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Global Market Report - 01 July

Lewis Jackson  |  01 Jul 2021Text size  Decrease  Increase  |  
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Australia

Aussie shares set to edge lower in the new financial year as the S&P 500, Dow Jones Industrial and Nasdaq all notched their fifth consecutive quarterly gains.

The Australian SPI 200 futures contract was down 6 points or 0.08 per cent to 7,217 near 7.30 am Sydney time on Thursday, suggesting a negative start to trading.

The S&P 500 has eked out its fifth straight record closing high as investors ended the month and the quarter by largely shrugging off positive economic data and looking toward Friday's highly anticipated employment report.

The Dow Jones Industrial Average rose 225.34 points, or 0.66 per cent, to 34,517.63, the S&P 500 gained 6.98 points, or 0.16 per cent, to 4,298.78 and the Nasdaq Composite dropped 20.12 points, or 0.14 per cent, to 14,508.22.

The Australian dollar was buying 74.99 US cents near 7.45am AEST, down from 75.16 at Wednesday’s close.

Locally, shares on the ASX have closed higher for a ninth consecutive month, the best winning run since 2007.

The ASX200 for June closed higher by 2.11 per cent following a tame final trading day of the financial year.

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The market, helped by record low rates and pandemic stimulus, is poised to equal the winning run of 10 months set in 2006 and 2007.

The benchmark S&P/ASX200 index on Wednesday closed up by 11.8 points, or 0.16 per cent, to 7313.

The All Ordinaries closed higher by 19.5 points, or 0.26 per cent, to 7585.

The market remains close to record highs (set earlier this month) and Pepperstone chief market strategist Chris Weston said while some expected a plunge, it was yet to happen.

"Valuations are stretched and people are asking have we had peak earnings, but we keep grinding higher," he said of the indices.

"Everyone is expecting the market to fall or bonds to fall, but no one is prepared to put those trades on.

"I wouldn't be surprised if we saw a five per cent move lower, but you need a trigger."
The trigger may come from the Reserve Bank meeting next month.

The RBA has flagged it intends to make a decision on its three-year bond target and quantitative easing (bond buying) program at the July 6 board meeting.

The RBA targets the three-year government bond on financial markets to ensure its yield, or interest rate, remains at 0.1 per cent and in line with the cash rate.

A shift from the April 2024 bond to the November 2024 bond would suggest the RBA does not expect to lift interest rates until closer to 2025.

The US Federal Reserve's annual Jackson Hole policy symposium in August could prove another trigger.

Central bank officials this month brought forward estimates of rate rises.

Investors will want to know when the bank might start winding up the economic stimulus which has helped inflation climb.

On the ASX, telecommunications shares proved best (up 2.66 per cent) after Telstra sold almost half of its mobile towers business for close to $3 billion.

The telco sold InfraCo Towers, which has 8200 towers, to Australia's Future Fund, and retirement funds Commonwealth Superannuation Corp and Sunsuper.

Shareholders will be winners. About 50 per cent of the $2.8 billion proceeds to be returned via a possible share buyback.

Shares were up 4.44 per cent to $3.76.

Data analytics provider Nuix revealed corporate watchdog ASIC is investigating former chief financial officer Stephen Doyle and family members.

ASIC is also investigating how the company's initial public offer last year was conducted.
Nuix has been rocked by allegations of poor governance since listing.

Shares closed down 12.99 per cent to $2.21.

Energy provider AGL confirmed it will demerge its coal-fired power stations business and cleaner energy operations.

AGL will become Accel Energy and try and redevelop the coal and gas-fired power stations for battery power.

AGL Australia will offer consumers electricity, gas, internet and mobile services.

Shares were down 9.99 per cent to $8.20.

Materials shares were the next best industry category after telecommunications. Materials rose 0.79 per cent.

Rio Tinto was the best of the big miners and gained 1.31 per cent to $126.64.

In banking, NAB was best of the big four and rose 0.42 per cent to $26.22.

Its peers in the group closed lower by less than one per cent.

Spot Gold was up 0.5 per cent at $US1769.71 an ounce; Brent crude was up 0.5 per cent at $US75.13 a barrel, Iron ore was up 0.8 per cent at $US 214.08 a tonne.

The yield on the Australian 10-year bond closed at 1.53 per cent.

Asia

At the close, China's Shanghai Composite index was up 0.5 per cent at 3,591.20.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, was down 0.57 per cent, to 28,827.95.

Japan's Nikkei 225 Index was down 0.07 per cent at 28,791.53.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down 0.77 per cent at 452.84.

The German DAX fell 1.02 per cent to 15,531.04.

North America

The S&P 500 has eked out its fifth straight record closing high as investors ended the month and the quarter by largely shrugging off positive economic data and looking toward Friday's highly anticipated employment report.

The Dow Jones Industrial Average rose 225.34 points, or 0.66 per cent, to 34,517.63, the S&P 500 gained 6.98 points, or 0.16 per cent, to 4,298.78 and the Nasdaq Composite dropped 20.12 points, or 0.14 per cent, to 14,508.22.

In the last session of 2021's first half, the indexes were languid and range-bound, with the blue-chip Dow posting gains while the Nasdaq edged lower.

All three indexes posted their fifth consecutive quarterly gains and the S&P 500 registered its second-best first-half performance since 1998, rising 14.4 per cent.

"It's been a good quarter," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.

"As of last night's close, the S&P has gained more than 14 per cent year-to-date, topping the Dow and the Nasdaq. That indicates that the stock market is having a broad rally."

For the month, the bellwether S&P 500 notched its fifth consecutive advance, while the Dow snapped its four-month winning streak.

The Nasdaq also gained ground in June.

This month, investor appetite shifted away from economically sensitive cyclicals in favour of growth stocks.

"Leading sectors year-to-date are what you'd expect," Pavlik added.

"Energy, financials and industrials, and that speaks to an economic environment that's in the early stages of a cycle."

"(Investors) started the switch back to growth (stocks) after people started to buy in to (Fed Chair Jerome) Powell's comments that focus on transitory inflation," Pavlik added.

"Some of the reopening trades have gotten a bit long in the tooth and that's leading people back to growth."

"The overall stock market continues to be on a tear, with very consistent gains for quite some time," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

"Valuations, while certainly high by historical standards, have been at a fairly consistent level, benefiting from the economic recovery."

The private sector added 692,000 jobs in June, breezing past expectations, according to payroll processor ADP.

The number is 92,000 higher than the private payroll ads economists predict from the Labor Department's more comprehensive employment report due on Friday.

Boeing Co gained altitude after Germany's defence ministry announced it would buy five of the plane maker's P-8A maritime control aircraft, coming on the heels of United Airlines unveiling its largest-ever order for new planes.

Micron Technology advanced ahead of its quarterly earnings report and after BMO upgraded the chipmaker's stock to "outperform" from "market perform" on continued supply-demand imbalance in 2022.

Walmart jumped after announcing on Tuesday that it would start selling a prescription-only insulin analogue.

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

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