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Global Market Report - 02 September

Lewis Jackson  |  02 Sep 2021Text size  Decrease  Increase  |  
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The ASX is set to open lower after the Nasdaq jumped to a new record and data showed private industrial activity in China slowed to its lowest level in a year.

The Australian SPI 200 futures contract was down 17 points or 0.2 per cent at 7,454 near 7.45 am Sydney time on Thursday, suggesting a negative start to trading.

The Nasdaq rose to a record to start the month, while other U.S. stock benchmarks were mixed.

The S&P 500 pared early gains to trade less than 0.1% higher. The benchmark stock index has climbed for seven consecutive months and closed Tuesday slightly below its all-time high. The tech-heavy Nasdaq Composite Index added 0.3% to a new closing high. The Dow Jones Industrial Average slipped around 0.1%.

Fresh data released showed that economic activity in the manufacturing sector grew in August. An index of US-based manufacturing rose to 59.9 in August from 59.5 in the prior month, according to the Institute for Supply Management.

The Australian dollar was buying 73.64 US cents near 7.50am AEST, up from the previous close of 73.13. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, fell to 87.20.

Locally, S&P/ASX 200 closed 0.1% lower at 7527.1, paring losses after data showed economic growth had slowed less than expected in the June quarter.

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The benchmark had been almost 1.0% lower in early trade and was still 0.8% lower before data showed the economy grew 0.7% in 2Q, compared with 1.9% in 1Q and economists' expectations for a 0.4% expansion.

Energy, telecoms and financials were the strongest performing sectors, offsetting losses elsewhere.

Banks ANZ, Commonwealth, Westpac and NAB rose by between 0.5% and 2.2%. Wesfarmers, Endeavour and Treasury Wine all weighed on the index as they traded ex-dividend.

Among the big movers on the ASX were Blackmores, down 6.6%, Reece, down 4.4% and Qantas, up 3.1%.

The sharp rise in Australian banks' shares seen this year could stall if economic growth slows, VanEck Australia says. This could be driven by a resultant slow down in housing loan growth as Delta-related lockdowns dent the "busiest time of the year for the property market, spring, consumer confidence and economic activity overall."

Many Australian commodity stocks seem to be pricing in stronger-for-longer market conditions, aka a "high plateau," according to KeyBanc Capital Markets.

"The argument for a sustained 'high plateau' is that demand will remain strong (with low inventories), with an additional cyclical rebound likely as many economies recover from the pandemic, overcome component shortages, and benefit from fiscal stimulus (ie. infrastructure), creating an elongated industrial upcycle," says KeyBanc.

Gold futures fell 0.1% to $US1816.10 an ounce; Brent crude was down 0.6% at $US71.20 a barrel, or 4.4% for the month; Iron ore tumbled 6.7% to $US143.43.

The yield on the Australian 10-year bond was up at 1.24%; The yield on the US 10-year note fell to 1.301%.


Chinese stocks ended the session mixed, continuing Tuesday's muted trade. The benchmark Shanghai Composite Index rose 0.7%, continuing to rise for the fourth-straight trading day.

The mining sector retreated from recent gains, as China begins the bidding process for the latest release of metal reserves. The losses were offset by a recovery in consumer stocks such as food-and-beverage firms, after the sector's muted performance in recent sessions.

A private manufacturing gauge in China fell to its lowest level in over a year, suggesting Covid-19 outbreaks led to a decline in activity in August.

Hong Kong stocks ended the session higher, extending a rally for the third consecutive trading day. The benchmark Hang Seng Index rose 0.6% to settle at 26028.29. Consumer companies led gains as the sector continued to recover from an earlier downturn. Tech companies lent further support, as the sector extended gains after a big rebound Tuesday. Meituan rose 1.8% and Tencent added 0.5%.

Japan's Nikkei Stock Average closed 1.3% higher, helped by gains in financial and insurance stocks. Financial shares were among the best performers.


London’s FTSE 100 was up 0.4% to 7149.84 on Wednesday.

The pan-European STOXX 50 index, which tracks the return of the largest listed companies across 19 European countries, closed 0.74% higher to 4227.27.

North America

The Nasdaq Composite jumped to a record to start the month, building on its strong gains from August.

The tech-heavy gauge added 50.15 points, or 0.3%, to 15309.38. The S&P 500 added 1.41 points, or less than 0.1%, to 4524.09. The Dow Jones Industrial Average slipped 48.20 points, or 0.1%, to 35312.53.

Stocks have risen over the summer, buoyed by expectations that the economic recovery would enable corporate profits to keep expanding. Investors are broadly optimistic that shares will continue to eke out gains, and Wednesday's moves continue a historically calm stretch for the market. The S&P 500 hasn't suffered a 5% pullback since October and has clinched more than 50 fresh highs in 2021.

"Every time you get even a 1% or 2% pullback, that presents the opportunity to 'buy the dip'" for investors, said Adam Phillips, a managing director at EP Wealth Advisors.

Individual investors in particular have piled into the stock market at a record pace this summer, helping send stocks to repeated records. JPMorgan Chase & Co. strategists estimate that net inflows to U.S. stocks and exchange-traded funds rose to a record of roughly $16 billion in July before another $13 billion poured in during August.

However, Mr. Phillips and other money managers caution that markets are likely to become more volatile in the fall, pointing to catalysts including the curtailment of stimulus programs by the Federal Reserve.

"September can be quite a challenging month for risk assets," said Suzanne Hutchins, head of real return investments at Newton Investment Management. "Markets are pretty high across the board, valuations are pretty rich."

Other potential risks on the horizon include China's crackdown on technology companies and Germany's federal election in September, Ms. Hutchins said. At the same time, "there is a lot of liquidity that needs to find a home, which is always pretty supportive," she added.

A private manufacturing gauge in China fell to its lowest level in over a year, suggesting Covid-19 outbreaks led to a decline in activity in August. Investors expect the slowdown will prompt the People's Bank of China to loosen monetary policy to boost growth, said Sebastien Galy, senior macro strategist at Nordea Asset Management.

Fresh data released Wednesday showed that economic activity in the U.S. manufacturing sector grew in August. An index of U.S.-based manufacturing rose to 59.9 in August from 59.5 in the prior month, according to the Institute for Supply Management. This Friday, traders will be parsing the monthly jobs report.

Concerns about the pace of economic growth have led investors to pile into shares of tech and fast-growing companies lately.

Shares of Netflix jumped $12.88, or 2.3%, to $582.07. Twitter and Apple shares also outperformed the broader market, gaining 1.6% and 0.5%, respectively.

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

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