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Global Market Report - 02 November

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

The ASX is set to rise ahead of today's RBA board meeting after Wall Street hit record highs.

The Australian SPI 200 futures contract was up 13 points or 0.17 per cent higher at 7,360 near 8.00 am AEST on Tuesday, suggesting a positive start to trading.

US stocks continued a weekslong march higher, reaching new records on Monday in a display of investor confidence in the economy's bumpy recovery.

The Dow Jones Industrial Average briefly jumped above 36000 for the first time, before pairing gains and ended the day 0.3% higher.

The S&P 500 rose 0.2% after closing out October with its best monthly performance since November 2020. The technology-focused Nasdaq Composite advanced 0.6%, its sixth consecutive winning session.

The Australian dollar was buying 75.18 US cents near 8.00am AEST, down from the previous close of 75.19. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 88.29.

Locally, the S&P/ASX 200 recovered from an early wobble to close 0.6% higher at 7370.8, despite Westpac's biggest one-day decline since March 2020.

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Most sectors showed gains as the ASX 200 followed US stocks' positive lead from the end of last week. The financials sector was dragged lower by a 7.4% drop from Westpac, its largest loss since the early days of the Covid-19 pandemic.

The second biggest bank by market capitalization announced a A$3.5 billion share buyback, but its lending margin disappointed investors.

The heavyweight materials sector edged up 0.3%, while utilities was buoyed by AusNet's 3.6% gain on agreement of an improved takeover proposal by a Brookfield-led consortium.

Australian regulators could take further action to damp booming house prices, if already introduced measures don't take the heat out of the market, says Westpac chief executive Peter King. After issuing Westpac's FY 2021 results, King said it was right for regulators to "tap on the brakes," to slow the market and if it doesn't slow there is "probably going to be more response coming."

Markets are watching for any clue that the Reserve Bank will consider bringing forward its timeline for interest rate hikes when the bank's board meets later today.

Gold futures rose 0.7% to $US1795.80 an ounce; Brent crude rose 0.9% to $US84.44 a barrel; Iron ore was down 3.6% at US$103.43.

The yield on the Australian 10-year bond slipped to 1.89%; The US 10-year Treasury note rose to 1.56.

Asia

Chinese stocks finished mixed, as investors reacted to companies' recent quarterly earnings results. Electric-car battery maker CATL surged to a historic high of CNY679.00 before paring gains to CNY650, 1.7% higher for the day. The Shanghai Composite Index dropped 0.1% and the Shenzhen Composite Index was 0.5% higher.

Hong Kong's Hang Seng Index dropped 0.9%, closing lower for the fifth straight session. Mainland Chinese property developers fell amid sluggish sales, while the healthcare sector declined on expectations of rising regulatory scrutiny. Tech stocks also retreated, with Tencent Holdings losing 2.4% and Alibaba Group down 2.1%.

Japanese stocks closed higher, led by electronics shares, as the ruling Liberal Democratic Party's election victory on Sunday increased the prospect of political stability. Sony Group advanced 5.4% and the Nikkei Stock Average rose 2.6%.

Europe

European markets closed higher after a strong start. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, rose 0.7%.

In London, the FTSE 100 snapped a three-day losing stream to increase 0.7% as chief executive of British bank Barclay’s stepped aside over his relationship with convicted sex offender and financier Jeffrey Epstein

North America

US stocks continued a weekslong march higher, reaching new records on Monday in a display of investor confidence in the economy's bumpy recovery.

The Dow Jones Industrial Average briefly jumped above 36000 for the first time, before pairing gains and ended the day 0.3% higher.

The S&P 500 rose 0.2% after closing out October with its best monthly performance since November 2020. The technology-focused Nasdaq Composite advanced 0.6%, its sixth consecutive winning session.

Companies that have reported earnings so far have signalled solid customer demand. That has assuaged some investors' concerns about supply-chain disruptions and rising prices. About 82% of S&P 500 companies that have reported so far this season have beaten analysts' earnings forecasts, according to FactSet data.

"The whole narrative of an abrupt slowdown in growth has been put on the back burner for now," said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Companies reporting quarterly results later this week include Airbnb, Pfizer and Uber Technologies.

Moderna shares slid $8.04, or 2.3%, to $337.17 after the Food and Drug Administration delayed a decision on authorizing use of the company's Covid-19 vaccine for adolescents. Shares of its smaller rival, Novavax, jumped $23.62, or 16%, to $172.45 after the company said it had completed its rolling submission to Canada's health regulator for authorization of its Covid-19 vaccine candidate.

Bond investors are wondering whether the Fed might raise interest rates sooner than they anticipated several months ago, before a sustained bout of inflation. The Fed's key policy-setting committee is scheduled to conclude a two-day meeting on Wednesday. Last week, Canada's central bank signalled that it could increase interest rates as soon as April.

"The market has become very concerned that inflation is a far bigger concern than central banks were letting on in the middle of the year and they're entering an inflation-fighting zone," said Seema Shah, chief strategist at Principal Global Investors. "We need to hear clarity about what the Fed is intending."

Some investors have sold long-duration government bonds, betting on higher interest rates. The yield on the 10-year Treasury note ticked up to 1.573%, from 1.555% Friday. Yields rise when prices fall.

New data showed US factory activity kept its strong momentum in October even though manufacturers faced a supply crunch that has made it hard to find parts and raw materials. The Institute for Supply Management's purchasing-managers index for manufacturing came in at 60.8, down slightly from 61.1 in September but above the 60.3 expected by economists.

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

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