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Global Market Report - 09 December

Lewis Jackson  |  09 Dec 2021Text size  Decrease  Increase  |  
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The ASX is set to open lower as Wall Street notches another advance.

The Australian SPI 200 futures contract was down 33 points or 0.74% at 7384 near 8.00 am AEST on Thursday, suggesting a negative start to trading.

US stocks finished with strength as investors assessed the effects of the Omicron variant on the economy.

The S&P 500 gained 0.3% Wednesday, just shy of a closing record a day after the benchmark index posted its biggest one-day jump since March. The Dow Jones Industrial Average gained 0.1%, reversing earlier losses. The technology-focused Nasdaq Composite was ahead 0.6%.

The Australian dollar was buying 71.74 US cents near 8.00am AEST, up from the previous close of 71.18. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 89.82.

Locally, the S&P/ASX 200 closed 1.25% higher at 7405.4 as broad-based gains pushed the benchmark to its biggest rise since early October. The ASX 200 built on Tuesday's 0.95% increase as global equities benefited from easing fears over the Omicron Covid-19 variant.

All 11 sectors rose, with materials, telecoms and tech all adding more than 2%. Buy-now-pay-later provider Zip Co. was the best-performing ASX 200 component for a second straight session, adding 11% after UBS upgraded the stock to neutral.

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Afterpay rose 4.2%, while BHP, Rio Tinto and Fortescue rose between 1.85% and 3.3% amid higher iron ore prices.

Gold futures edged up 0.1% to $US1786.90 an ounce; Brent crude added 0.7% to $US76.00 a barrel; Iron ore was flat at US$111.37.

The yield on the Australian 10-year bond slipped to 1.61%, with the US 10-year Treasury yield advancing to 1.53%.


Chinese stocks advanced on Wednesday as sentiment picked up after Beijing earlier this week cut banks' reserve requirement ratio and signalled support for the property sector. The benchmark Shanghai Composite Index rose 1.2%, while the Shenzhen Composite Index gained 1.8%. The ChiNext Price Index, which measures the performance of startups and emerging industries, added 1.7%.

Japanese stocks ended higher, led by gains in electronics stocks as some Omicron variant jitters abate. The Nikkei Stock Average rose 1.4%. Developments around the emerging Covid-19 variant will continue to be in focus.

Hong Kong stocks extended Tuesday's gains amid upbeat sentiment driven by Beijing's moves to boost bank lending and shore up support for the property sector. The benchmark Hang Seng Index edged up 0.1%, following a 2.7% jump yesterday.


European stocks slipped after US markets dipped at the open. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies slipped 0.5%.

In London, shares traded flat on Wednesday as travel and leisure companies were affected by reports that the UK government is mulling the introduction of new restrictions to curb the spread of the omicron coronavirus variant. The FTSE 100 closed 0.03% lower.

North America

US stocks finished the day with strength as investors assessed the effects of the Omicron variant on the economy.

The S&P 500 gained 0.3% Wednesday, just shy of a closing record a day after the benchmark index posted its biggest one-day jump since March. The Dow Jones Industrial Average gained 0.1%, reversing earlier losses. The technology-focused Nasdaq Composite was ahead 0.6%.

Stocks have snapped back after swooning when the Omicron variant first emerged in late November. Investors have pointed to evidence that Omicron might cause less severe illness than previous variants, though scientists are still assessing its virulence and ability to evade vaccines. Investors are buckling in for more volatility in the markets, driven by uncertainty outlook for inflation and mixed economic data.

One reason some investors expect inflation to persist is the tight labour market. More evidence of hiring difficulties emerged with the Labor Department's latest US job openings and labour-turnover survey, which indicated that job openings rose to 11 million in October. Economists had predicted 10 million unfilled positions. Meanwhile, 4.2 million workers quit their jobs in October. Fresh consumer-price index data on Friday will offer investors some insight into cost increases.

"The number one question investors have is, 'Will inflation start to subside?' Attached to that question is how will the central banks react to it," said Clifton Hill, global macro portfolio manager at Acadian Asset Management. Investors are also wondering whether their portfolios are protected if central banks react more aggressively to prolonged inflation than anticipated, Mr. Hill said.

In the bond market, the yield on 10-year Treasury notes rose to 1.53% Wednesday from 1.479% Tuesday. Bond yields and prices move in opposite directions. Investors are awaiting the Federal Reserve's meeting next week to find out if officials will tighten the pace of paring back asset purchases.

"We've had a very, very good year. It's hard for the market to perhaps just keep this surge going given the uncertainty about the Fed next week, " said David Kelly, chief global strategist at JPMorgan Funds. Fed Chairman Jerome Powell has signalled the potential for at least one interest rate increase in the first half of 2022.

Mr. Kelly, who believes the Fed will be forced to turn more hawkish in light of strong economic data, forecasts three rate increases next year. He is recommending investors to hold European and Japanese equities, along with US value stocks relative to a normal portfolio.

Vaccine makers diverged, with Moderna gaining 0.3% and Pfizer falling 0.6%. Pfizer and BioNTech said Wednesday a third dose of their Covid-19 vaccine neutralized Omicron in lab tests, but that a two-dose regimen was much less effective.

"The markets generally—if you look back in 2021—they have looked through any of the episodes of even partial lockdowns or that kind of risk," said Willem Sels, chief investment officer for private banking and wealth at HSBC. "They assume vaccines would be effective or partially effective."

Apple shares rose 2.3%, pushing the company's market value to nearly $3 trillion. Stanley Black & Decker advanced 3.3% after the toolmaker said it would sell the bulk of its security-business assets to Securitas for $3.2 billion and buy back $4 billion in stock next year.

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

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