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Global Market Report - 4 June

Lewis Jackson  |  04 Jun 2021Text size  Decrease  Increase  |  
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Australia

Aussie shares are set to edge higher after a record close on Thursday, while a pullback in tech stocks left Wall Street slightly lower.

The Australian SPI 200 futures contract was up 2 points or 0.03 per cent to 7,265 near 7.30 am Sydney time on Friday, suggesting a positive start to trading.

US stocks have ended lower, with tech shares dragging on the S&P 500 and Nasdaq, as investors balanced concerns about inflation and the Federal Reserve reining in stimulus with relief about corporate tax hikes.

The Dow Jones Industrial Average fell 23.34 points, or 0.07 per cent, to 34,577.04; the S&P 500 lost 15.27 points, or 0.36 per cent, at 4,192.85; and the Nasdaq Composite dropped 141.82 points, or 1.03 per cent, to 13,614.51.

The Australian dollar was buying 76.6 US cents near 7.30 AEST, down from 77.24 at Thursday’s close.

Locally, Australia's share market keeps breaking records - and overseas investors are clamouring for the benefits.

The ASX200 set a record for the third time this week after the index rose to 7281.8 points on Thursday.

The biggest stock on the market, the Commonwealth Bank, set a record price of $101.85. Shares closed up 0.88 per cent to $101.21.

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Pepperstone chief market strategist Chris Weston said the ASX was performing in a stunning fashion.

"You cannot get any more bullish in a market of all-time highs," he said.

The benchmark S&P/ASX200 index closed higher by 42.3 points, or 0.59 per cent, to 7260.1.

The All Ordinaries closed up 41.8 points, or 0.56 per cent, to 7510.7.

Mr Weston said lots of capital was coming from overseas as foreign investment workers took notice.

"If this market keeps going up and up, and you're not invested in it, you're not going to get paid," he said.

The ASX has had eight consecutive months of gains.

It is a run not seen since 2007 when China's economic boom prompted a flurry of investment.

Yet Mr Weston said Aussie banks were driving this ASX pandemic surge.

"As long as banks are working well, and the housing market stays strong, you really just need one or two sectors to make the index move up," he said.

Banks are enjoying strong demand for loans as home buyers seize on low interest rates.

Mr Weston also said Reserve Bank officials were less interested in raising rates and winding up support like other central banks.

"We've got an economy that is clearly on the mend, but we're not at a later cycle like the US," he said.

US financial authorities are canvassing winding up support measures from the pandemic in case inflation gets out of control.

Philadelphia Federal Reserve Bank president Patrick Harker said it may be time for policymakers to start thinking about slowing the central bank's asset purchases.

A weekly US unemployment report and May private payrolls data will be the next lot of data to inform investors there.

US markets gained only about 0.1 per cent.

Meanwhile Aussie trade data helped reassure investors the economy is tracking well.

Australian exports recovered by three per cent in April, pushing the trade surplus to $8 billion. This is $2 billion more than March.

Imports declined three per cent.

The federal government offered a support payment to Victorians struggling with the coronavirus lockdown.

There were two local infections reported as Melburnians prepare for a second week of restrictions.

On the ASX, energy shares surged by 3.27 per cent a day after OPEC decided not to increase supply by more than planned.

Beach Energy rose 5.79 per cent to $1.37. Oil Search gained 4.13 per cent to $4.03. Woodside climbed 3.11 per cent to $23.85.

Financial shares, which comprise a large part of the market, were higher by 0.96 per cent.

ANZ was one of the biggest improvers in the category. Shares rose 1.48 per cent to $28.77.

Buy now, pay later provider Sezzle inked a deal for Target US to use its payments platform at its stores as well as online.

The deal is for three years and does not include Target Australia.

Shares were higher by 22.67 per cent to $9.20.

Wesfarmers shares hit a record high of $56.67.

However shares closed lower by 2.08 per cent to $55.11 after the Bunnings owner said sales had moderated following pandemic peaks.

Fortescue was best of the big miners and rose 0.69 per cent to $23.44.

Spot Gold was down 1.9 per cent at $US1872.35 an ounce; Brent crude was down 0.3 per cent to $US71.14 a barrel. Iron ore was up 0.9 per cent at $US210.99.

The yield on the Australian 10-year bond closed down at 1.67 per cent.

Asia

At the close, China's Shanghai Composite index was down 0.36 per cent at 3,584.21.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, was down 1.13 per cent, to 28,966.03.

Japan's Nikkei 225 Index closed up 0.39 per cent at 29,058.11.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down 0.12 per cent at 450.79.

The German DAX rose 0.23 per cent to 15,602.71.

North America

US stocks have ended lower, with tech shares dragging on the S&P 500 and Nasdaq, as investors balanced concerns about inflation and the Federal Reserve reining in stimulus with relief about corporate tax hikes.

The Dow Jones Industrial Average fell 23.34 points, or 0.07 per cent, to 34,577.04; the S&P 500 lost 15.27 points, or 0.36 per cent, at 4,192.85; and the Nasdaq Composite dropped 141.82 points, or 1.03 per cent, to 13,614.51.

The Dow posted a slight loss after five sessions of gains.

Stocks rebounded somewhat after reports that US President Joe Biden offered to scrap his proposed tax hike.

In talks with Republicans, the Democrat offered to drop plans to hike corporate rates as high as 28 per cent and instead set a 15 per cent minimum tax rate for companies, sources told Reuters.

A better than expected US weekly unemployment report and private payrolls numbers for May pointed to strengthening labour conditions, ahead of the closely watched US payrolls report due on Friday.

A measure of service sector activity increased to a record high.

Investors are focused on whether robust economic reports could prompt the Fed to pare back monetary support put in place during the coronavirus pandemic sooner than expected.

"The market is digesting strong economic data with some inflationary pressures and factoring in whether this will change the timing of Fed tapering and how to factor that into stock prices," said Brad Neuman, director of market strategy at Alger in New York.

Sparking fears over easing support was the Fed's announcement on Wednesday that it will begin to unwind its corporate bond holdings acquired last year through an emergency lending facility launched to calm credit markets at the height of the pandemic.

The heavyweight S&P 500 tech sector fell 0.9 per cent.

Tech and other growth stocks are seen as particularly vulnerable if inflation drives up bond yields and more heavily discounts the value of future cash flows.

"Higher rates and inflation are kind of the package deal that investors are watching right now," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

"If you have rising inflation, rising interest rates, they are going to be especially harmful to growth stocks."

The energy sector rose 0.3 per cent and financials gained 0.2 per cent.

Those and other value stock segments that are expected to outperform in an expanding economy have topped tech and other growth shares for much of 2021.

Overall, the S&P 500 is up 11.6 per cent for the year and within about 1.0 per cent of its record high.

In company news, General Motors Co shares rose 6.4 per cent after the car maker estimated "significantly better" first-half profits than previously forecast.

Rival Ford added 7.2 per cent.

Frenzied trading continued in retail investor favourite AMC Entertainment Holdings.

After big swings, AMC shares ended down 17.9 per cent after the theatre chain operator said it completed a share offering it announced earlier in the day.

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

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