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Global Market Report - 04 November

Lewis Jackson  |  04 Nov 2021Text size  Decrease  Increase  |  
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Australia

The ASX is poised to open higher as the Federal Reserve announces tapering of bond buying.

The Australian SPI 200 futures contract was up 37 points or 0.5 per cent higher at 7,400 near 8.00 am AEST on Thursday, suggesting a positive start to trading.

Broad US stock indexes notched fresh highs after the Federal Reserve approved plans to begin scaling back its bond-buying stimulus program this month.

The S&P 500 rose about 0.7%, while the Dow Jones Industrial Average edged up roughly 0.3%. The technology-heavy Nasdaq Composite Index outperformed its peers, gaining around 1%.

"It was more dovish than markets expected," said Mona Mahajan, senior investment strategist at Edward Jones, of the Fed meeting. "Anytime there's a whiff of lower rates, we tend to get favorable market reactions.

The Australian dollar was buying 74.46 US cents near 8.00am AEST, down from the previous close of 74.27. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 88.32.

Locally, the S&P/ASX 200 closed 0.9% higher at 7392.7, bouncing off a three-week low a day after the country's central bank tempered expectations about the speed at which interest rates will rise.

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The benchmark had been as much as 1.5% higher but pared some of its gains through the second half of the session, with the tech sector dropping into negative territory.

Every other sector rose, led by the heavyweight financial and materials sectors. Lenders Commonwealth, NAB and ANZ rose between 1.2% and 2.3%. Iron ore giants BHP, Rio Tinto and Fortescue put on between 1.1% and 3.1%, but shares in gold miners fell.

The Afterpay – Square deal is one step closer after shareholders at the US tech giant approved motions related to the acquisition by a wide margin on Wednesday afternoon New York time.

Gold futures fell 1.4% to $US1763.90 an ounce; Brent crude slipped 3.2% to $US81.99 a barrel; Iron ore was up 4.5% at US$100.10.

The yield on the Australian 10-year bond slipped to 1.84%; The US 10-year Treasury note rose to 1.57.

Asia

Chinese stocks finished mixed, as new-energy sector and auto makers declined, while property developers and coal miners rebounded. The Shanghai Composite Index dropped 0.2%, the Shenzhen Composite Index edged 0.1% higher, and the ChiNext Price Index lost 0.4%.

Hong Kong's Hang Seng Index extended its losing streak to seven sessions, with losses at a major solar parts manufacturer and several automakers. The index closed 0.3% lower. The Hang Seng TECH Index slipped 0.6% to 6273.44, though Meituan added 2.2% and Tencent Holdings was 1.1% higher.

Japanese markets were closed for a public holiday

Europe

European markets ended higher in a day of choppy trading as the US Fed announced the beginning of the end on its bond buying program. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, rose 0.35%.

In London, the FTSE 100 slipped 0.4%.

North America

Major US stock indexes hit concurrent records for a fourth consecutive session after the Federal Reserve approved plans to start scaling back its bond-buying stimulus program.

The S&P 500 hit session highs after Chairman Jerome Powell's postmeeting press conference. The broad stock-market gauge rose 29.92 points, or 0.6%, to 4660.57. The Dow Jones Industrial Average added 104.95 points, or 0.3%, to 36157.58. The technology-heavy Nasdaq Composite Index gained 161.98 points, or 1%, to 15811.58, rising for an eighth consecutive session. All three indexes finished at highs.

The Federal Reserve concluded its two-day meeting and announced plans to end its bond-buying program but keep rates unchanged. Investors were prepared for the Fed to start dialing back its bond purchases and were focused on how the Fed approached rising prices. Mr. Powell put greater emphasis on the uncertainty facing the outlook for inflation and the Fed's statement described high inflation as "largely reflecting transitory factors."

"It was more dovish than markets expected," said Mona Mahajan, senior investment strategist at Edward Jones, of the outcome and press conference. "Anytime there's a whiff of lower rates, we tend to get favorable market reactions."

Low interest rates have been a boost for growth stocks, and the tech-heavy Nasdaq outperformed its peers and finished its longest winning streak since 2020.

The yield on the benchmark 10-year US Treasury note rose to 1.577%, up from 1.546% on Tuesday. Bond yields and prices move in opposite directions.

Major indexes have been on a winning streak in recent weeks, and some investors said they expect stocks to keep rising through the end of 2021, continuing a rally that has been fuelled by low interest rates over the past year.

"Earning season has been very strong and the beats have been extremely robust," said Hugh Gimber, a strategist at J.P. Morgan Asset Management. "Despite the fact that there have been lots of concerns about price pressures and supply bottlenecks, there is no sign that any of that is going through into margins."

Though the broader market was calm, companies popular with traders on Reddit's WallStreetBets recorded big swings while options activity heated up. Bed Bath & Beyond surged 15%. The company, which on Tuesday announced a partnership with grocery chain Kroger, was among the most discussed companies on the forum, according to sites that track mentions of ticker symbols.

Meanwhile, Activision Blizzard fell $10.92, or 14%, to $66.75. after the videogame maker said the release of two of its titles would be delayed. Ride-hailing firm Lyft jumped 8.2% after saying revenue climbed in the latest quarter as demand for its services returned.

Avis Budget Group fell 17% after more than doubling in the prior session. The company reported better-than-expected profit and announced plans to add more electric vehicles to its rental fleet.

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

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