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Global Market Report - 12 August

Lewis Jackson  |  12 Aug 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to edge higher as the Dow and S&P 500 hit new highs and data showed the pace of US inflation moderated in July.

The Australian SPI 200 futures contract was up 10 points or 0.13 per cent at 7,493 near 7.00 am Sydney time on Thursday, suggesting a positive start to trading.

The Dow Jones Industrial Average and S&P 500 have closed at record levels as data indicated US inflation growth may have peaked while sectors tied to economic growth advanced on the heels of the passage of a large infrastructure bill.

The Dow Jones Industrial Average rose 221.22 points, or 0.63 per cent, to 35,485.89, the S&P 500 gained 11.11 points, or 0.25 per cent, to 4,447.86 and the Nasdaq Composite dropped 23.91 points, or 0.16 per cent, to 14,764.18.

The Australian dollar was buying 73.72 US cents near 7.30am AEST, up from 73.26 US cents at Wednesday’s close.

Locally, a bumper Commonwealth Bank payout prompted investors to snap up bank stocks as they helped the ASX to its sixth consecutive record high.

The bank's $6 billion buyback, part of an improved full-year cash profit, generated enough enthusiasm for shares to trade at a record $109.03 on Wednesday.

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The biggest player on the ASX had its shares close higher by 1.51 per cent to $108.17.

Most of the big banks have indicated they will return to shareholders funds earlier set aside for COVID-19 losses. All the big banks closed higher.

There was just as much demand for a few other categories.

Investors raised the mining giants despite an overnight slide in the price of their key export, iron ore.

Energy shares were also up after losses for the past two days.

The benchmark S&P/ASX200 index closed higher by 21.7 points, or 0.29 per cent, to a record 7584.3.

The index climbed as high as 7615.1 during trade.

The All Ordinaries closed up 24.2 points, or 0.31 per cent, to 7854.6.

In the US, markets closed mostly lower prior to consumer inflation data due soon.

Deep Data Analytics chief executive Mathan Somasundaram said the figures would influence US Federal Reserve officials' decision on when to ease support measures for the US economy, such as bond buying.

Mr Somasundaram said any easing of support measures would be followed by higher interest rates.

US inflation surged earlier in the year as the economy rebounded from pandemic lows.

Mr Somasundaram said if the inflation figures beat expectations (4.5 per cent for the year), investors would expect Fed Reserve officials to start winding back support.

He said investors would then sell stocks, which could cause the market to drop.

In Australia, coronavirus lockdowns continue plaguing trade.

Melbourne's lockdown will be extended by a week after Victoria recorded another 20 infections.

People in Cairns are ready to exit a short lockdown, while millions in NSW must stay at home until the end of the month.

Insurer IAG wants to stop more businesses claiming for COVID-19 damage, after it posted a full-year loss.

The company behind CGU and NRMA is among an industry group challenging in the courts whether business may claim earnings lost due to the pandemic on insurance.

IAG did however reinstate a final dividend, 13 cents per share.

Its stocks fell 2.65 per cent to $5.14.

Among the big miners, BHP was best and gained 1.47 per cent to $52.52. Rio Tinto was better by 1.29 per cent to $129.14. Fortescue was little changed at $22.52.

Stock market software vendor Iress jumped 5.78 per cent to $15.19 after an improved takeover offer.

EQT Fund Management has offered to pay $15.91 for all shares before franking credits.

EQT would also ensure an interim payout of up to 16 cents per share.

Iress said its board will recommend the offer to investors.

Lake Resources, which mines lithium to make electric car batteries, might have found backers for a project in Argentina.

UK export agencies have put forward their interest in providing most of the money required to produce lithium from the Kachi project.

Shares were up 9.57 per cent to 63 cents.

Spot Gold was up 1.4% at $US1752.79 an ounce; Brent crude was up 1.0 per cent at $US71.34 a barrel; Iron ore was up 1.9 per cent to $US165.48.

The yield on the Australian 10-year bond closed at 1.22 per cent.

Asia

At the close, China's Shanghai Composite index was up 0.08 per cent at 3,532.62.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed up 0.20 per cent at 26,660.16.

Japan's Nikkei 225 was up 0.65 per cent at 28,070.51.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up at 474.32.

The German DAX was up at 15,826.09.

North America

The Dow Jones Industrial Average and S&P 500 have closed at record levels as data indicated US inflation growth may have peaked while sectors tied to economic growth advanced on the heels of the passage of a large infrastructure bill.

The Dow Jones Industrial Average rose 221.22 points, or 0.63 per cent, to 35,485.89, the S&P 500 gained 11.11 points, or 0.25 per cent, to 4,447.86 and the Nasdaq Composite dropped 23.91 points, or 0.16 per cent, to 14,764.18.

The Labor Department said the consumer price index increased 0.5 per cent last month after climbing 0.9 per cent in June, the largest drop in month-to-month inflation in 15 months, easing concerns about the potential for runaway inflation.

"Certainly, the numbers show you more deceleration," said Steven Ricchiuto, US chief economist at Mizuho Securities USA LLC in New York.

"This number is going to put the Fed in a little bit of a quandary because they've gone out with all this rhetoric about tapering, about tightening rates, about being defensive and the inflation numbers aren't quite where they should be but they're certainly not showing that this thing is out of control."

Investors have been closely attuned to inflation pressures in recent months, concerned that a continual rise in prices could push the Federal Reserve to begin to scale down its ultra-accommodative policy stance earlier than anticipated.

Kansas City Federal Reserve President Esther George said on Wednesday that with the US economy growing at a robust pace, it signals the "time has come to dial back the settings".

In addition, Dallas Federal Reserve President Robert Kaplan said the central bank should announce its timeline to reduce its massive bondholding next month, with tapering to begin in October.

After the US Senate passed a $US1 trillion ($A1.4 trillion) bipartisan infrastructure package on Tuesday, an additional $US3.5 trillion budget plan full of new domestic programs was also approved by the legislative body but disagreements within the Democratic party threatened the size and scope of the spending.

Shares of equipment maker Caterpillar Inc advanced and was the biggest boost to the Dow and peer Deere & Co gained.

Also moving higher were construction materials supplier Vulcan Materials Co and steelmaker Nucor Corp, building on gains in the prior session on expectations of benefiting from infrastructure projects.

The materials and industrials were the best performing of the 11 major S&P sectors.

Technology stocks moved off earlier lows following a strong 10-year note auction, which sent yields lower after a five day streak of gains session amid optimism about a stronger economic reopening.

NortonLifeLock Inc jumped after the cybersecurity company agreed to buy London-listed rival Avast for up to $US8.6 billion.

Coinbase Global Inc climbed after the cryptocurrency exchange beat market estimates for second-quarter profit, helped by a near 38 per cent jump in trading volumes on a sequential basis.

Virgin Galactic plunged after Morgan Stanley downgraded the stock to "underweight" from "equal-weight," pointing to a prolonged period of no flights.

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

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