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 - 18 May

Lewis Jackson  |  18 May 2022Text size  Decrease  Increase  |  
Email to Friend

Australia

Australian shares are set to jump after robust retail spending data bolstered a US equity rally as markets weighed hawkish comments from Federal Reserve Chairman Jerome Powell.

ASX futures were up 70 points or 1% at 7181 as of 8.00am on Wednesday, suggesting a positive start to the day.

Overseas, the S&P 500 climbed 2%, a day after posting a modest loss. The Dow Jones Industrial Average rose 1.3%. The Nasdaq Composite jumped 2.8%, rebounding after it fell 1.2% on Monday. The technology heavy index was buoyed by gains of more than 4% at Amazon and Tesla.

On Tuesday, fresh data from the Commerce Department showed some signs of economic resilience, with US shoppers increasing retail spending in April for the fourth consecutive month. That, as well as the reopening of some stores in Shanghai this week after a strict Covid-19 lockdown, provided some sources of optimism.

Stocks briefly pared gains on Tuesday afternoon as Fed Chairman Jerome Powell voiced resolve in fighting inflation, before indexes climbed back toward new session highs. "There could be some pain involved" in restoring price stability, Mr. Powell said.

"I think for better or worse, this is often a pattern that we see in bear markets," said Andrew Sheets, chief cross-asset strategist at Morgan Stanley. "You do get these reversals that happen quite frequently...and I think that makes it hard to trade."

Locally, the S&P/ASX 200 closed 0.3% higher at 7112.5 as commodity and financial stocks lifted the benchmark to a third straight gain.

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

The index shrugged off weakness from US stocks to continue its recovery from last week's selloff, which dragged it to a fourth consecutive weekly loss.

Iron ore miners BHP, Rio Tinto and Fortescue added between 0.55% and 2.3%, while shares of lithium miners gained even more. Whitehaven Coal climbed 5.9% to an all-time high of $5.20 as its share buyback continues.

Energy explorers Santos, Woodside and Beach added between 2.0% and 6.1% amid higher oil prices, while banks ANZ, Westpac, NAB and Commonwealth put on between 0.1% and 1.7%.

Brambles gave back two-thirds of Monday's gains after the global pallet company advised that European private equity giant CVC Capital Partners would not be pursuing a takeover offer after all, "due to the current external market volatility".

The tech sector lost 0.8% after adding 9.2% over the previous two sessions.

Job search company Seek and realestate.com.au owner REA Group both fell by a little over 4%, while former message board favourite Zip dropped 3.2% to a more than three-year low of 92 cents. Shares in the buy now, pay later company peaked at over $12 in February 2021.

In commodity markets, Brent crude oil dipped to 1.3% to US$112.77 a barrel. Iron ore added 2.2% to US$130.15. Gold increased 0.3% to US$1818.90.

Local bond prices dipped slightly on Tuesday, with the yield on the Australian 2 Year government bond up to 2.55% while the 10 Year increased to 3.40%. It was a similar pattern overseas and yields on US Treasury 2 Years rose to 2.70%, and the 10 Year climbed to 2.99%.

The Australian dollar rose to 70.28 US cents as of 7.00am on Wednesday, up from the previous close of 69.69 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies fell to 95.79.

Asia

China stocks ended the session higher, recovering from losses on Monday when officials released weak retail sales data for April. The benchmark Shanghai Composite Index rose 0.6% to settle at 3093.70, while the Shenzhen Composite Index was up 0.7% at 1940.05. The tech-heavy ChiNext Price Index gained 1.6% to end at 2369.09. Auto companies led the upturn, in line with the sector's soaring momentum in Hong Kong, as analysts increasingly turned more positive about the outlook for the sector's recovery from the resurgence of Covid-19 in China.

In Hong Kong the Hang Seng Index closed 3.3% higher at 20602.52 amid gains in regional markets. Investor sentiment may have brightened on news that Shanghai's Covid-19 cases seem to be improving and the city will exit its lockdown on June 1, KGI Securities analyst Chua Tit Hong says in a note. Among the gainers were lens maker Sunny Optical, which jumped 13%, and Geely Automobile, advancing 8.8%. Technology shares also rose, led by Alibaba Health Information Technology, up 7.5%. Decliners included Country Garden Holdings, which was off 1.0%.

Japanese stocks ended higher, led by gains in energy and shipping stocks, thanks partly to hopes for a further economic recovery from the Covid-19 pandemic and the easing of the lockdown in Shanghai. Oil explorer Inpex gains 5.6% and major shipper Nippon Yusen climbed 3.7%. The Nikkei Stock Average rose 0.4% to 26659.75. Investors are paying attention to movements of the yen and crude-oil prices as the earnings season winds down.

Europe

European markets rose after upbeat Asian trading and early gains for US stocks. The pan-European Stoxx Europe 600, French CAC 40 and German DAX advanced more than 1%.

"The next short-term bounce looks well under way across stocks, as beaten-down names see fresh gains," IG analyst Chris Beauchamp says. "But while it might be the beginning of a much longer-term rally, the persistence of fears about a recession and higher prices means chances are high that this oversold surge has a few weeks of life in it before we see stocks reverse course again."

London’s FTSE 100 closed up 0.7% on Tuesday, with Imperial Brands leading the risers after the tobacco group--which houses Davidoff, Gauloises and JPS among its brands--published numbers for the first half. "Pretax profits fell to GBP1.2 billion [$1.48 billion], largely due to the costs of leaving Russia, which resulted in a charge of GBP201 million, while a better-than-expected performance in its Next Generation Products revenue has also helped," says Michael Hewson, chief market analyst at CMC Markets UK.

North America

US stock indexes posted strong gains Tuesday as investors snapped up beaten-down shares in the technology, banking, airline and other sectors.

The S&P 500 climbed 2%, a day after it posted a modest loss. The Dow Jones Industrial Average rose 1.3%. The Nasdaq Composite jumped 2.8%, rebounding after it fell 1.2% on Monday. The technology heavy index was buoyed by gains 4% plus gains at Amazon and Tesla.

Stocks have taken a beating in recent weeks on wide-ranging economic, geopolitical and Covid-19 concerns. Weighing most heavily on many investors' minds is the outlook for the US economy as the Federal Reserve lifts interest rates to combat inflation.

On Tuesday, fresh data from the Commerce Department showed some signs of economic resilience, with US shoppers increasing retail spending in April for the fourth consecutive month. That, as well as the reopening of some stores in Shanghai this week after a strict Covid-19 lockdown, provided some sources of optimism.

Stocks briefly pared gains on Tuesday afternoon as Fed Chairman Jerome Powell voiced resolve in fighting inflation, before indexes climbed back toward new session highs. "There could be some pain involved" in restoring price stability, Mr. Powell said in remarks at The Wall Street Journal's Future of Everything Festival.

Markets have been choppy in recent weeks. The Nasdaq Composite, for example, has swung 1% or more in either direction in all but three of May's 12 trading sessions. Many market observers expect such volatility to continue as investors react to the war in Ukraine, corporate earnings and the outlook for China's economy.

"I think for better or worse, this is often a pattern that we see in bear markets," said Andrew Sheets, chief cross-asset strategist at Morgan Stanley. "You do get these reversals that happen quite frequently...and I think that makes it hard to trade."

Morgan Stanley has a year-end price target of 3900 for the S&P 500, implying that the index still has farther to fall. Last week, the S&P 500 was on the cusp of dropping into a bear market, defined as a fall of at least 20% from a recent high. As of Tuesday's close, the index was down about 15% from its January record.

"We're seeing the most aggressive tightening [of monetary policy] in decades against the backdrop of a very uncertain economic outlook and a squeeze on households," said Craig Erlam, senior market analyst at Oanda. Last week's US inflation data, which showed that pricing pressures edged down just slightly in April, was worrisome, he said.

"It's not just that [inflation] accelerated fast on the way up. The prospect of it decelerating slowly on the way down is a major concern," he said.

Tech was the best-performing sector of the S&P 500 on Tuesday. Chip maker Nvidia and electric-car maker Tesla both advanced more than 5%, while Apple, Microsoft, PayPal Holdings and Zoom Video Communications all gained more than 2%.

Shares of Citigroup rallied $3.59, or 7.6%, to $51.05 after a securities filing showed Warren Buffett's Berkshire Hathaway Inc. bought about $3 billion worth of shares in the bank. Paramount Global and Ally Financial -- other companies in which Berkshire invested -- also rallied.

United Airlines surged $3.43, or 7.9%, to $46.97 a share after the carrier lifted its revenue outlook due to improved travel demand. American Airlines and Delta Air Lines both posted big gains as well.

Twitter gained 93 cents, or 2.5%, to $38.32, even after Tesla Chief Executive Elon Musk said his $44 billion bid for the social-media company can't move forward until the company is clearer about how many of its accounts are fake. Twitter has now wiped out all the gains it notched after Mr. Musk disclosed a stake in the company in April and is trading well below his deal that values the company at $54.20 a share.

Walmart slumped $16.86 a share, or 11%, to $131.35 -- retreating to its lowest level in more than a year -- after the retail giant reported that earnings fell sharply, hurt by higher supply-chain and labor costs. Home Depot shares rose $4.96, or 1.7%, to $300.95 after the home-improvement retailer boosted its outlook for the year and said shoppers were spending more per shopping trip.

The price of bitcoin stabilized, rising 0.7% to trade at $30,080.86 at 5 pm New York time on Tuesday. Shares of Coinbase Global, which have been battered by bitcoin's spring selloff, jumped $8.30, or 13%, to $70 on Tuesday after the crypto exchange said it would slow hiring.

The relative calm in Tuesday's markets sent the WSJ Dollar Index falling 0.8%. The index, which measures the greenback against a basket of 16 other currencies, has climbed for much of this year as investors have sought the safety of the US dollar in a market with few other places to hide. Even with its decline, the index is still hovering near its highest level since March 2020.

Futures on Brent crude oil, the international energy benchmark, fell 2% to settle at $111.93 a barrel.

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