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 - 05 August

Ruth Saldanha  |  05 Aug 2022Text size  Decrease  Increase  |  
Email to Friend

Australia

Australian shares are set to open higher, even as Wall Street closed the trading day mixed as corporate earnings came in and the number of Americans applying for unemployment benefits increased.

ASX futures were up 11 points or 0.16% at 6896 as of 8:00am on Friday, pointing to a gain at the open.

The S&P 500 lost 3.23 points, or less than 0.1%, to 4,151.94. The technology-focused Nasdaq Composite added 52.42 points, or 0.4%, to 12,720.58. The Dow Jones Industrial Average shed 85.68 points, or 0.3%, to 32,726.82.

The Bank of England raised its key interest rate by a half percentage point Thursday, the largest single step in more than a quarter-century. The central bank's move follows the Federal Reserve in giving priority to the fight against inflation over the risk of hurting growth.

On Thursday, the Labor Department said the number of people applying for unemployment benefits rose to 260,000 at the end of July, up by 6,000 from the previous week. New filings fell as low as 166,000 in late March but have edged up as the economy has slowed.

On the economic front, traders will be able to parse July's US jobs data on Friday. Economists surveyed by The Wall Street Journal expect the Labor Department to report 258,000 jobs added.

In commodity markets, Brent crude oil slipped 2.8% to $US94.05 a barrel, gold was higher by 1.9% at US$1,810 per ounce.

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

In local bond markets, the yield on Australian 2 Year government bonds rose to 2.62% while the 10 Year rose to 3.14%. Overseas, the yield on 2 Year US Treasury notes declined to 3.03% and the yield on the 10 Year US Treasury notes declined to 2.67%.

The Australian dollar hit 69.71 US cents nearly flat from the previous close of 69.49. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged down to 97.63.

Asia

Chinese shares ended higher in Asia trade, following two days of losses amid worries over U.S.-China relations following U.S. House Speaker Nancy Pelosi's visit to Taiwan. The benchmark Shanghai Composite Index added 0.8% to 3189.04, the Shenzhen Composite advanced 0.9% to 2135.33 and the ChiNext Price Index gained 0.5% to 2640.78. Auto maker BYD Co. ended 1.5% higher after its July vehicle sales reach an all-time fresh high. Developements relating to China-Taiwan relations will likely be in focus, after Beijing suspended some fish and fruit imports from Taiwan, as well as natural sand exports to Taiwan, UOB analysts say in a note. "China's foreign ministry said that more punishments for the US and Taiwan would follow," they note. 

Hong Kong's Hang Seng Index rose 2.1% to 20174.04, extending a rebound in the previous session, driven by gains among the tech and electronics sectors. Although the local market has stabilized after a selloff earlier this week amid U.S. House Speaker Nancy Pelosi's Taiwan visit, near-term caution toward Chinese shares is probably warranted due partly to elevated U.S.-China tensions, Goldman Sachs analysts say in a note. BYD Co. rose 2.5% after strong July sales data. Wharf REIC jumped 6.7% despite posting a 1H loss, with its interim dividend up 4.5% on year at HK$0.70. Alibaba Group gained 5.1% ahead of its quarterly results due later today. Among laggards, SJM Holdings slumped 12%, following plans for a rights issue.

Europe

European markets gained after the Bank of England's interest-rate rise. The pan-European Stoxx Europe 600 gained 0.5%, the French CAC 40 added 0.65% and the German DAX climbed 0.5%.

The BoE predicted a U.K. recession starting in 4Q this year and lasting through 2023, Validus Risk Management says. "With [foreign minister] Liz Truss heavy favorite to take the Tory leadership, she may find the position a poisoned chalice as she takes the wheel just as the U.K. enters its worst recession in over a decade," Validus's Shane O'Neill writes. 

London’s FTSE 100 closed up 0.03% Thursday as the Bank of England announced the largest increase in interest rates in 27 years and raised them by 0.50% to 1.75%. "Despite the dire outlook painted by the Bank of England... the FTSE 100 has managed to hold up reasonably well, although weakness in the oil price which is back below $100 a barrel is holding it back," Michael Hewson of CMC Markets said. Entain was the day's biggest riser, closing up 5%, followed by Flutter Entertainment and Anglo American, up 4% and 3.2% respectively. Rolls-Royce was the day's biggest faller after posting a swing to 1H pretax loss, down 8.1%, followed by Hikma Pharmaceuticals and Mondi, down 6.3% and 5% respectively.

North America

US stocks closed mixed Thursday as investors considered a fresh batch of corporate earnings reports and the number of Americans applying for unemployment benefits increased.

The S&P 500 lost 3.23 points, or less than 0.1%, to 4,151.94. The technology-focused Nasdaq Composite added 52.42 points, or 0.4%, to 12,720.58. The Dow Jones Industrial Average shed 85.68 points, or 0.3%, to 32,726.82.

Shares of Coinbase Global surged $8.09, or 10%, to $88.90 after the cryptocurrency exchange announced a partnership with money manager BlackRock. Lucid Group fell $2, or 9.7%, to $18.56 after the electric-vehicle maker cut its forecast for car production. Clorox lost $6.81, or 4.7%, to $137.76 after the cleaning-product manufacturer posted flat revenue for its latest quarter.

Eli Lilly lost $8.04, or 2.6%, to $305.79 after the pharmaceuticals company said revenue fell in the second quarter. Alibaba's New York-listed shares rose $1.71, or 1.8%, to $97.43 after the Chinese e-commerce company posted results.

Stocks have ripped higher in recent weeks, pushing the S&P 500 13% higher from its mid-June low. Broadly positive earnings reports, coupled with signs that some drivers of the inflation surge are easing, have boosted the partial recovery in stocks after a difficult first six months of the year.

"We are getting some updated outlook from a lot of the management of these companies, it wasn't as pessimistic as some had feared," said Shawn Cruz, head trading strategist at TD Ameritrade. "I think the worst-case scenario has been pulled off the table and that's bringing some buyers back into the market."

But some investors say volatility is likely to return, especially if the slowing economy begins to take a toll on the outlook for corporate earnings later in the year. Some money managers also say markets have been overly eager in predicting that the Fed will stop raising interest rates and then cut them next year.

"We could be in a bit of a bear-market rally," said Desmond Lawrence, senior investment strategist at State Street Global Advisors.

On the economic front, traders will be able to parse July's jobs data on Friday. Economists surveyed by The Wall Street Journal expect the Labor Department to report 258,000 jobs added.

Investors appear to be reasoning that slowing economic growth will pull the Fed back from raising interest rates, which would boost the price of stocks and bonds, Mr. Lawrence said. "That might be a little bit premature," he said, adding that expectations of corporate earnings "are pretty elevated for what seems to be turning into a slowdown."

Saira Malik, chief investment officer at Nuveen, said market expectations of Fed rate cuts in early 2023 are "optimistic."

"We think the Fed will have to continue to increase rates for the foreseeable future until inflation gets to a much lower level," Ms. Malik said. "And it could take a recession in order for us to get there."

is editorial manager at Morningstar.ca

© 2022 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend