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Global Market Report - 11 November

Lewis Jackson  |  11 Nov 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to slip after US stocks and bonds sold off as inflation hit a multi-decade high.

The Australian SPI 200 futures contract was down 12 points or 0.1 per cent at 7,400 near 8.00 am AEST on Thursday, suggesting a negative start to trading.

US stocks fell Wednesday after data showing that inflation rose to a three-decade high added to investors' concerns about price pressures in the global economy.

The benchmark S&P 500 dropped 0.8%. The blue-chip Dow Jones Industrial Average lost 0.7%, while the tech-heavy Nasdaq Composite Index declined 1.7%.

Fresh data showed that US inflation rose in October to its highest level since 1990, driven by supply shortages and strong consumer demand. The annual rate of inflation stood at 6.2%.

The Australian dollar was buying 73.35 US cents near 8.00am AEST, down from the previous close of 73.75. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, jumped to 89.01.

Locally, the S&P/ASX 200 closed 0.1% lower at 7423.9, dragged by commodity stocks. The benchmark followed a negative lead from U.S. stocks, which retreated slightly from record highs, and it sits 0.4% lower so far this week.

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Rio Tinto, Fortescue and BHP lost between 1.65% and 2.7% amid lower iron ore prices, while BlueScope Steel's 5.8% drop made it the ASX 200's worst-performing component.

Santos, Oil Search and Woodside all fell as the energy sector shed 1.1%, turning negative for the week.

Banking stocks pared some of the overall losses, with NAB adding 4.4% amid favourable analyst responses to the previous day's FY result.

Gold futures rose 0.9% to $US1847.70 an ounce; Brent crude dropped 2.8% to $US82.41 a barrel; Iron ore was down 3.7% US$88.90.

The yield on the Australian 10-year bond fell to 1.72%; The US 10-year Treasury note rose to 1.56.

Asia

Chinese stocks finished lower, weighed by the auto sector and an unexpectedly high jump in inflation. The Shanghai Composite Index dropped 0.4% to 3492.46, while the Shenzhen Composite Index and the ChiNext Price Index gave up 0.3% each. Electric-vehicle makers and suppliers tracked Tesla's slump, with BYD shedding 3.3% and battery maker CATL down 2.3%.

"The higher-than-expected inflation data out of China reinforces ongoing concerns around global inflationary pressures, driving some risk-off moves ahead of the U.S. CPI today," IG analyst Jun Rong Yeap says. The latest data could put a cap on how much the Chinese central bank can loosen monetary policy, he says.

Hong Kong stocks closed higher for a second session, with the benchmark Hang Seng Index adding 0.7%. Mainland property developers led gains, after state media reported that China may ease financing rules for the real estate sector. The recovery was despite steep losses for developer Fantasia Holdings, which dived nearly 37% in today's trading, after lifting a monthlong trading halt. The plunge came after the company said some lenders were asking for loans to be repaid early, following its surprise bond default last month.

The Nikkei Stock Average closed 0.6% lower at 29106.78, with declines led by tire companies. Worries over China's property sector is weighing on overall sentiment in the Asian markets, forex broker Oanda said.

Europe

European stocks edged higher as a jump in US inflation sent Wall Street lower. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies rose 0.2%.

In London, The FTSE 100 index closed The FTSE 100 climbed 0.9% on Tuesday, helped by UK television broadcaster ITV's results as well as positivity from the retail sector, with Marks & Spencer in particular upgrading its guidance.

North America

US stocks fell Wednesday after data showing that inflation hit a three-decade high added to investors' concerns about price pressures in the global economy.

The benchmark S&P 500 dropped 0.8%. The blue-chip Dow Jones Industrial Average lost 0.7%, while the tech-heavy Nasdaq Composite Index declined 1.7%.

Fresh data showed that US inflation rose in October to its highest level since 1990, driven by supply shortages and strong consumer demand. The annual rate of inflation stood at 6.2%.

Yields on shorter-term US government bonds rose, suggesting bond investors expect the increases in consumer prices may prompt the Federal Reserve to more quickly raise interest rates. The yield on the two-year Treasury note rose to 0.503%, from 0.409% Tuesday. The yield on the benchmark 10-year US Treasury note, meanwhile, rose to 1.558%, from 1.431%. Yields rise as bond prices fall.

Stocks have charted a rapid course higher in recent weeks, boosted by a strong batch of earnings. Markets are showing "stubborn resilience" despite inflation concerns and the prospect of tightening monetary policy, said Aoifinn Devitt, chief investment officer at Moneta Group.

"Inflation is very much here, and arguably not transitory, but markets don't seem to be too concerned about that," she said.

The inflation data shows that companies have succeeded in passing price increases on to consumers, said Katie Nixon, chief investment officer at Northern Trust Wealth Management.

"Large public companies have pricing power," she said. "Inflation is not necessarily a bad thing for stocks, particularly if the Fed doesn't react."

Energy stocks were the worst-performing sector in the S&P 500, dropping 2.8% as oil prices declined. Technology stocks also fell, with Apple shares down 1.9% and Microsoft shares down 1.5%. Rising yields tend to hurt tech stocks, which often trade at high prices based in part on projections of growth far into the future.

"The higher interest rates are, the less valuable those future cash flows, those future earnings, are for growth stocks," said Don Calcagni, chief investment officer at Mercer Advisors.

Among individual stocks, shares of Coinbase Global fell 8.1% after the cryptocurrency exchange reported earnings late Tuesday that missed analysts' expectations. DoorDash shares rose 11.6% after the company said it had agreed to buy Finnish food-delivery firm Wolt Enterprises in a deal valued at over $8 billion.

Tesla shares steadied after their recent declines and were recently up 4.3%. The electric-vehicle maker's shares had declined 12% Tuesday, extending Monday's losses after Chief Executive Elon Musk signalled he might sell a big chunk of his stock.

Shares of electric-vehicle startup Rivian Automotive jumped in their market debut, rising nearly 30% from the stock's initial public offering price.

While earnings season has helped lift indexes, investors are still demanding safe-haven assets, Ms. Devitt said. "Even when markets are raging, people are not giving up on bonds. There is a slight lack of conviction in terms of how long this can last," she said.

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

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