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Global Market Report - 10 February

Lewis Jackson  |  10 Feb 2022Text size  Decrease  Increase  |  
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Australia

Australian shares are poised to rise after US stocks rallied amid gains for battered technology giants Meta and Netflix as an easing bond market selloff helped sentiment.

ASX futures were up 41 points or 0.6% at 7193 near 8.00 am AEST, suggesting a positive start to trading.

US stocks rose and government-bond yields fell Wednesday following a recent climb, potentially easing some pressure on technology shares.

The S&P 500 was up 1.45%. The broad index had also risen Tuesday as investors snapped up shares of companies across industries. The Dow Jones Industrial Average climbed or 0.86%, while the Nasdaq Composite added 2.1%. While all three indexes are up this week so far, they are in negative territory year to date.

Locally, the S&P/ASX 200 closed 1.1% higher at 7268.1, gaining more than 1.0% in consecutive sessions for the first time since October 2020.

Commonwealth Bank surged 5.6% after the largest ASX-listed company by market capitalization announced a A$2 billion on-market buyback. That helped lift the heavyweight financial sector by 2.6%. Banks ANZ, NAB and Westpac added between 1.7% and 2.4%.

Computershare's 11% gain after upgrading its annual guidance made it the ASX 200's best-performing component and led the tech sector higher by 4.2%. Altium, WiseTech, Appen and Tyro rose between 4.3% and 5.4%.

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Commodity stocks weighed, paring strong gains from earlier in the week.

Overseas, the pan-continental Stoxx Europe 600 rose 1.7%. In Asia, major stock indexes closed with gains. Hong Kong's Hang Seng jumped 2.1% and Japan's Nikkei 225 added 1.1%. China's Shanghai Composite and South Korea's Kospi gained 0.8% each.

Turning to commodities, gold futures gained 0.3% to $US1833.50 an ounce; Brent crude added 1.1% to $US91.79 a barrel; Iron ore fell 4% to US$146.50.

In bond markets the yield on the Australian 10-year bond slipped to 2.10%. The benchmark US 10-year Treasury yield moved lower to 1.95%. Yields fall when prices rise.

The Australian dollar was buying 71.80 US cents near 8.00am AEST, up from the previous close of 71.44. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, edged down to 89.59.

Asia

Chinese stocks ended higher on Wednesday, with gains led by the telecom sector and liquor makers. Telecom companies' fundamentals are improving amid a benign competitive environment, 5G migration and strong demand for digital services, Nomura says. China Mobile surged 10% to an all-time high, while China Telecom added 2.8% and telecom equipment maker ZTE rose 3.3%. Chinese baijiu makers Kweichow Moutai and Wuliangye Yibin each gained more than 3%. Among laggards, property developer China Vanke slipped 1.8% after its January contracted sales halved from a year earlier. The Shanghai Composite Index rose 0.8%, the Shenzhen Composite Index advanced 1.6% and ChiNext Price Index rebounded 1.3% from Tuesday's decline.

In Hong Kong, stocks finished up, rebounding from two days of losses as the tech sector recovered. The benchmark Hang Seng Index rose 2.1%. Alibaba was the top gainer on the index, after investor fears over a potential stake sale by its largest shareholder, SoftBank, eased. The Japanese investment giant said that Alibaba's recent registration of 1 billion additional American depositary shares, which some investors worried was a sign of potential shareholder divestment, isn't tied to any future transactions. The Chinese e-commerce company jumped 6.8%, while fellow tech stocks NetEase and Xiaomi added 4.9% and 4.8%.

Turning to Japan, the Nikkei Stock Average rose 1.1% to close at 27579.87, tracking gains in regional equity markets and US stock futures as well as driven by strong earnings. Shimano surged 17% after the bicycle-parts maker projected a 1.3% rise in 2022 net profit following a 83% net-profit surge in 2021. JFE Holdings climbed 9.0% after raising its fiscal-year revenue and net-profit views. Nissan Motor added 5.7%% after its 3Q net profit beat consensus.

Europe

European stocks rose after upbeat trading in Asia and as traders expected a higher open on Wall Street. The pan-European Stoxx 600 jumped 1.7%.

"European stock markets are extending the upward move after a positive Asian session and following a higher close of US indices, despite some general uncertainty seen across markets," XTB chief market analyst Walid Koudmani says.

In London, the FTSE 100 hit a new two-year high, closing up 1.01%, after another strong session, boosted by travel and leisure and a possible easing of Covid-19 restrictions in England at the end of the month, says Michael Hewson, chief market analyst at CMC Markets.

Oil prices pulled back from their biggest one-day decline this year on Tuesday and the prospect of US-Iran talks resuming is a positive sign, Hewson notes.

North America

US stocks rose and government-bond yields fell Wednesday following a recent climb, potentially easing some pressure on technology shares.

The S&P 500 was up 1.45%. The broad index had also risen Tuesday as investors snapped up shares of companies across industries. The Dow Jones Industrial Average climbed or 0.86%, while the Nasdaq Composite added 2.1%. While all three indexes are up this week so far, they are in negative territory year to date.

Wednesday's advance came as all 11 sectors within the S&P 500 rose. Many were up at least 1%.

Markets have been hurt in recent days by a rout in tech stocks. Investors have been unloading shares of tech companies with lofty valuations ahead of a potential increase in interest rates by the Federal Reserve.

Analysts said the volatility could continue until investors get clear guidance from the Fed about the rate increases ahead. Some are betting the turbulence will continue throughout 2022.

"We could potentially see bouts of volatility throughout this year, especially as the Fed starts its tightening cycle; that's usually when markets have a little bit of indigestion," said Mona Mahajan, a senior investment strategist at Edward Jones.

Fresh inflation data due Thursday is expected to give investors additional clues as to how quickly the Fed may raise rates after slashing them in 2020 to cushion the economy from the impact of Covid-19. Matt Weller, global head of market research at Forex.com, said a notable jump in core inflation data could persuade the Fed to act more aggressively and raise rates by 0.5 percentage point.

Analysts said a more aggressive Fed could hurt tech companies even more. Shares of Facebook parent Meta Platforms rose 5.4% after falling 20% last week. Google parent Alphabet added 1.6%. Technology companies tend to benefit from low bond yields as some investors will pay more for shares that they expect to churn out outsize profits in the future.

"Don't necessarily assume this is the worst it can get, and if you're feeling uneasy, I would consider lightening up on risky exposure," said Mr. Weller.

The yield on the benchmark 10-year US Treasury note ticked down to 1.934% Wednesday from 1.954% Tuesday, its highest closing level since July 2019. Yields move inversely to prices.

European bonds yields also fell Wednesday, with the yield on the 10-year German bund ticking down to 0.218% from 0.264% Tuesday, according to Tradeweb.

"All market participants are now trying to gather more information on how this global turnaround of central banks will happen," said Carsten Brzeski, ING Groep's global head of macro research. "There is a question of how stock markets will adjust to this new normal."

Uber Technologies and Walt Disney were slated to post results late Wednesday. Shares of Chipotle Mexican Grill rose 10% after it said it had increased menu prices again and was likely to raise them further this year. Lyft rose 6.8% after the ride-hailing company posted weaker-than-expected ridership numbers. CVS Health fell 5.45% after the drugstore chain reported quarterly results that beat expectations, but provided a mixed full-year outlook.

Investors are monitoring factors that could affect earnings, including the anticipated increase in interest rates, elevated inflation and supply-chain disruptions. As of late last week, 34 companies in the S&P 500 had given lower earnings guidance than analysts expected, while 13 companies had issued higher guidance, according to FactSet.

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

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