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Global Market Report - 06 July

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

Australian shares to open higher as investors wait on the RBA policy statement due at 2.30pm. World markets closed higher while US markets were shut for the 4th of July.

The Australian SPI 200 futures contract was up 19 points or 0.26 per cent at 7,248 near 7.10 am Sydney time on Tuesday.

World stocks clung close to record highs as worries about the Delta variant of COVID-19 offset positive sentiment from surging euro zone business activity and a welcome US jobs report.

US markets were closed for the 4th of July long weekend.

The MSCI All Country World index closed at a record 724.66 last week, and was 0.1 per cent higher on Monday.

The Australian dollar was buying 75.30 US cents near 7.15am AEST, up from 75.20 at Monday’s close.

Locally, an impending Reserve Bank decision affecting long term interest rates may have preoccupied share market investors, who were largely restrained on Monday.

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The central bank's monthly meeting on Tuesday has been keenly anticipated and, along with the US Independence Day holiday tonight, may have contributed to negligible moves on the ASX.

While analysts do not expect a change to the record low cash rate of 0.1 per cent, they are more interested in the bank's position on long term rates.

CommSec market analyst James Tao said the meeting was one investors will pay a lot of attention to.

The RBA will decide whether to move its three-year bond yield target for the same rate from April 2024 to November 2024.

A move to the latter would largely be in keeping with the RBA position that it does not expect to lift the cash rate until 2024.

However most analysts expect the RBA will continue buying the April 2024 bond and give itself an earlier opportunity to raise rates.

Mr Tao said this would mean the RBA viewed the economy as performing well and not in need of all the support the central bank is providing.

The Commonwealth Bank, which runs CommSec, recently forecast rates to rise next year due to a strong Australian economy.

On the ASX, a surge in Sydney Airport shares following a takeover offer helped the market close little changed.

Shares in the airport closed higher by 33.91 per cent to $7.78 after a $22.3 billion offer from infrastructure investors.

Industrials shares closed up 4.93 per cent as a result, and helped steady the indices.

Energy shares were better by 2.03 per cent, but there were losses for financials (0.45 per cent) and healthcare (0.65 per cent).

The benchmark S&P/ASX200 index closed up 6.4 points, or 0.09 per cent, to 7315.

The All Ordinaries closed higher by 1.9 points, or 0.03 per cent, to 7589.

Wall Street scaled new highs on Friday.

Jobs data for June showed robust hiring yet persistent weakness in the labour market that will keep the Federal Reserve from raising interest rates soon.

The three major US indices - the S&P, Dow and Nasdaq - closed at record highs.

In Australia, people in Sydney and surrounding regions are enduring their second week of a coronavirus lockdown.

Another 35 people have been infected with COVID-19 in New South Wales, according to Monday's update.

Tabcorp will spin off its lotteries and Keno arm as a separate ASX-listed business and stopped short of selling its wagering operation.

The company said the demerger of lotteries was the fastest and most effective way to benefit shareholders.

The board has also chosen not to sell its wagering and media arm, which includes the TAB betting outlets and Sky racing TV and radio networks.

This was despite several suitors offering to pay about $3.5 billion.

Shares closed down 4.42 per cent to $4.97.

Meanwhile BetMakers Technology Group, which in May tried to buy Tabcorp's wagering business, said the two were discussing overseas opportunities.

The company said it also completed buying tote provider Sportech.

Shares were up 2.39 per cent to $1.07.

Some of the big energy providers were doing well.

Woodside was higher by 2.83 per cent to $23.60. Santos gained 1.96 per cent to $7.27.

The big four banks were all lower by less than one per cent.

The big miners were mixed. BHP lost 0.21 per cent to $48.45. Fortescue gained 0.47 per cent to $23.69. Rio Tinto edged up 0.33 per cent to $126.13.

Spot Gold was up 0.3 per cent at $US1791.85 an ounce; Brent crude was up 1.3 per cent at $US77.16 a barrel, Iron ore was up 1.8 per cent at $US221.82 a tonne.

The yield on the Australian 10-year bond closed at 1.43 per cent.

Asia

At the close, China's Shanghai Composite index was up 0.44 per cent at 3,534.32.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 0.59 per cent at 28,143.50

Japan's Nikkei 225 Index was down 0.64 per cent at 28,598.19.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up 0.34 per cent at 458.36.

The German DAX rose 0.1 per cent to 15,661.97.

North America

US markets were closed for the 4th of July long weekend.

Elsewhere, world stocks clung close to record highs as worries about the Delta variant of COVID-19 offset positive sentiment from surging euro zone business activity and a welcome US jobs report.

The MSCI All Country World index closed at a record 724.66 last week, and was 0.1 per cent higher on Monday.

The STOXX index of 600 leading European companies was flat on Monday, reversing earlier losses after data showed euro zone businesses expanded activity at the fastest rate in 15 years in June.

Activity for British services firms also soared in June, albeit at a slightly slower rate. French shares sank 0.4 per cent as Health Minister Olivier Veran warned France could be heading for a fourth wave of the pandemic due to the highly transmissible Delta variant.

COVID-19 angst also weighed on Japan shares, with the Nikkei falling 0.6 per cent, to a two-week low, following a surge in infections in Tokyo, just weeks before the city hosts the Olympics.

MSCI's broadest index of Asia-Pacific shares outside Japan, was flat.

China's blue chip stock index recovered from earlier losses to close 0.1 per cent higher as pledges by Beijing to continue policy support for its tech sector helped counter worries about a crackdown on ride-hailing giant Didi Global and scrutiny of other platform companies in the country.

Trading was thinner than usual with US markets closed for the extended 4th of July weekend.

"Markets in general are still trying to find their feet," said James Athey, investment director, Aberdeen Standard Investments.

"Equities, of course, continue to shrug off or ignore anything that might be considered remotely negative as they continue their merry and complacent dance towards an inevitable reckoning."

S&P 500 futures signalled a 0.1 per cent dip for Tuesday's open, after the index closed 0.8 per cent higher at a record on Friday. The Dow Jones Industrial Average rose 0.4 per cent and the Nasdaq Composite added 0.8 per cent to also hit a record.

US non-farm payrolls increased by a bigger-than-expected 850,000 jobs last month, data on Friday showed.

But the unemployment rate unexpectedly ticked up to 5.9 per cent from 5.8 per cent, while the closely watched average hourly earnings, a gauge of wage inflation, rose 0.3 per cent last month, lower than the consensus forecast for a 0.4 per cent increase.

"The goldilocks print suggests there is no need to accelerate the tapering timeline or the implied rate hike profile," Tapas Strickland, an analyst at National Australia Bank, wrote in a client note.

"Overall the level of payrolls is still 6.8 million below pre-pandemic February 2020 levels and is still below the level of substantial progress needed by the Fed. As such there is nothing in this report for the Fed to become hawkish about."

Eyes will be trained on the minutes of the Federal Open Markets Committee meeting from last month, when policymakers surprised markets by signalling two rate hikes by the end of 2023.

Commentary by Fed officials since then has been more balanced, particularly from Chair Jerome Powell, and investors parse Wednesday's release for further clues on the timing of policy tightening.

Euro zone government bond yields nudged higher but analysts expect the recent downward trajectory to resume after the US payrolls data.

Germany's 10-year Bund yield was up by half a basis point at -0.231 per cent.

The dollar was mostly flat on Monday after dropping from a three-month high at the end of last week, pressured by the weaker details of the US payrolls report.

The greenback climbed by about 0.2 per cent to $1.1859 per euro and traded flat at 111.05 yen.

Gold was up 0.3 per cent to $1,792.30 an ounce.

Crude oil was rangebound as OPEC+ talks dragged on. Saudi Arabia's energy minister pushed back on Sunday against opposition by fellow Gulf producer the United Arab Emirates to a proposed OPEC+ deal and called for "compromise and rationality" to secure agreement when the group reconvenes on Monday.

Brent crude added 0.1 per cent $76.21 a barrel, and US crude gained 0.1 per cent to $75.25 a barrel.

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

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