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Global Market Report - 10 December

Lewis Jackson  |  10 Dec 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to slip in line with weakness on Wall Street. 

The Australian SPI 200 futures contract was down 11 points or 0.2% at 7367 near 8.00 am AEST on Friday, suggesting a negative start to trading.

US stocks were mostly lower Thursday as investors assessed weekly jobless claims data and the latest global restrictions to limit the spread of the Omicron variant.

The S&P 500 dropped 0.7%. The benchmark had closed 0.3% higher Wednesday. The Nasdaq Composite declined 1.7%, with losses accelerating during the afternoon. The Dow Jones Industrial Average gave up earlier gains and finished the day near flat.

The Australian dollar was buying 71.49 US cents near 8.00am AEST, down from the previous close of 71.69. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.07.

Locally, the S&P/ASX 200 closed 0.3% lower at 7384.5, pausing the ascent made against the backdrop of easing Covid-19 worries. Losses among commodity, technology and consumer stocks more than offset any strength elsewhere as the benchmark pared its strong gains so far this week.

Rio Tinto, BHP and Champion Iron gave up between 0.9% and 3.85% amid lower iron ore prices, while Oil Search, Santos and Beach pulled back between 1.4% and 3.95%, ending the energy sector's four-session winning streak.

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Insurers rose and NAB and Commonwealth, the two largest banks by market capitalization, each gained 0.2%. Yet the heavyweight financial sector edged less than 0.1% lower as ANZ, Westpac and Macquarie slipped.

Gold futures edged down 0.5% to $US1776.20 an ounce; Brent crude lost 2.3% to $US74.06 a barrel; Iron ore shed 2.6% to US$108.53.

The yield on the Australian 10-year bond rose to 1.67%, with the US 10-year Treasury yield slipping to 1.47%.

Asia

Chinese stocks closed higher on Thursday, extending an upturn in recent sessions driven by Beijing's latest stimulus measures and support signals for the country's property sector. The benchmark Shanghai Composite Index rose 1.0%, while the Shenzhen Composite Index added 0.9%. The ChiNext Price Index, a measure for the performance of emerging industries, also grew 1.0%. The consumer sector, which led Wednesday's gains, continued to strengthen. In particular, tourism agencies, hotel operators and beverage makers were among the top risers.

Japanese stocks ended lower, dragged by falls in auto and electronics stocks, as the Omicron variant has raised concerns over the pace of economic recovery from the Covid-19 pandemic. Isuzu Motors drops 2.6% and Hitachi Ltd. loses 3.5%. The Nikkei Stock Average fell 0.5% following two consecutive sessions of gains.

Hong Kong's Hang Seng Index added 1.1%, supported by pharma and property sectors. China's latest inflation data have proven benign, giving regional markets "a small sigh of relief," Oanda senior market analyst Jeffrey Halley says. Alibaba Health and CSPC Pharma each advanced more than 6%. The property sector strengthened. Country Garden, China Resources Land and Longfor Group rose 2.5%-3.4%. Among tech stocks, Alibaba Group climbed 2.3% and Tencent Holdings was 1.2% higher.

Europe

European stocks were lower, with travel-related companies among the biggest losers as investors eye the possibility of stricter coronavirus restrictions. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies slipped 0.1%.

In London, shares dropped amid rising Omicron and Delta coronavirus-variant cases. The UK government's new restrictions are relatively light given Omicron's transmission levels, borne of growing confidence the variant will be less deadly than predecessors, says IG Group PLC senior market analyst Joshua Mahony.

"Thus while the UK economy may see consumer activity somewhat subdued compared with an ordinary December, investors should take solace in the possibility that we could soon see the economy firing on all cylinders once again," Mr. Mahony says.

The FTSE 100 closed 0.2% lower.

North America

US stocks were mostly lower Thursday as investors assessed weekly jobless claims data and the latest global restrictions to limit the spread of the Omicron variant.

The S&P 500 dropped 0.7%. The benchmark had closed 0.3% higher Wednesday. The Nasdaq Composite declined 1.7%, with losses accelerating during the afternoon. The Dow Jones Industrial Average gave up earlier gains and finished the day near flat.

Investors are generally optimistic, said Oanda analyst Edward Moya. Growth in 2022 should be good and US equities should benefit from that, he said, but there is concern about the Omicron coronavirus variant, wage and inflation pressure, and Federal Reserve monetary policy. "I think it'll be very choppy the rest of the year," he said.

The Federal Reserve's policy-making body holds a two-day meeting next week, at which it may provide more details about how it plans to wind down its bond-buying program and when it plans to begin raising interest rates. What concerns stock investors, Mr. Moya said, is that the Fed might turn more aggressive than expected, tightening monetary policy and putting pressure on equities prices.

Stocks have swung back and forth in recent weeks, buffeted by conflicting headlines on the Omicron variant and mixed signals on the health of the economy. Investors are still awaiting further data on the strain's severity and vaccine efficacy. Some pharmaceutical companies including Pfizer and GlaxoSmithKline have said this week that their shot and antibody treatment, respectively, appear to work against Omicron in early-stage studies.

European governments have moved to tighten restrictions, spurring concerns about setbacks to the economic recovery. UK Prime Minister Boris Johnson on Wednesday evening outlined a new work-from-home mandate and mask guidelines. A study released by a Japanese scientist said the variant was four times more transmissible than the Delta strain.

"There's still a lot we don't know. We're waiting for details to emerge, " said Arun Sai, a multiasset strategist at Pictet Asset Management. On restrictions, "as long as it's temporary, it doesn't completely derail the recovery. We now know the playbook. We're talking about a one- or two-quarter postponement of a recovery in services. That's the critical element that's at risk here."

Some of the divergence is due to how the indexes are constructed. The Dow's components are weighted by price. Two of its better performers on Thursday were Home Depot, up slightly, and McDonald's, up 1.1%. The S&P 500 and Nasdaq, however, are weighted by market cap. In the S&P's consumer discretionary sector, the gains by Home Depot and McDonald's -- with market caps of $433 billion and $169 billion, respectively -- were outweighed by losses at Amazon and Tesla, which have market caps above $1 trillion.

Meme stock GameStop declined 10% after the company posted earnings that showed a widening loss. Amazon.com fell 1.1% after the Italian government fined it $1.3 billion for alleged abuse of market dominance. The European Union is also investigating the e-commerce giant.

American Airlines fell 0.5% after The Wall Street Journal reported the company is planning to trim international flights next summer because of Boeing's delays in delivering new 787 Dreamliners. Boeing was down 1.6%.

In a sign the labour market is improving faster than expected, weekly jobless claims came in at 184,000, the lowest level since 1969, according to the Labor Department. Claims declined from the previous week and were below economists' forecasts.

Cloud-computing firm Oracle, network company Broadcom and wholesaler Costco are set to report results after markets close. "Earnings have been strong overall, it's a really positive underlying driver for equity markets," said Kiran Ganesh, a multiasset strategist at UBS Global Wealth Management.-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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