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Global Market Report - 2 June

Lewis Jackson  |  02 Jun 2021Text size  Decrease  Increase  |  
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Australia

Aussie shares set to edge up slightly amid the RBA holding rates steady and iron ore prices rebounding past $US200.

The Australian SPI 200 futures contract was up 12 points or 0.17 per cent to 7159 near 7.10 am Sydney time on Wednesday, suggesting a positive start to trading.

Wall Street's main indexes ended little changed on Tuesday, with gains in energy and financial shares countering declines in healthcare as investors weighed the latest US economic data for signs of a rebound and rising inflation.

The Dow Jones Industrial Average rose 40.14 points, or 0.12 per cent, to 34,569.59, the S&P 500 lost 2.97 points, or 0.07 per cent, to 4,201.14 and the Nasdaq Composite dropped 16.31 points, or 0.12 per cent, to 13,732.43.

The Australian dollar was buying 77.54 US cents near 7.30 AEST, up from 77.50 at Tuesday’s close.

Locally, investors are debating whether the Reserve Bank might be signalling it's about to reduce quantitative easing efforts after some subtle changes in the bank's language.

The central bank left the cash rate at 0.1 per cent on Tuesday but analysts were more interested in the decision to drop a line from last month's statement.

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ANZ Bank head of Australian economics David Plank noted the RBA statement dropped a previous commitment that the bank was prepared to make more bond purchases.

"It is hard not see the shift in language as a possible signal," Mr Plank said.

The RBA has been buying bonds since last year as part of efforts to help the economy through the coronavirus pandemic.

Mr Plank said the next phase of quantitative easing might not be the same size as earlier ones.

Any tapering of those efforts could represent an important shift for rates and investors.
Westpac head of rates strategy Damien McColough agreed the change in language could suggest a tapering of quantitative easing.

However both men said they did not expect this.

The Aussie dollar slumped from about 77.60 US cents to 77.40 US cents as foreign exchange traders looked elsewhere for a rate rise.

The rates decision gave shares a short-lived boost but not enough for gains.

The benchmark S&P/ASX200 index closed lower by 19 points, or 0.27 per cent, to 7142.6.

The All Ordinaries closed down 14.6 points, or 0.2 per cent, to 7392.1.

Energy shares were best and rose 1.34 per cent.

A meeting of the Organisation of Petroleum Exporting Countries, due Tuesday, will discuss supply.

Santos was one of the best ASX energy performers and rose 2.07 per cent to $6.91.

Financials fared worst and lost 0.72 per cent.

ANZ was worst of the banks and shed 1.39 per cent to $28.31.

Bankers may be concerned by the possibility of customers in Victoria needing more assistance.

The state's seven-day coronavirus lockdown appears set to be extended after three more infections were reported. This brings the total from the Melbourne outbreak to 54.

One of the biggest market movers was software vendor for the car industry, Infomedia.
Shares were higher by 12.92 per cent to $1.53.

The company said sales were increasing, and full-year sales were forecast to be between $95 million to $96 million.

Full-year cash earnings before interest, tax, depreciation and amortisation were expected to be between $19 million and $20 million.

No estimates had been given before.

Infomedia has also completed its purchase of US-based e-commerce vendor SimplePart.

Milk supplier Synlait climbed 8.54 per cent to $3.05 after flooding in the Canterbury region of New Zealand did not prevent staff collecting milk from farmers.

Several farms in Synlait's network suffered significant damage and the company said collecting milk was challenging due to road closures.

There was no change to full-year production plans or the earnings forecast.

Supermarket giant Woolworths said it completed buying more shares in data analytics provider Quantium.

Woolworths has raised its shareholding from 47 per cent to 75 per cent.

Woolworths shares were higher by 0.34 per cent to $41.76.

There was no lead from US markets due to the Memorial Day public holiday.

On Wednesday, gross domestic product figures for the March quarter are due.

NAB analysts tipped a 0.7 per cent rise, less than the previous two quarters.

Spot Gold was down 0.4 per cent at $US1899.94 an ounce; Brent crude was up 1.8 per cent to $US70.56 a barrel. Iron ore was up 4.9 per cent at $US208.67.

The yield on the Australian 10-year bond closed at 1.69 per cent.

Asia

At the close, China's Shanghai Composite index was up 0.26 per cent at 3,624.71.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, was up 1.08 per cent, to 29,468.00.

Japan's Nikkei 225 Index closed down 0.16 per cent at 28,814.34.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up 0.75 per cent at 450.10.

The German DAX fell 0.64 per cent to 15,421.13.

North America

Wall Street's main indexes ended little changed on Tuesday, with gains in energy and financial shares countering declines in healthcare as investors weighed the latest US economic data for signs of a rebound and rising inflation.

The Dow Jones Industrial Average rose 40.14 points, or 0.12 per cent, to 34,569.59, the S&P 500 lost 2.97 points, or 0.07 per cent, to 4,201.14 and the Nasdaq Composite dropped 16.31 points, or 0.12 per cent, to 13,732.43.

The S&P 500 financial sector hit a record high while expected growth in fuel demand boosted oil prices and helped lift the energy sector.

The healthcare sector was dragged down by a weak profit forecast from Abbott Laboratories.
Data showed US manufacturing activity picked up in May as pent-up demand in a reopening economy boosted orders.

But unfinished work piled up because of shortages of raw materials and labour.

"People came back from a holiday weekend convinced that the economy is recovering nicely and that any inflation that we might be seeing in labour and other costs is temporary," Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Along with financials and energy, the small-cap Russell 2000 rose sharply on Tuesday, underscoring strength for segments of the stock market expected to do particularly well in an expanding economy.

"The economy certainly is growing and that's a positive, and again it's a positive for the most cyclical parts of the stock market," said Kristina Hooper, chief global market strategist at Invesco in New York.

While the S&P 500 remains within about 1.0 per cent of its record high after four straight months of gains, investors are worried about whether rising inflation could hit equity prices.

Stock markets on Friday brushed off a surge in key inflation readings for April following reassurances from Federal Reserve officials that the central bank's ultra-loose monetary policy would remain in place.

Minneapolis Federal Reserve Bank President Neel Kashkari and Fed Vice Chair for supervision Randal Quarles on Tuesday reiterated the view that higher prices would be transitory.

This week's focus will be on a raft of economic data, culminating with US payrolls due on Friday.

Abbott Labs shares fell after the company cut its full-year 2021 profit forecast, citing expectations for a sharp decline in revenue from its COVID-19 tests as more people in the US get vaccinated.

Shares of other test makers also fell.

Cloudera Inc shares jumped after private equity firms KKR & Co and Clayton Dubilier & Rice LLC agreed to take the data analytics firm private.

A group of "meme stocks" extended gains from the previous week, with shares of AMC Entertainment Holdings Inc rising after the movie theatre chain said it sold $US230 million ($A297 million) of its stock.

is a reporter/data journalist for Morningstar. You can follow Lewis on Twitter @lewjackk

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