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Global Market Report - 16 September

Lewis Jackson  |  16 Sep 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to rise after Wall Street staged a rebound amid a surge in oil prices. Iron ore falls to near $US100 as the rout continues.

The Australian SPI 200 futures contract was up 32 points or 0.4 per cent at 7,447 near 8.00 am Sydney time on Thursday, suggesting a positive start to trading.

US stocks rose Wednesday, staging a rebound as investors tried to gauge the strength of the economic recovery.

The S&P 500 rose about 0.9%. Energy was the best-performing sector of the S&P 500, boosted by the oil rally. The Dow Jones Industrial Average gained 0.7%, while the technology-focused Nasdaq Composite climbed 0.8%.

Stocks have retreated in September, with some investors worried that markets are ripe for a pullback after marching higher for much of the year. The Dow is down about 1.5% since the start of the month.

The Australian dollar was buying 73.32 US cents near 8.00am AEST, up from the previous close of 73.19. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, fell to 87.12.

Locally, the S&P/ASX 200 closed 0.3% lower at 7417.0, snapping a three-day winning streak with losses in commodity and financial stocks.

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The energy sector lost 2.2% as Whitehaven Coal, Oil Search, Santos, Beach Energy and Worley gave up between 2.3% and 4.3%. Generator and retailer AGL slumped 7.4%, making it the worst-performing ASX 200 component. BHP lost 3.5% as it detailed its potash plans more, while Champion Iron fell 3.2%. Commonwealth Bank, NAB and ANZ slipped by between 0.2% and 0.4%.

Woodside Petroleum is best positioned among Australian energy companies to benefit from strong liquefied natural gas prices, according to UBS. The bank now expects spot Asian LNG prices of US$5.5/mmbtu, driving a 3-11% increase in Woodside's EPS outlook over 2021-2023.

Whitehaven Coal is likely to reinstate its dividend in February as it benefits from the rally by thermal coal and metallurgical coal prices, Goldman Sachs says.

Gold futures fell 0.7% to $US1794.80 an ounce; Brent crude was up 2.5% at $US75.46 a barrel; Iron ore was down 4.1% to $US116.65.

The yield on the Australian 10-year bond fell to 1.20%; The yield on the US 10-year note rose to 1.30%.

Asia

Chinese stocks finished lower on Wednesday, dragged by consumer-related and property sectors, while lithium producers gained.

Chinese economic activity data in August showed that on-year retail sales growth slowed to 2.5% from 8.5% in July, and home sales by value slumped 19.7%, the biggest drop since April 2020. The Shanghai Composite Index slipped 0.2%, the Shenzhen Composite Index edged 0.1% lower.

Hong Kong stocks ended the session lower too, extending a losing streak for the third straight day. The benchmark Hang Seng Index slid 1.8% to settle at 25033.21.

Shares of Macau casino operators tumbled after the Macau government hinted at tighter supervision and regulations for gaming licenses. Sands China was the top loser with a 33% decline, settling at its lowest closing level in nearly a decade. Galaxy Entertainment dived 20% and SJM Holdings slumped 24%. Wynn Macau and MGM China also both lost over 25%.

Japan's Nikkei Stock Average closed broadly lower as profit-taking kicked in following the benchmark Nikkei's ascent to a 31-year high on Tuesday. The index closed down 0.5%. Among the biggest losers was SoftBank Group, which fell 5.8% amid continuing concerns about the valuation of its Chinese portfolio companies.

Europe

The FTSE 100 closed Wednesday up 0.25% to 7016.49. Oil prices and other rising commodity prices pushed the like of BP PLC, Royal Dutch Shell PLC and mining stocks to the top of the index.

The pan-European Stoxx 600 index closed down 0.8% at 463.91.

North America

US stocks rose Wednesday, staging a rebound as investors tried to gauge the strength of the economic recovery.

The S&P 500 added 37.65 points, or 0.8%, to 4480.70, recovering some of its losses after it fell during six of the previous seven trading sessions. The broad stocks gauge ended the day roughly 1.2% below the all-time closing high it notched in early September.

The Dow Jones Industrial Average advanced 236.82 points, or 0.7%, to close at 34814.39 on Wednesday. The technology-focused Nasdaq Composite climbed 123.77, or 0.8%, to 15161.53.

Stocks have retreated this month, with some investors worried that markets are ripe for a pullback after marching higher for much of the year. The Dow is down more than 1.5% since the start of September, marking its worst first 10 trading days of a month since May 2020.

Some investors have also voiced concern that the economic rebound wouldn't be as fast as they previously expected. The spread of the Delta variant of the coronavirus, an economic slowdown in China and supply-chain difficulties have all damped sentiment.

"We've shifted from worrying about premature tightening [by the Federal Reserve] killing off the recovery in equities to concerns about the strength of the recovery weighing on equities," said Sebastian Mackay, multiasset fund manager at Invesco. Mr. Mackay remains upbeat about the outlook for stocks, but said he has taken out insurance against volatility by buying put options.

New Fed data showed US industrial production rose at a seasonally adjusted 0.4% in August compared with the previous month. The reading broadly matched forecasts from economists polled by The Wall Street Journal, who expected a 0.5% rise. But factory output lost some momentum in August compared with July, when it rose by a revised 0.8%.

While the pace of growth has slowed, the shift is consistent with a typical transition from the early stages of a recovery to the middle of an expansion cycle, said George Mateyo, chief investment officer at Key Private Bank.

"In the long term, we think stocks are the place to be, notwithstanding some short-term volatility," Mr. Mateyo said.

Oil prices extended a recent rally, driven in part by disruption to output caused by Hurricane Ida. More than 39% of oil output in the Gulf of Mexico and 48% of gas output was offline Tuesday, the Bureau of Safety and Environmental Enforcement said.

Energy was the best-performing sector of the S&P 500, boosted by the oil rally. Chevron shares gained $2.04, or 2.1%, to $98.24.

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

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