Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Global Market Report - 02 December

Lewis Jackson  |  02 Dec 2021Text size  Decrease  Increase  |  
Email to Friend

Australia

The ASX is set to fall as news Omicron reached US shores reversed a rally on Wall Street.

The Australian SPI 200 futures contract was down 55 points or 0.7% at 7184 near 7.30 am AEST on Thursday, suggesting a negative start to trading.

US stocks fell in a choppy trading session Wednesday, dragged down by news that the first known case of the Omicron variant was identified in the US.

Major US indexes started the day on an upbeat note, with the Dow Jones Industrial Average surging nearly 521 points, as stocks attempted to rebound from their post-Thanksgiving selloff. But the rally lost steam in the afternoon after reports that new Covid-19 infections nearly doubled in South Africa Wednesday and that the Covid-19 Omicron variant was identified in California.

US indexes slid following the reports. The Dow Jones Industrial Average lost about 462 points, or 1.3%. The benchmark S&P 500 declined 1.2%. The technology-heavy Nasdaq Composite fell 1.8%.

The Australian dollar was buying 71.13 US cents near 7.00am AEST, down from the previous close of 71.27. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.02.

Locally, the S&P/ASX 200 closed 0.3% lower at 7235.9, paring losses as sentiment continued to swing amid uncertainty over the latest Covid-19 variant. The benchmark dropped as much as 1.0%, following losses by US indexes, before grinding its way higher.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Gains by heavyweight stocks partially offset losses elsewhere. Shares in seven of the top 10 companies by market capitalization closed higher, while an index of the top 20 stocks rose 0.2%.

Travel and retail stocks were hit hard, but banks NAB, Westpac and Commonwealth added between 0.3% and 0.75%, as data showed 3Q GDP falling less than expected on quarter.

Major mining stocks also showed strength, with Rio Tinto, BHP and Fortescue Metals up between 1.3% and 2.4%

Gold futures rose 0.25% to $US1781 an ounce; Brent crude continued its decline, falling 0.9% to $US68.57 a barrel; Iron ore was up 2.1% at US$104.49.

The yield on the Australian 10-year bond edged up to 1.72%; The US 10-year Treasury yield slipped to 1.43%.

Asia

Chinese stocks ended Wednesday mixed, extending a muted trading pattern so far this week. The benchmark Shanghai Composite Index rose 0.4%, while the Shenzhen Composite Index added 0.2%. The ChiNext Price Index, a measure for emerging industries, edged down by 0.6%. Shanxi Securities says domestic demand is likely recovering, as shown in China's latest PMI data, which suggested a slight expansion in factory activity in November. However, risk-averse sentiment likely continued to prevail due to rising concerns over the new Covid-19 variant, the brokerage says.

Hong Kong shares finished higher, tracking regional equities. The benchmark Hang Seng Index gained 0.8%, rebounding from closing at a 14-month low yesterday. Gains were led by Chinese oil majors and tech shares, while the casino sector weakened further. Tencent Holdings climbed 2.0%, but Alibaba Group declined 1.3%. News that junket operator Suncity Group is shutting its VIP rooms in Macau added to existing concerns about greater regulatory scrutiny on casinos. Wynn Macau slid 8.6%, Sands China lost 4.2% and Galaxy Entertainment shed 2.9%.

Japanese stocks closed a volatile session higher, helped by gains in machinery and real-estate stocks, following recent selloffs due to concerns about the Omicron variant. The Nikkei Stock Average rose 0.4%, following three consecutive sessions of losses. Investors remained focused on any developments over the emerging variant of Covid-19 and US private-sector jobs and manufacturing activity data due later in the day.

Europe

European stocks rise in closing trade as worries over the Omicron coronavirus variant ease on the continent. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies rose 1.7%.

"There are a number of reasons for this more positive tone, one being the assurances from BioNTech founder and chief executive Ugur Sahin that the current vaccines will still provide a decent defence against the new variant, even if they aren't as effective," CMC Markets analyst Michael Hewson says.

A World Health Organization official also said most Omicron infections have been mild, "reinforcing the more positive narrative," he says.

In London, the FTSE 100 advanced 1.6%.

North America

US stocks fell in a choppy trading session Wednesday, dragged down by news that the first known case of the Omicron variant was identified in the US.

Major US indexes started the day on an upbeat note, with the Dow Jones Industrial Average surging nearly 521 points, as stocks attempted to rebound from their post-Thanksgiving selloff. But the rally lost steam in the afternoon after reports that new Covid-19 infections nearly doubled in South Africa Wednesday and that the Covid-19 Omicron variant was identified in California.

US indexes slid following the reports. The Dow Jones Industrial Average lost about 462 points, or 1.3%. The benchmark S&P 500 declined 1.2%. The technology-heavy Nasdaq Composite fell 1.8%.

The emergence of the Omicron variant is injecting heightened uncertainty into financial markets at a time when investors were already trying to ascertain the impact of rising inflation on the market. Investors have little to go on as they assess whether the variant will lead to renewed restrictions in the US and elsewhere and, if so, how governments and central banks would respond to support the economy.

"Volatility in the short run should be expected -- ultimately, we're dealing with a little more uncertainty than we have been," said Chris Zaccarelli, chief investment officer of Independent Advisor Alliance. "There's enough cause for concern that people are shooting first and asking questions later."

For his part, Mr. Zaccarelli said his Charlotte-based firm has been delaying expanding its positioning in cyclical sectors due to concerns about Covid-19, and currently remains balanced between growth and value stocks. "We feel like in the absence of perfect information, it makes sense to prepare for either scenario," he said.

Wednesday's selloff was broad based. Among the S&P 500's 11 sectors, only the utilities, healthcare and consumer staples groups traded higher Wednesday afternoon. The sectors are typically viewed as more defensive havens within the stock market.

One cause of concern among investors is the question of how effective Covid-19 vaccines will be against the new variant. Though drugmakers have said the variant first identified in South Africa looks like it could make existing vaccines less effective, they expect to be able to update the shots.

Vaccine-maker Moderna tumbled, losing 11%. Pfizer, in contrast, ticked up 2%.

Travel stocks were also punished. Cruise company Royal Caribbean fell 7.6%. American Airlines Group lost 7.9%.

Treasury yields fell, also reversing gains from earlier in the day, as investors sought safety in government bonds. Yields fall when bond prices rise. The yield on benchmark 10-year Treasury notes slid to 1.433% from 1.440% Tuesday.

"We just don't know how much more infectious it is, how severe the symptoms are and what the impact of that is," said Sebastian Mackay, a multiasset fund manager at Invesco, of the Omicron variant. "What I'd assume now is this probably isn't enough to derail the recovery that's going on."

Invesco's multiasset funds have bought stocks at cheaper levels since Omicron first rattled markets last week, Mr. Mackay added.

In energy markets, Brent oil prices, continued to tumble on signs Omicron could curtail demand for jet fuel, falling 0.9% to $68.57 a barrel. The Organization of the Petroleum Exporting Countries meets Wednesday and Thursday to determine its response to recent price declines.

Analysts say the cartel, still holding back production in tandem with allies led by Russia, may pause plans to pump more oil in January, or further cut output. Goldman Sachs analysts said recent price declines suggest traders are preparing for daily global oil demand to fall by more than 7% over the next three months.

Another cause for concern, stock investors say, is that the rapid pace of inflation could prevent the Fed and other central banks from unleashing stimulus in the event of severe disruption caused by Omicron. Fed Chairman Jerome Powell added to those worries Tuesday when he opened the door to an interest-rate rise in the first half of 2022.

The Organization for Economic Cooperation and Development said Wednesday it expects consumer-price inflation in the US to average 4.4% in 2022, up from the 3.1% forecast in September. The forecasts were made before the Omicron variant was discovered. However, the research body's chief economist said the world could experience price declines if the new variant sidesteps existing vaccines.

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

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend