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Global Market Report - 08 December

Lewis Jackson  |  08 Dec 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to jump amid a global rally as fears about the Omicron variant receded for now.

The Australian SPI 200 futures contract was up 51 points or 0.7% at 7382 near 8.00 am AEST on Wednesday, suggesting a positive start to trading.

The US stock market rose sharply on Tuesday, as the S&P 500 and oil prices rose on hopes that Omicron would prove less damaging to the economy than feared.

The benchmark stock index gained 2.1%, building on Monday's gains and recouping all its losses from last week. The tech-focused Nasdaq Composite Index jumped 3%, while the Dow Jones Industrial Average rose 492 points, or 1.4%.

Hopes that the new Covid-19 strain will have a less-pronounced impact on travel and consumer confidence have bolstered stocks this week. Scientists and vaccine makers are still assessing the severity of Omicron and how well existing vaccines may work against it.

The Australian dollar rebounded from earlier lows to buy 71.11 US cents near 8.00am AEST, up from the previous close of 70.48. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 90.14.

Locally, the S&P/ASX 200 closed 0.95% higher on Tuesday at 7313.9 for its biggest gain in two months. The benchmark built on a positive lead from US stocks, which rose amid easing fears about the seriousness of the Covid-19 Omicron variant.

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Nearly every sector finished higher, with health, tech and energy leading with gains of between 1.7% and 2.1%. Travel stocks Qantas, Webjet, Flight Centre and Corporate Travel Management added between 3.8% and 5.7%.

The heavyweight materials and financial sectors put on 0.5% and 0.7%, respectively.
Buy-now-pay-later provider Zip Co. was the best-performing ASX 200 component, jumping 9.9% to regain almost all its losses of the prior day.

The Reserve Bank left its policy settings on hold at its monthly policy meeting on Tuesday. In a statement, Governor Phillip Lowe said that the emergence of Omicron is not expected to derail the recovery.

Commodities jumped as China stepped up support for its financial system. Gold futures edged up 0.4% to $US1786.10 an ounce; Brent crude popped 2.6% to $US74.96 a barrel; Iron ore jumped 8.3% to US$111.34.

Government bonds continued to recover from the lows notched at the close of last week. The yield on the Australian 10-year bond rose to 1.64%, with the US 10-year Treasury yield advancing to 1.48%.

Asia

Chinese shares were mixed on Tuesday, with gains in property developers meeting losses in liquor makers. Developers were boosted by greater support for the property sector, as China injects more liquidity into its financial system, Jefferies said. The Shanghai Composite Index ended 0.2%, the Shenzhen Composite Index closed 0.7% lower and the ChiNext Price Index dropped 1.1%.

Japanese stocks ended higher, led by especially strong gains in railway and airlines stocks as some of the more severe concerns about the Omicron variant ease for now. Meanwhile, SoftBank Group surged 7.9% following rallies in some of its portfolio companies such as Alibaba Group Holding and Didi Global. The Nikkei Stock Average rose 1.9%. Investors remain focused on any developments over the emerging Covid-19 variant and governments' responses.

Hong Kong shares closed up amid gains from technology and property stocks. Both sectors were helped by fresh moves from Beijing to stimulate China's slowing economy, including injecting more liquidity into its financial system, Jefferies said. Alibaba Group surged 12% following a business reorganization to combine its Chinese e-commerce units into one. The Hang Seng Index closed 2.7% higher, while the Hang Seng Tech Index rose 4.2%.

Europe

European stocks gained as investors piled back into markets on the back of receding fears about the Omicron coronavirus variant. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies jumped 2.5%.

In London, The FTSE 100 closed 1.5% higher on Tuesday led by the basic resource sector after China's latest trade numbers showed a substantial pick up in commodity demand and iron imports reached a 16-month high.

North America

The US stock market rose sharply on Tuesday, as the S&P 500 and oil prices rose on hopes that Omicron would prove less damaging to the economy than feared.

The benchmark stock index gained 2.1%, building on Monday's gains and recouping all its losses from last week. The tech-focused Nasdaq Composite Index jumped 3%, while the Dow Jones Industrial Average rose 492 points, or 1.4%.

Hopes that the new Covid-19 strain will have a less-pronounced impact on travel and consumer confidence have bolstered stocks this week. Scientists and vaccine makers are still assessing the severity of Omicron and how well existing vaccines may work against it.

The balance of the latest Omicron updates appears to indicate that another major economic shock isn't coming, which has sparked short covering and a scramble to buy after a few weeks of losses, said ThinkMarkets analyst Fawad Razaqzada. "It's a relief rally," he said.

Eventually, though, investors will likely refocus on monetary policy and the pace of the Federal Reserve's tapering program, said Mr. Razaqzada. "That's going to be the next big thing for the market," he said.

Additionally, lower trading volumes in the lead-up to the holidays are likely to cause exaggerated moves in either direction, analysts say.

"We're in this period where investors are grappling for any news they can find and that, coupled with low liquidity, is leading to some big moves," said Hugh Gimber, a strategist at J.P. Morgan Asset Management.

US stocks were led by riskier, more growth-oriented sectors, such as technology, energy and consumer-discretionary, but all 11 of the S&P 500 sectors were rising. Consumer-discretionary stocks especially sensitive to Covid-19 developments, such as Marriott International, Hilton Worldwide and Royal Caribbean, were higher.

Bank stocks, which have been seesawing along with the latest Omicron news, were higher in afternoon trading. Morgan Stanley rose 3.6%, Wells Fargo gained 2.9% and JPMorgan was up 1.6%.

Vir Biotechnology's shares gained 4.3% after the immunology company and its partner, GlaxoSmithKline, said their Covid-19 antibody treatment proved effective against the Omicron variant in laboratory studies.

Shares of Intel gained 3.8% after The Wall Street Journal reported that it was planning to publicly list shares in its Mobileye self-driving-car unit, the latest move by Chief Executive Pat Gelsinger to revive the semiconductor giant's fortunes.

Bitcoin, the world's largest cryptocurrency by market value, rose 1.4% to $51,058, according to FactSet, as it continued to recover from the weekend selloff.

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

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