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Global Market Report - 10 November

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

The ASX is set to rise after US stocks dipped off record highs and Tesla plunged 12%.

The Australian SPI 200 futures contract was up 20 points or 0.27 per cent higher at 7,440 near 8.00 am AEST on Wednesday, suggesting a positive start to trading.

US stocks retreated from record levels Tuesday, breaking an eight-day winning streak for the S&P 500.

The benchmark index fell 0.4%. The Dow Jones Industrial Average ticked down 0.3% after the blue-chip index closed at a record for the 44th time in 2021. The technology-focused Nasdaq Composite fell 0.6%.

Some investors view Tuesday's pullback as a breather after the rally. Propelled by strong third-quarter earnings, stocks have continued to trend upward against the backdrop of supply-chain issues and concerns about inflation.

The Australian dollar was buying 73.77 US cents near 8.00am AEST, down from the previous close of 74.23. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 88.30.

Locally, the S&P/ASX 200 closed 0.2% lower at 7434.2, weighed by banking stocks. The benchmark spent the day in a narrow 34-point range straddling the gain line, finishing at its session low despite a positive lead from US equities.

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National Australia Bank lost 0.8% after FY cash profit rose 77%, though its shares had been at two-year highs in the previous two weeks. Commonwealth, Westpac and ANZ gave up between 1.2% and 1.55%.

The materials sector added 1.0% amid gains by gold and iron ore miners, while Chalice jumped 29% after what it said was the largest nickel sulphide discovery globally in over 20 years. The mineral is used in electric vehicle batteries among other applications.

Asia

Chinese stocks recovered some ground Tuesday, helped by bank stocks' gains. The Shanghai Composite Index rose 0.2% and the Shenzhen Composite Index added 0.8%. The ChiNext Price Index advanced 0.9% to 3409.94. Bank stocks were stronger amid positive sentiment over developments for Covid-19 treatments and as global economies reopen.

Hong Kong shares edged higher as sentiment was aided by positive Covid-19 news and a recent slew of strong US earnings. The Hang Seng Index rose 0.2% and the Hang Seng TECH Index gained 0.45%. Mizuho Bank says risk appetite remained buoyant amid easing fears of imminent interest rate hikes, increased reopening hopes due to the development of Covid-19 pills and the passage of US infrastructure stimulus.

Japanese stocks end broadly down with the Nikkei Stock Average closing 0.8% lower. SoftBank Group soared 10.5% after it announced a Y1 trillion share buyback program. Meanwhile the USD/JPY fell to the lowest level in four weeks as bearish sentiment persists and a dovish Federal Reserve sends investors out of the dollar. The Yen is seen as a safe haven currency.

Europe

European stocks followed US stocks down on Tuesday. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies slipped 0.19%.

In London, The FTSE 100 index closed The FTSE 100 closed down 0.36% on Tuesday, failing to find lift-off despite some decent company earnings and a headline-grabbing update from Rolls-Royce Holdings PLC regarding its expansion into nuclear energy.

North America

US stocks retreated from record levels Tuesday, breaking an eight-day winning streak for the S&P 500.

The benchmark index fell 0.4%. The Dow Jones Industrial Average ticked down 0.3% after the blue-chip index closed at a record for the 44th time in 2021. The technology-focused Nasdaq Composite fell 0.6%.

Some investors view Tuesday's pullback as a breather after the rally. Propelled by strong third-quarter earnings, stocks have continued to trend upward against the backdrop of supply-chain issues and concerns about inflation.

"I don't read anything into it," said Jerry Braakman, chief investment officer for First American Trust in California. "That's just a natural reaction to a great eight-day run."

General Electric gained nearly 3% after the industrial giant said it planned to form three public companies focusing on healthcare, energy and aviation.

Tesla shares fell 12%, extending Monday's decline after Chief Executive Elon Musk signalled he might sell a big chunk of his stock.

"Tesla is more of a bellwether for animal spirits in the market than it is of fundamentals and earnings projection," said Bill Callahan, an investment strategist at Schroders, a British investment management company. Mr. Callahan said Tesla could be adding to the S&P 500's decline Tuesday. "That stock is sort of a barometer of what is the risk appetite in the market."

Meanwhile, Roblox shares jumped more than 40% after the online entertainment company said its revenues more than doubled in the third quarter.

Bitcoin's dollar value hit a record, trading as high as $68,525.84, according to CoinDesk. It previously topped $66,000 in October, powered by a wave of buying after the first US exchange-traded fund linked to the cryptocurrency started trading. Cryptocurrency exchange Coinbase Global, whose shares often track bitcoin, is scheduled to report earnings after markets close.

After faltering in early fall, stocks took off in mid-October as solid earnings bolstered investors' confidence in the economic recovery. Though some money managers remain concerned about the Federal Reserve raising interest rates at some point, many think stocks will continue to eke out gains. Data out Tuesday showed producer prices in October rose 0.6% from September and 8.6% on the year, signaling that inflation remains elevated.

Strong demand from consumers is powering the US economy and profits at its biggest companies, said Mike Bell, a strategist at J.P. Morgan Asset Management. "Of course that's causing some inflationary pressure but the markets...are buying into the Fed narrative that rates aren't going to go up too quickly," he added.

Mr. Bell sees two main risks: A winter rush of Covid-19 cases could put pressure on hospital systems and prompt governments to reimpose some economy-slowing restrictions. Further out, he thinks investors are underestimating the extent to which the Fed will push up interest rates to quell inflation stemming from a tight labor market.

Shares of AMC Entertainment, popular among individual traders, fell 11%. The cinema chain reported a loss and said attendee levels remained lower than pre-pandemic.

Hertz Global Holdings Inc., the rental-car giant that emerged from bankruptcy this summer, started trading again on the Nasdaq on Tuesday. Shares declined nearly 10%.

Meme stocks have come back into focus lately after volatile moves. "Some of the stocks have been lit up on hopes, dreams, themes and memes," said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company, who is recommending holding small cap and value stocks.

Investors took a dim view of PayPal Holdings Inc.'s growth outlook after company executives said they expect revenue for the final three months of the year to be lower than initially expected. Shares dived 11%.

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

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