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Global Market Report - 1 February

Lewis Jackson  |  01 Feb 2022Text size  Decrease  Increase  |  
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Australian shares are poised to pop after Wall Street’s rally hit a second day, capping a tumultuous month for stocks gripped by fears over rising rates and political tensions in Europe. The Reserve Bank's monetary policy statement is due at 2.30pm AEST.

ASX futures were up 37 points or 0.5% at 6905 near 8.00 am AEST, suggesting a positive start to trading.

The S&P 500 rose Monday but closed out its worst month since March 2020 as expectations for higher interest rates erode enthusiasm for stocks.

On the final trading day of January, the S&P 500 advanced 1.9%, while the Dow Jones Industrial Average gained 1.2%, or about 406 points. The tech-heavy Nasdaq Composite advanced 3.4%, chipping away at its monthly losses. The day's gains built on a rally Friday for all three indexes.

Locally, the S&P/ASX 200 closed 0.2% lower at 6971.6 after tech stocks helped the benchmark pare early losses.

The index dropped 0.8% shortly after the open, giving back some of Friday's 2.2% gain. It steadily recovered and was briefly in positive territory in the afternoon before edging lower again. Appen, WiseTech and Life360 put on between 4.45% and 7.3% as local tech stocks followed a positive lead from their US counterparts.

The heavyweight finance sector was the biggest drag with Westpac, Macquarie, NAB, Commonwealth and ANZ giving up between 1.6% and 3.4%.

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Ansell was the worst-performing ASX 200 component, shedding 14% after slashing its earnings guidance.

Overseas, the pan-continental Stoxx Europe 600 gained 0.7%. In Asia, markets were closed in China and South Korea for a holiday. Hong Kong's Hang Seng and Japan's Nikkei 225 each added more than 1%. Macau Legend Development shares fell 19% in Hong Kong after media reports of the arrest of its chief executive over the weekend, on suspicion of money laundering and illegal gambling, including operating online casinos.

Turning to commodities, gold futures added 0.7% to $US1799.30 an ounce; Brent crude rose 1.3% to $US91.21; Iron ore dropped 4.2% to US$141.75 a tonne.

In bond markets the yield on the Australian 10-year bond slipped for a second day to 1.89%, while the benchmark US 10-year Treasury yield edged up to 1.79%. Yields fall when prices rise.

The Australian dollar was buying 70.67 US cents near 8.00am AEST, up from the previous close of 69.90. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, declined to 90.29.


Chinese markets are shut all week for the Chinese New Year holidays.

Hong Kong shares ended higher in a half-day session, supported by tech sector gains which tracked the Nasdaq Composite's 3.1% jump on Friday. Meituan and NetEase each advanced more than 5%, Alibaba Group rose 3.6% and Tencent Holdings was 2.6% higher. Other notable gainers included Shimao Group, adding 4.6% following plans to sell its Shanghai hotel property for CNY4.5 billion, which will be used to pare debts. CanSino Biologics climbed 4.8% after saying it expects swinging to net profit in 2021 on sharply higher revenue. Macau Legend Development said over the weekend that its CEO has been arrested. The stock closed 19% lower. Galaxy Entertainment lost 2.2% and Sands China slipped 0.7%. The Hang Seng Index gained 1.1%, rising 1.7% for January. The market will be shut for the Chinese New Year holidays until Friday.

Japan's Nikkei Stock Average rose 1.1%, reversing earlier losses amid gains in US stock futures. However, volatility in financial markets could stay elevated in the near term, especially with most of Asia out for Lunar New Year holidays for parts of this week, Maybank says. Top performers included shipping companies, such as Mitsui O.S.K. Lines jumping 9.6% and Nippon Yusen K.K. climbing 7.2%. Recruit Holdings added 5.5%, following news of a share buyback.


Stocks mostly rose on both sides of the Atlantic as investors became more upbeat after last week's US Federal Reserve announcement. The pan-European Stoxx 600 gained 0.7% on Monday to end the month 3.9% lower.

"The new week has begun on a much more positive footing, following on from Wall Street's bounce Friday, as investors start to look on the bright side following the recent sell-off," IG chief market analyst Chris Beauchamp says. "With the Fed out of the way for now, a calmer outlook prevails, even if we still have some big-name earnings to come.”

In London, the FTSE 100 edged 0.02% down in what has been a rollercoaster month for the index. But while lagging today, the FTSE 100 has largely outperformed other markets in Europe in January as a whole, says Michael Hewson, chief market analyst at CMC Markets UK. "The UK benchmark has managed to set itself apart on the month with a decent performance, while markets elsewhere in Europe have struggled," Hewson says. The benchmark index is up 1.1% for the month.

North America

The S&P 500 rose Monday but closed out its worst month since March 2020 as expectations for higher interest rates erode enthusiasm for stocks.

On the final trading day of January, the S&P 500 advanced 1.9%, while the Dow Jones Industrial Average gained 1.2%, or about 406 points. The tech-heavy Nasdaq Composite advanced 3.4%, chipping away at its monthly losses. The day's gains built on a rally Friday for all three indexes.

The broad US stock index has retreated 5.3% in volatile trading in January as investors wrestle with the question of how tighter monetary policy would influence equity valuations. High inflation and a strong labour market have led Federal Reserve officials to accelerate their plans for unwinding support for the economy.

The central bank last week signalled that it would begin steadily raising rates in mid-March. Adding to investors' anxieties in recent weeks: the possibility of a Russian invasion of Ukraine and the surge of the Omicron variant of Covid-19.

The suite of concerns has led to declines across the stock market, with 10 of the S&P 500's 11 sectors retreating in the new year. Only energy stocks have bucked the downward trend.

"January really snuck up on a lot of people," said Wayne Wicker, chief investment officer at MissionSquare Retirement. "Everybody was predicting volatility, but I think the declines in January probably exceeded expectations."

The shift by the Federal Reserve unsettles a key support for stocks. Investors credit the central bank's near-zero short-term interest rates and program of bond-buying with helping fuel the stock market's run from its lows of March 2020. Even after pulling back in recent weeks, the S&P 500 is trading at about double its closing low that month.

Technology stocks have slumped this month as investors consider how rising interest rates could weigh especially hard on the group's pricey valuations, which are based in part on expectations for growth far into the future. Microsoft shares have dropped 7.5% in January, while Nvidia shares have slumped 17%.

The Nasdaq Composite has fallen 9% this month, making January its worst month since March 2020.

"Tech was just very highly valued, very overbought," said Dustin Thackeray, chief investment officer at Crewe Advisors. "It was certainly due for a pullback."

Trading in January has featured big days both up and down, as well as sharp intraday reversals.

"There has been extreme volatility so far this year," said Louise Dudley, an equities portfolio manager at Federated Hermes. "People are particularly worried with the interest-rate expectations continuing to get higher. We're definitely seeing from the US that they're very on top of the inflation numbers -- they're going to do everything they can."

Ms. Dudley said she expects that volatility will lessen as investors get more clarity over whether inflation has peaked and how companies expect to be impacted by higher prices for energy, labor and materials.

Investors are listening for clues about companies' expectations as corporate earnings season continues. Analysts expect that profits from companies in the S&P 500 rose 24% in the fourth quarter from a year earlier, according to FactSet. About one-third of companies in the index have reported.

Strong earnings reports, coupled with the depth of the stock-price declines in January, make some investors think the market may rise from here.

"I think there's a good chance that last week marked a short-term bottom, " said Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management. "The fundamentals have not validated the weakness"

Among individual stocks, shares of Netflix jumped 11% Monday after a ratings upgrade from Citigroup and share purchases by Co-Chief Executive Reed Hastings.

US-listed shares of Sony rose 4.5% after Sony Interactive Entertainment LLC said it is buying videogame developer Bungie. Earlier in January Microsoft said it would buy videogame giant Activision Blizzard.

Citrix Systems shares fell 3.4% as the cloud-computing company said it would be taken private in an all-cash acquisition valued at $16.5 billion.

Shares of L3Harris Technologies dropped 4.3% after the aerospace and defence company gave a downbeat revenue outlook.

In bond markets, the yield on the benchmark 10-year US Treasury note was little changed, edging up to 1.780% Monday from 1.779% Friday. But the monthly yield gain was the largest since March 2021.

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

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