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Global Market Report - 07 July

Lewis Jackson  |  07 Jul 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to edge lower at the open, after global markets pulled back. The Dow and S&P 500 closed lower as cyclical stocks fell and US bond yields hit a four-month low.

The Australian SPI 200 futures contract was down 11 points or 0.15 per cent at 7,162 near 7.25 am Sydney time on Wednesday.

The Dow and S&P 500 have fallen as investors took profits in some of the groups tied most closely to economic growth while the Nasdaq edged higher to another closing record.

The Dow Jones Industrial Average fell 204.9 points, or 0.59 per cent, to 34,581.45, the S&P 500 lost 8.74 points, or 0.20 per cent, to 4,343.6 and the Nasdaq Composite added 24.32 points, or 0.17 per cent, to 14,663.64.

The Australian dollar was buying 74.96 US cents near 7.45am AEST, down from 75.85 at Tuesday’s close.

Locally, a Reserve Bank decision to begin easing support for the economy has contributed to the biggest loss on the ASX in more than two weeks.

Shares fell steadily after the RBA on Tuesday made slight changes to its bond-buying and will not extend its three-year yield curve control target.

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The cash rate remains at a record low 0.1 per cent.

Most share categories were lower and the benchmark S&P/ASX200 index closed down by 53.2 points, or 0.73 per cent, to 7261.8.

The All Ordinaries closed lower by 57.6 points, or 0.76 per cent, to 7531.4.

Energy shares were the only category with decent gains and rose 1.54 per cent.

Fidelity International investment specialist Anthony Doyle said the RBA had taken its first steps along the long road towards having normal policy measures.

The central bank has used unconventional measures such as quantitative easing to inject the economy with more cash than usual since the pandemic began last year.

Mr Doyle said by not extending one emergency measure - the three-year bond yield target of 0.1 per cent - the Reserve had signalled its growing confidence in the economy.

Low rates have helped investors boost share markets to record levels.

GSFM investment strategist Stephen Miller noted the RBA reaffirmed the cash rate would not rise before 2024.

Some central banks have recently brought forward estimates of rate hikes due to rising inflation.

Inflationary pressures were less visible in Australia, Mr Miller said.

Overall, the RBA's decisions were only a marginal retreat from high levels of support, he said.

The central bank will drop its bond buying in September from $5 billion per week to $4 billion per week.

Mr Doyle said conditions remained favourable for increases in equity prices.

The RBA decisions triggered an initial slide in the Aussie dollar, which then improved.

The Aussie rose to its highest level of the day, 75.99 US cents, at 1612 AEST.

Westpac head of financial markets strategy Robert Rennie cited the RBA's upbeat assessment of the Aussie economy as contributing to buying.

Overseas, there was less action than usual as Wall Street closed for the Independence Day holiday.

European stocks closed higher after signs of stronger than expected growth in the eurozone private sector.

On the ASX, retail magnate Solomon Lew called for the board of the troubled Myer chain to resign after his company increased its ownership.

Premier increased its stake in the department store business from about 10 per cent to 15.77 per cent.

Shares in Myer were higher by 14.86 per cent to 42 cents.

Shares in Premier were down 1.89 per cent to $27.05.

Energy stocks rose after OPEC and allies called off talks which might have increased oil supply.

Oil Search was up 4.62 per cent to $4.08.

Woodside gained 1.99 per cent to $24.07.

Westpac will sell its New Zealand life insurance business and said the sale will simplify the bank.

Westpac will sell the operations for $A373 million to insurer Fidelity Life Assurance Company.

The Kiwi company will sell life insurance products to Westpac New Zealand customers as part of a 15-year deal.

Shares in the bank were down 0.31 per cent to $25.45.

Westpac's peers in the big four were all lower by less than one per cent.

Big miners were mixed.

BHP gained 0.83 per cent to $48.85. Fortescue shed 1.39 per cent to $23.36. Rio Tinto decreased by 0.57 per cent to $125.41.

On Wednesday, gold and copper explorer Askari Metals will join the ASX.

Spot Gold was up 0.3 per cent at $US1796.80 an ounce; Brent crude was down 3.3 per cent at $US74.63 a barrel, Iron ore was down 0.2 per cent at $US222.36 a tonne.

The yield on the Australian 10-year bond closed at 1.47 per cent.

Asia

At the close, China's Shanghai Composite index was down 0.12 per cent at 3,530.26.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 0.25 per cent at 28,072.86

Japan's Nikkei 225 Index was up 0.16 per cent at 28,643.21.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down 0.52 per cent at 455.98.

The German DAX fell 0.96 per cent to 15,511.38.

North America

The Dow and S&P 500 have fallen as investors took profits in some of the groups tied most closely to economic growth while the Nasdaq edged higher to another closing record.

The Dow Jones Industrial Average fell 204.9 points, or 0.59 per cent, to 34,581.45, the S&P 500 lost 8.74 points, or 0.20 per cent, to 4,343.6 and the Nasdaq Composite added 24.32 points, or 0.17 per cent, to 14,663.64.

Bank stocks fell as US Treasuries rallied, with the 10-year yield hitting its lowest level since February 24.

The Dow led the day's declines while financials pressured the S&P 500 along with energy shares.

At the same time, a regulatory crackdown by officials in Beijing drove a sell-off in shares of several US-listed Chinese firms including Didi Global Inc.

Alan Lancz, president of Alan B. Lancz & Associates Inc, an investment advisory firm based in Toledo, Ohio, said investors may be taking profits after a strong end of the quarter and string of recent records.

"It was such a good quarter end," he said.

Now, "cyclicals are really getting hit".

With Treasury yields down, "investors may be worried the economy might not be a good as the stock market was showing," he said.

Last week, all three indexes posted their fifth consecutive quarterly gains.

They scaled new highs on Friday.

The S&P 500 growth index also hit a record high on Tuesday while the S&P 500 value index was down.

Data showed US services industry activity grew at a moderate pace in June, likely restrained by labour and raw material shortages.

The CBOE Volatility index rose.

Didi Global shares fell after Chinese regulators ordered over the weekend the company's app be taken down days after its $US4.4 billion ($A5.8 billion) listing on the New York Stock Exchange.

Other US-listed Chinese e-commerce firms including Alibaba Group also fell.

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

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