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Global Market Report - 09 July

Lewis Jackson  |  09 Jul 2021Text size  Decrease  Increase  |  
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Australia

Australians shares set to follow world markets down after Wall Street sold off over anxieties over growth slowing down.

The Australian SPI 200 futures contract was down 48 points or 0.66 per cent at 7,207 near 7.25 am Sydney time on Friday.

Wall Street has lost ground, with the S&P 500 and the Nasdaq pulling back from record closing highs in a broad sell-off driven by uncertainties surrounding the pace of the US economic recovery.

The Dow Jones Industrial Average fell 259.86 points, or 0.75 per cent, to 34,421.93, the S&P 500 lost 37.31 points, or 0.86 per cent, to 4,320.82 and the Nasdaq Composite dropped 105.28 points, or 0.72 per cent, to 14,559.79.

The Australian dollar was buying 74.30 US cents near 7.45am AEST, down from 74.35 at Thursday’s close.

Locally, Australia's share market has topped its rivals across Asia and closed higher despite concerning coronavirus developments in locked-down Sydney.

Solid gains for the big miners as well as an increase of more than one per cent for technology and consumer staples shares helped the ASX.

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The performance came despite NSW recording its highest number of daily infections this year, 38.

Most Asian markets finished lower despite the US S&P 500 and Nasdaq having closing highs.

The benchmark S&P/ASX200 index closed up 14.5 points, or 0.2 per cent, to 7341.4 on Thursday.

The result was within 50 points of its record close.

The All Ordinaries closed higher by 15.6 points, or 0.21 per cent, to 7614.9.

The indices were up by about half a per cent after the first hour of trade, but eased.

CommSec market analyst Steven Daghlian said once Asian trade started, the ASX faded.

Japanese officials prepared to declare a coronavirus state of emergency during the Olympics due to a surge in infections.

South Korea reported a one-day record increase of 1,275 new infections.

Asian markets closed lower except for the Taiwan Stock Exchange.

Mr Daghlian put the ASX's slide during trade in context.

"Yes we've seen a pullback but we're still up," he said.

"We've had a tremendous run of nine months of gains."

The Aussie dollar also eased. It had bought more than 75 US cents late on Wednesday, but slipped to buy about 74.50 US cents

The lower Aussie would have made ASX shares cheaper for overseas investors.

In the US, investors were buoyed by the minutes of the most recent Federal Reserve meeting.

Fed officials said further progress on the economic recovery "was generally seen as not having yet been met".

Traders hope the central bank will wait longer before easing the support provided during the pandemic.

In Australia, Reserve Bank governor Philip Lowe continued to discuss Tuesday's decision to gradually ease the bank's support for the economy.

However, he would not be drawn on whether the cash rate might rise next year from a record low 0.1 per cent.

"It is based on inflation outcomes, not the calendar," he said.

On the ASX, Seven Group has continued to buy shares and increase its stake in Boral.

Seven bought 60 million shares at $7.40 each.

The company now owns almost 41 per cent of the building materials supplier.

Seven shares were higher by 4.43 per cent to $21.22.

Boral shares were lower by 0.14 per cent to $7.39.

AMP will sell its global equities and fixed income business to Macquarie Asset Management.

The AMP Capital business manages $60 billion in assets and will be sold for $185 million.

The sale is part of preparing the demerger of AMP Capital.

AMP shares closed even at $1.12.

Macquarie shares were higher by 0.45 per cent to $157.17.

The big iron ore miners played a valuable role in the market's performance.

BHP was higher by more than two per cent early and closed better by 1.76 per cent.

Fortescue and Rio Tinto were also higher.

In technology, instalments payment provider Zip surged 13.73 per cent to $8.78.

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

Spot Gold was down 0.2 per cent at $US1799.46 an ounce; Brent crude was up 0.6 per cent at $US73.89 a barrel, Iron ore was down at $US218.04 a tonne.

The yield on the Australian 10-year bond closed at 1.32 per cent.

Asia

At the close, China's Shanghai Composite index was down 0.79 per cent at 3,525.50.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 2.89 per cent at 27,153.13

Japan's Nikkei 225 Index was down 0.88 per cent at 28,118.03.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down 1.72 per cent at 451.61.

The German DAX fell 1.73 per cent to 15,420.64.

North America

Wall Street has lost ground, with the S&P 500 and the Nasdaq pulling back from record closing highs in a broad sell-off driven by uncertainties surrounding the pace of the US economic recovery.

The Dow Jones Industrial Average fell 259.86 points, or 0.75 per cent, to 34,421.93, the S&P 500 lost 37.31 points, or 0.86 per cent, to 4,320.82 and the Nasdaq Composite dropped 105.28 points, or 0.72 per cent, to 14,559.79.

As the bond market rallied on a flight to safety, all three major US stock indexes tumbled. The Dow's economically sensitive transports plunged 3.3 per cent on Thursday, its biggest daily drop since October.

Still, analysts noted that the market remained close to historical highs.

"We're still effectively at all-time highs, so I wouldn't read much into today's market action," said Oliver Pursche, senior vice president at Wealthspire Advisors in New York.

"The bond market is reflecting that the probability of there being material inflation over a long period of time is very unlikely, and that's the fear that had been driving yields higher" before the recent rally, Pursche added.

"We're in a goldilocks scenario, with enough growth to support the economy but not so much that the Fed changes policy beyond what they've already announced," he said.

On Wednesday, the US Federal Reserve released minutes from its latest monetary policy meeting, which showed the central bank does not yet believe the economy has fully recovered, yet a debate on tightening policy has begun in earnest.

Sensing cracks in the US economic recovery, traders covered short positions in the bond market. The yield of the benchmark 10-year US Treasury note fell for the eighth consecutive session.

All 11 major sectors of the S&P 500 ended in the red, with financials suffering the largest percentage loss.

The number of US workers filing first-time applications for unemployment benefits unexpectedly ticked up to 373,000 last week, a sign that the US labour market recovery remains choppy.

Beijing's ongoing clampdown on US-listed Chinese companies fed into the risk-averse mood.

Since China's opening salvo over the weekend against ride-hailing app Didi Global, Beijing has broadened its scrutiny of US-listed Chinese companies beyond the tech sector.

Didi shares dropped 5.9 per cent, while Alibaba and Bidu shed 3.9 per cent and 3.7 per cent, respectively.

Big banks are due to kick off second-quarter reporting next week. Analysts expect aggregate year-on-year earnings growth of 65.4 per cent for companies in the S&P 500 index, up from the 54 per cent growth forecast made at the beginning of the quarter, according to Refinitiv.

"Much like inflation data I want to see what earnings growth over two years rather than one," Pursche said. "That would be a much better guide as to how strong earnings are going to be."

"Coming out of the pandemic one-year data points are so distorted that they're almost irrelevant."

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

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