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Global Market Report - 18 November

Lewis Jackson  |  18 Nov 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to edge lower as Wall Street gave up Tuesday's gains.

The Australian SPI 200 futures contract was down 4 points at 7,366 near 7.30 am AEST on Thursday, suggesting a negative start to trading.

US stocks fell on Wednesday after earnings from big retailers like Target, TJX Cos. and Lowes.

The S&P 500 slipped 0.26% as of 4 pm New York, a reversal from Tuesday's gains. The Nasdaq was down roughly 0.3%, and the Dow Jones Industrial Average slipped 0.6%, or 210 points.

A strong earnings season had propelled stocks to fresh highs in recent weeks, with investors shaking off concerns that supply-chain issues might weigh on profits or that higher prices might keep people from spending.

The Australian dollar was buying 72.59 US cents near 7.00am AEST, down from the previous close of 73.01. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, slipped to 89.56.

Locally, the S&P/ASX 200 closed 0.7% lower at 7369.9 as Commonwealth Bank of Australia dragged the heavyweight financial sector into the red.

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Shares in Commonwealth, Australia's largest listed company by market capitalization, lost 8.1% after warning of the margin impact of low interest rates and fierce competition. NAB, Westpac and ANZ followed Commonwealth lower, losing between 1.1% and 2.0%.

Commonwealth's worst share performance since March 2020 made it the second worst performing ASX component after Nufarm, which fell 8.6% after warning of margin impacts from material costs and congested supply-chains.

Iron-ore miners Rio Tinto, BHP and Fortescue gave up between 1.0% and 1.9%.

Gold futures fell 0.8% to $US1851.90 an ounce; Brent crude rose 0.55% to $US82.50 a barrel; Iron ore was up 1.1% US$90.04.

The yield on the Australian 10-year bond rose to 1.82%; The US 10-year Treasury yield rose to 1.64%.

Australian wage growth defied Covid-19 lockdowns in 3Q and posted a solid 0.6% on-quarter gain. Still, the result extends a long history of less-than-impressive growth. Goldman Sachs says Australia has now recorded weak sub-3.0% wage growth for 34 consecutive quarters.

Asia

Chinese stocks finished higher, helped by lithium producers and renewable-energy sectors. The virtual meeting between US and China's leaders had an overall positive impact on A shares as cooperation between the countries could strengthen global governance amid challenges posed by the pandemic and climate change, Ping An Securities says. The Shanghai Composite Index rose 0.4%, the Shenzhen Composite Index climbed 1.1% and the ChiNext Price Index was up 0.8%.

Hong Kong's Hang Seng Index is down 0.2% after a strong performance in the previous session. Positive sentiment from the meeting between Xi Jinping and US President Joe Biden lifted the Hang Seng index by 1.3% yesterday as the amiable approach of both parties seemed to indicate that tensions are cooling, IG says.

Japanese stocks has slipped with investors possible taking profits after four straight sessions of gains. The Nikkei Stock Average fell 0.4%.

Europe

European stocks were mixed as corporate earnings continue and a surge in UK inflation fuelled expectations of a rate hike. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies rose 0.1%.

In London, The FTSE 100 index fell 0.5% after a jump in inflation jolted markets and raised the likelihood rates will rise at the Bank of England’s December meeting. Data showed the UK's consumer-price index rose 4.2% year-on-year in October.

"Coming off the back of a 14-month low in unemployment, today's 10-year high inflation reading builds a renewed story around potential action at the Bank of England," IG analyst Joshua Mahony says.

North America

US stocks fell Wednesday after earnings from big retailers like Target, TJX Cos. and Lowe's.

The S&P 500 slipped 0.26% as of 4 pm New York, a reversal from Tuesday's gains. The tech-focused Nasdaq Composite Index was down roughly 0.3%, and the Dow Jones Industrial Average slipped 0.6%, or 210 points.

A strong earnings season had propelled stocks to fresh highs in recent weeks, with investors shaking off concerns that supply-chain issues might weigh on profits or that higher prices might keep people from spending.

Lowe's shares added 0.4% Wednesday after the company boosted its full-year sales guidance. TJX gained 5.8% after the retailer posted earnings that exceeded analysts' expectations.

But the market momentum has cooled over the past week, after news that US inflation is at a three-decade high. Target shares fell 4.7% Wednesday even though the retailer posted revenue and earnings that topped Wall Street's expectations.

The coming year likely won't get the same benefits that 2021 did, such as stimulus checks and bounceback from the Covid-19 pandemic's lows, said Emily Roland, co-chief investment strategist at John Hancock Investment Management.

"Don't get too comfortable in the fast lane," Ms. Roland said this week. "Next year, we just don't see the highest-risk parts of the market leading, and we're actually looking to trim risk into spring."

Still, a dip in retail stocks could be a buying opportunity, said Andrew Slimmon, head of the applied equity advisers team at Morgan Stanley Investment Management.

"If a company beats estimates, but the stock drops, I would not run out and sell those stocks," Mr. Slimmon said. "Stocks don't go down for long when companies are doing better than expected."

The yield on the benchmark 10-year Treasury note was 1.604% Wednesday, down from 1.632% Tuesday. Yields and prices move inversely.

Visa Inc. shares fell 4.7% after Amazon.com Inc. said it would stop accepting Visa's UK credit cards because of their high fees. The move marks a major escalation in the e-commerce giant's yearslong battle with the card network.

Shares of Tesla rose 3.25%. Chief Executive Elon Musk sold another 934,000 shares Tuesday for roughly $973 million, continuing a recent selling spree, according to regulatory filings.

Fresh data showed that housing starts, a measure of US home-building, declined 0.7% in October from September. Home builders are contending with rising material costs and labor shortages, which are driving up home prices.

Morgan Stanley's Mr. Slimmon said he is betting on housing stocks as he expects supply issues to ease next year.

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

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