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Global Market Report - 01 November

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

The ASX is set to rise after the S&P 500 notched its best month since last November.

The Australian SPI 200 futures contract was up 68 points or 0.9 per cent higher at 7,348 near 7.30 am AEST on Monday, suggesting a positive start to trading.

US stocks ended the day higher, shrugging off a decline in shares of Apple and Amazon.com after the companies' earnings showed even the biggest winners during the Covid-19 pandemic have been affected by supply-chain problems and tight labor markets.

The S&P 500 edged up 0.2%. The Dow Jones Industrial Average added 0.3%. The Nasdaq Composite gained 0.3%.

Major indexes closed October with big gains. The S&P 500 was up 6.9% this month, marking its largest monthly increase since November of last year. The Nasdaq Composite has climbed 7.3% month-to-date, while the Dow is up 5.8%.

The Australian dollar was buying 75.19 US cents near 7.30am AEST, down from the previous close of 75.43. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 88.37.

Locally, the S&P/ASX 200 closed 1.4% lower at 7323.7, with losses in nearly every sector dragging the benchmark to a consecutive weekly loss. The ASX 200 lost 1.2% for the week.

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The ASX 200 looked likely to build on momentum from US equities when it opened 0.2% higher in line with futures, but swiftly fell away.

Real estate, communications and financials were the worst performing sectors, with banks ANZ, Westpac, NAB and Commonwealth losing between 1.6% and 2.5%. Macquarie was in a trading halt pending a capital raise after hiking its final dividend on a jump in profit.

Carsales.com shed 3.0% after a 1Q update light on specific guidance.

Equity analysts lament a continued lack of detail on Fortescue's clean-energy venture, Fortescue Future Industries. Goldman Sachs lists it as one of the reasons for its sell rating on the stock. "FMG is spending circa US$500 million on Fortescue Future Industries in FY22 with very little disclosure on projects and the benefits," Goldman says.

The Reserve Bank of Australia opted not to defend its yield curve control target Friday, setting the stage for a u-turn in its policy stance this week that recognizes growing global inflation risks, according to economists. The RBA meets Tuesday to discuss policy.

Gold futures fell 1% to $US1783.90 an ounce; Brent crude rose 0.1% to $US84.38 a barrel; Iron ore was down 4.8% at US$107.28.

The yield on the Australian 10-year bond jumped to 2.08%; The US 10-year Treasury note fell to 1.56.

Asia

Chinese stocks ended Friday higher. The benchmark Shanghai Composite Index rose 0.8%. Cinema operators led gains, after film production company Huayi Brothers Media posted upbeat third quarter earnings. Utilities operators lent further support, as investors expect improving profitability for the sector after authorities unveiled new measures to curb coal prices.

Hong Kong's Hang Seng Index closed 0.7%, with declines among insurers and clothing manufacturers. Auto maker maker BYD Co. was off 1.7% after reporting a decline in 3Q net profit. Gains were led by Budweiser Brewing Co. APAC, which advanced 3.7%.

Japanese stocks ended in positive territory, erasing earlier losses as investors adjusted positions ahead of Japan's lower-house elections this weekend. The Nikkei Stock Average closed 0.25% higher, led by shipping companies.

Europe

European markets lack direction after eurozone inflation rose to 4.1% for October, reportedly hitting a 13-year high. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, rose 0.1%, for a 4.5% gain for October.

"Just a day after the European Central Bank reiterated its stance that above-target inflation is transitory, today's inflation reading of 4.1% highlights why other central banks are seemingly on the cusp of tightening monetary policy," IG analyst Joshua Mahony says.

In London, the FTSE 100 slipped 0.2%. The index was up 2.1% this month.

North America

US stocks capped their strongest month since November by shrugging off woes at two of the biggest companies in the stock market, Apple and Amazon.com.

Both companies warned investors Thursday afternoon that ongoing supply-chain disruptions were affecting their operations. Apple said the snarls were hindering the manufacturing of iPhones and other products and would bring increased difficulties during the holiday-shopping season. Amazon, meanwhile, posted lower-than-expected third-quarter sales and signalled that a tight labour market and supply-chain issues would weigh on fourth-quarter earnings.

The S&P 500 added 8.96 points, or 0.2%, Friday to end at 4605.38. For the month, it added 6.9%, the index's largest percentage gain since last November. The technology-heavy Nasdaq Composite also notched its best performance since November, adding 7.3% for October. For the day, the index added 50.27 points, or 0.3%, to finish at 15498.39.

The Dow Jones Industrial Average, meanwhile, gained 89.08 points, or 0.2%, Friday to end at 35819.56. For October, the index gained 5.8%, its best monthly showing since March.

For months, investors have been on high alert about such economic disruptions and have tried to determine the impact that stickier-than-expected inflation, labour shortages and shipping and logistics delays would have on global markets.

Two giant companies gave negative signals, and stocks still continued to rise, showing the resilience of the bull market that began in the midst of a global pandemic.

"I think investors are taking [Apple and Amazon's earnings results] in stride because they've seen broader strength across the market" during earnings season, said Keith Lerner, co-chief investment officer at Truist Advisory Services. "You're seeing this quarter that corporate America is showing how adaptable it is."

Apple shares lost $2.77, or 1.8%, to end at $149.80. Amazon.com shares declined by $74.14, or about 2.2%, to end at $3,372.43. Together, the companies account for nearly 10% of the S&P 500's market capitalization.

On Friday, the two largest US oil companies, Exxon Mobil and Chevron, reported their most profitable quarterly earnings since before the pandemic. Exxon gained 16 cents, or about 0.3%, to end at $64.47. Chevron added $1.37, or 1.2%, to finish at $114.49.

Starbucks shares fell by $7.13, or 6.3%, to $106.07 after the coffee chain said its US sales were strong, but the pandemic's resurgence in China had dragged on revenue.

Fresh data Friday from the Commerce Department showed that Fed's preferred inflation gauge, the personal-consumption-expenditures price index, rose 4.4% in September from the previous year, the fastest pace since 1991. The department also said consumer spending grew more slowly in September, as the Covid-19 Delta variant and supply-chain disruptions weighed on households.

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

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