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Global Market Report - 06 December

Lewis Jackson  |  06 Dec 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to rise after US stocks and bond yields fell Friday amid weakness in the tech giants.

The Australian SPI 200 futures contract was up 11 points or 0.15% at 7260 near 8.00 am AEST on Monday, suggesting a positive start to trading.

Major US indexes gave up their strong early gains and turned lower, setting them on track to finish a bumpy week on Wall Street with losses.

The S&P 500 lost around 1%, dragged down by shares of tech companies. The index rallied Thursday despite uncertainty about the Omicron variant's potential impact on the global economy. The tech-focused Nasdaq Composite lost 1.9%. The Dow Jones Industrial Average fell 0.6%.

The Nasdaq is headed toward a 3.3% weekly loss. The S&P 500 and Dow are on track to fall around 1.7% and 1.4%, respectively, this week.

The Australian dollar was buying 70.01 US cents near 8.00am AEST, down from the previous close of 70.90. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.18.

Locally, the Australia's S&P/ASX 200 closed 0.2% higher at 7241.2 on Friday but still posted a fourth straight weekly loss. The benchmark jumped 0.9% ahead in early trade but needed an afternoon surge to recover from a mid-session slump into negative territory.

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The heavyweight financial and materials sectors added 1.0% and 0.45%, respectively, helping offset losses among health and consumer stocks. Commonwealth, Westpac, ANZ and NAB put on between 0.7% and 1.3% after analysts said new capital rules wouldn't have a big impact on earnings.

BHP and Rio Tinto added 1.3% and 1.4%, respectively. The ASX 200 lost 0.5% for the week.
Gold futures rose 1.2% to $US1783.90 an ounce; Brent crude edged up 0.3% to $US69.88 a barrel; Iron ore was down 0.7% at US$102.36.

The yield on the Australian 10-year bond fell to 1.60%, with the US 10-year Treasury yield also down to 1.34%.

Asia

Chinese stocks ended Friday higher, slightly picking up from the market's muted performance so far this week. The benchmark Shanghai Composite Index edged up by 0.9%, while the Shenzhen Composite Index added 0.7%. The ChiNext Price Index, a measure for emerging industries and startups, rose 0.3% after three consecutive sessions of losses. Port operators and shipping firms led the upturn amid expectations of higher container freight rates due to tight cargo transportation capacity, which may be intensified by the new Covid-19 variant.

Hong Kong's Hang Seng Index closed 0.1% lower, weighed by property stocks. Developers were heavily pressured by continuing concerns over the sector. Integrated property developer Kaisa Group fell 8.8% after it failed to persuade bondholders to agree to a $400 million debt swap. China Aoyuan declined 12% after it received payment notices from creditors and said there is no guarantee it would be able to meet financial obligations. Tech stocks were also lower, after a new rule was finalized overnight that would bring US regulators closer to delisting foreign companies if they don't open themselves to audits.

Japanese stocks ended broadly higher, led by strong gains in airline and railway stocks, as investors trimmed bets against share declines ahead of US jobs data. The Nikkei Stock Average rose 1.0%. Any developments over the emerging variant are in focus.

Europe

European stocks closed lower as investors digested the latest US nonfarm payrolls report (NFP). The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies declined 0.6%.

"The week is ending on a sour note for equities, which remain in thrall to the potential spread of the Omicron variant, and are also sulking in the wake of a poor NFP figure," IG analyst Chris Beauchamp said. Payrolls rose less than forecast, and while the unemployment rate dropped, slower wage growth contributed to the move out of risk assets, he says.

In London, the FTSE 100 closed 0.1% lower.

North America

Major US indexes gave up their strong early gains and turned lower, setting them on track to finish a bumpy week on Wall Street with losses.

The S&P 500 lost around 1%, dragged down by shares of tech companies. The index rallied Thursday despite uncertainty about the Omicron variant's potential impact on the global economy. The tech-focused Nasdaq Composite lost 1.9%. The Dow Jones Industrial Average fell 0.6%.

The Nasdaq is headed toward a 3.3% weekly loss. The S&P 500 and Dow are on track to fall around 1.7% and 1.4%, respectively, this week.

Though losses in the stock market have been broad-based, many highflying tech and growth stocks have badly underperformed. Shares of Meta Platforms, formerly Facebook, and Netflix have tumbled almost 10% each this week. The ARK Innovation ETF, which recently counted Tesla, Coinbase and Zoom Video Communications among its biggest holdings, has fallen 13%.

The sharp moves in tech stocks highlight how quickly investments that were widely-favored by individual and institutional investors alike have retreated, in some cases dragging the broader market lower.

The new variant has injected volatility into the stock market at a time when investors were already weighing several other big risks such as inflation and the path of the economic recovery.

After a relatively placid stretch across financial markets, investors have been confronted with a litany of worries in recent weeks. Many investors are expecting the Federal Reserve to raise interest rates next year after a prolonged period of keeping interest rates near zero, policies that have helped send major indexes to record after record over the past year. Federal Reserve Bank of Atlanta President Raphael Bostic said Thursday that the Fed should accelerate the pace of its drawdown, or tapering, of monthly bond purchases.

The variant has triggered fresh restrictions around the world, throwing up new obstacles to overseas travel just as it was starting to bounce back from last year's Covid-19 measures. Scientists are trying to gauge how effective current vaccines will be against the variant.

"Omicron will absolutely effect growth in the next few months," said Dev Kantesaria, founder of Valley Forge Capital.

The latest monthly jobs report, released Friday, highlighted how slower hiring threatens to cloud the economic recovery, though some analysts said they found some good news in the report. The report showed that employers added 210,000 jobs in November, below the 573,000 expected by economists polled by The Wall Street Journal. The unemployment rate declined to 4.2% in November and the share of people either working or looking for work rose, a positive sign for the economy.

"On balance I would still rate it a good report for the economy, despite the fact that the headline looks to be a miss," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

Still, the moves in the bond market have continued to puzzle some investors who have questioned why yields are slipping even as the Federal Reserve is expected to raise interest rates next year and inflation has remained high. Jason Pride, chief investment officer of private wealth at Glenmede, said that it indicated some fixed income investors were positioning for the Fed to make a policy mistake, or for the central bank to not move ahead with the pace of rate increases many are anticipating.

"Fixed-income markets are moving in the opposite direction of what everyone's monetary policy expectations are," said Mr. Pride. "There's a little bit of a hint here of the market being scared of a Fed mistake."

In bond markets, the yield on the benchmark 10-year Treasury note fell to 1.342% this week, recording the biggest one-week yield decline since June 2020. Yields have now fallen for three consecutive weeks. Yields and prices move inversely.

Brent crude futures, the benchmark in global oil markets, lost 2.4% this week to $69.88, notching a sixth consecutive week of declines. OPEC and a group of Russia-led oil producers agreed Thursday to continue pumping more crude, betting that pent-up demand in a post-lockdown world would outweigh any hit to economic activity from the recent Covid-19 permutations. The group said its session would remain open, a technical move that would allow it to reconvene quickly and change course if the Covid-19 situation changes dramatically.

In corporate news, Zillow's stock jumped more than 6% after the real estate technology company authorized a share buyback. US-listed shares of Didi Global fell 19% after the Chinese ride-hailing group said it planned to move its listing to Hong Kong. DocuSign shares plunged more than 35% after the e-signature software company posted earnings that suggested weakening demand, and guidance for the current quarter that fell shy of Wall Street's expectations.

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

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