tech, health and consumer stocks were weak.

Reserve Bank of Australia Governor Philip Lowe moved to strongly push back on current market pricing suggesting the central bank could raise interest rates as early as late 2022, saying the bank's desired wages and inflation targets remain a long way off. Mr. Lowe also poured cold water on the idea that the RBA would raise interest rates soon to rein in runaway house-price growth.

Also on Tuesday, data showed Australian residential property rose 6.7% in the June quarter versus the quarter before. Canberra posted an 8.2% rise on-quarter, while Sydney prices rose 8.1%.

Gold futures rose 0.7% to $US1807.10 an ounce; Brent crude was up 0.1% at $US73.60 a barrel; Iron ore was down 1.8% to $US121.67.

The yield on the Australian 10-year bond fell to 1.25%; The yield on the US 10-year note fell to 1.29%.

Asia

Chinese stocks ended Tuesday mixed amid the country's latest Covid-19 outbreak in Fujian province that has prompted a localized lockdown. Steelmakers, which rallied in recent weeks, suffered heavy losses. Property developers also fell after market leader China Evergrande said it expected a significant decline in September contracted sales. The Shanghai Composite Index fell 1.4% to 3662.20.

In Hong Kong stocks also ended sharply lower, with the benchmark Hang Seng Index falling 1.2% to 25502.23—its lowest closing level in more than two weeks. The market was mainly dragged by China Evergrande, shares of which slumped 12% to hit their lowest lowest point since 2017.

The slide came after the Chinese developer said it expects a significant fall in September property sales and has appointed financial advisers to ease liquidity issues, intensifying investor concerns that the cash-strapped conglomerate could default.

In Japan the Nikkei Stock Average closed 0.7% higher to 30670.10, its highest level since August 1990, driven by hopes for fiscal stimulus and other economic policies by a new chief of Japan's ruling party.

Investors continue to focus on comments from ruling-party chief candidates ahead of the election later this month. Steel, chip and shipping stocks have led the recent surge in stocks. Tuesday's gains were led by insurance and tech stocks.

Europe

The FTSE 100 closed Tuesday down 0.49% to 7034.06. A fall in commodity prices sent major miners lower, says IG Group PLC's senior market analyst Joshua Mahony. "Sharp declines across the likes of palladium, iron ore, platinum and copper have sent miners lower, to the detriment of UK markets in particular," Mahony says.

The pan-European Stoxx 600 index closes flat at 467.65, erasing earlier gains due to softer US inflation figures as concerns persist that prices may remain elevated while growth starts to stall.

North America

US stocks fell on Tuesday, continuing their recent pullback even after fresh data showed that inflation climbed at a slower pace than economists expected in August.

The S&P 500 declined 25.68 points, or 0.6%, to 4443.05. The Dow Jones Industrial Average shed 292.06, or 0.8%, to 34577.57. The technology-heavy Nasdaq Composite fell 67.82, or 0.4%, to 15037.76.

Major US stock indexes rose after the opening bell before turning lower. The market has broadly pulled back this month amid concerns that rising cases of the Delta variant of Covid-19 could weigh on economic activity and that stocks have rallied for too long without a correction. The S&P 500 has now declined in six of the past seven trading sessions.

"I'm hearing more and more calls for a correction in the market," said Jack Janasiewicz, a portfolio manager at Natixis Investment Managers Solutions.

The Labor Department's consumer-price index rose a seasonally adjusted 0.3% in August from July—lower than the 0.4% that economists surveyed by The Wall Street Journal expected. The rise is slower than the 0.5% monthly increase in July, and down markedly from June's 0.9% pace.

Investors have been closely following inflation data for signs of whether the Federal Reserve might begin to scale back its easy-money policies. Tuesday's inflation reading appeared unlikely to change the Fed's plans, Mr. Janasiewicz said. Many Fed officials have said in recent public statements that the central bank could begin reducing, or tapering, its monthly purchases of bonds by the end of this year if the economy performs as they anticipate.

"There is this interesting moment we've got in markets where Delta is still a concern, but at the same time you've got central banks tapering or about to taper," said Edward Park, chief investment officer at UK investment firm Brooks Macdonald. "It is an interesting time for markets, and that is why it is a bit skittish."

Fed officials have said they expect the current spike in inflation to be temporary, pointing to supply bottlenecks that have arisen in various industries as the economy has reopened from pandemic-driven lockdowns.

But some investors fear inflation could prove to be sticky. August inflation was high by the standards of recent years, with the Labor Department's main index up 5.3% from a year ago.

"It is hard for us to say, 'Well folks, all these things are transitory and come January 2022, we expect everything to be back to normal,'" said Carsten Brzeski, ING Groep's global head of macro research. "Every data point that shows that inflation is more than only transitory, we get closer to tapering."

All 11 sectors of the S&P 500 ended the day in negative territory, with energy and financials posting the steepest losses.

Casino stocks fell after the Macau government indicated it would seek to tighten regulation of gaming in the territory, a major Asian gambling destination. Wynn Resorts tumbled $11.23 a share, or 11%, to $92.25. Las Vegas Sands shares fell $4.18, or 9.7%, to $38.71.

Class A shares of Comcast fell $4.38, or 7.3%, to $55.59 after the cable and broadband giant's chief financial officer said there had been a recent slowdown in subscriber growth.

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

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