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Global Market Report - 13 December

Lewis Jackson  |  13 Dec 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise after the S&P 500 defied rising prices to close at a record.

The Australian SPI 200 futures contract was up 13 points or 0.2% at 7366 near 7.45 am AEST on Monday, suggesting a positive start to trading.

US stocks finished the week higher after fresh inflation data raised investors' hopes that price increases may be nearing a peak.

The S&P 500 closed at a record Friday, advancing about 1%. The move marked the index's largest one-week percentage gain since the week ending 5 Feb. The tech-focused Nasdaq Composite Index was up 0.7%. The Dow Jones Industrial Average was up 0.6%.

US inflation hit an almost four-decade high in November. Labor Department figures showed that the consumer-price index—which measures what people pay for goods and services—rose 6.8% in November from a year ago. Price pressures have been driven by strong demand and supply-chain woes related to the pandemic, as well as higher energy prices.

The Australian dollar was buying 71.69 US cents near 8.00am AEST, up from the previous close of 71.48. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 89.93.

Locally, the S&P/ASX 200 closed 0.4% lower at 7353.5, paring gains as uncertainty over the impact of the Omicron Covid-19 variant continued to sway global equity markets.

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The health, energy and tech sectors led the losses, slightly offset by consumer and utilities stocks. Santos and Oil Search, which executed their merger on Friday, lost 2.1% and 2.4%, respectively, amid lower oil prices.

Eight of the nine largest health companies by market capitalization lost ground, led by CSL's 2.1% decline.

Afterpay dropped 4.4%, mirroring a similar decline earlier by its soon-to-be-parent Square.
The ASX 200 rose 1.55% for the week.

China's recent jump in iron-ore imports is unlikely to be a sign of increasing demand for the steelmaking commodity, according to Capital Economics on Friday. CE notes high and rising stockpiles at Chinese ports and tips "a swift downturn" for prices. Iron ore prices rebounded more than 10% to above the US$100 mark in late November.

Gold futures rose 0.5% to $US1784.80 an ounce; Brent crude added 1% to $US75.15 a barrel; Iron ore shed 0.5% to US$108.03.

The yield on the Australian 10-year bond fell to 1.63%, with the US 10-year Treasury yield edging up to 1.48%.

Asia

Chinese stocks closed the session mixed on Friday, weakening slightly from several sessions of gains. N-Securities said the market has likely faced some profit-taking pressure after the recent gains. The benchmark Shanghai Composite Index lost 0.2%, while the Shenzhen Composite Index edged up 0.1%. The ChiNext Price Index, a measure for emerging industries, rose 0.2%. Metal producers and media firms were among the top gainers, while the oil sector led losses.

Japanese stocks closed broadly lower as concerns continued about the Omicron variant and Fed's potential shift to tightening. The Nikkei Stock Average fell 1.0%.

Hong Kong stocks turned down, as concerns about Omicron-related restrictions and heavily indebted Chinese developers rattled investor nerves. Tech and casino shares took a hit. NetEase lost 2.3%, Tencent Holdings dropped 1.9% and Alibaba Group slipped 1.8%. Sands China declined 3.6% and Galaxy Entertainment retreated 2.9%. The Hang Seng Index fell 1.1% but was up 1.0% for the week.

Europe

European stocks fell Friday as consumer prices in the US jumped to the highest level in decades. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies slipped 0.3% on Friday but closed the week 2.8% higher.

In London, the FTSE 100 closed 0.4% lower but held on to 2.4% for the week. Investors appear to be pausing for breath following big gains in the first half of the week, said Chris Beauchamp, IG Group's chief market analyst. While Wall Street struggled to hold on to all of its gains after the publications of the consumer price index, European indices have remained in the red, he said.

"It looks like investors continue to digest the bounce from earlier in the week, and with multiple central banks meeting next week, traders cannot afford to become too enthused with the holiday spirit just yet," Mr. Beauchamp said.

North America

US stocks finished the week higher after fresh inflation data raised investors' hopes that price increases may be nearing a peak.

The S&P 500 closed at a record Friday, advancing about 1%. The move marked the index's largest one-week percentage gain since the week ending 5 Feb. The tech-focused Nasdaq Composite Index was up 0.7%,. The Dow Jones Industrial Average was up 0.6%.

Inflation hit an almost four-decade high in November. Labor Department figures showed that the consumer-price index—which measures what people pay for goods and services—rose 6.8% in November from a year ago. Price pressures have been driven by strong demand and supply-chain woes related to the pandemic, as well as higher energy prices.

"There's a bit of a relief in the market at the moment. It's in line with market expectations and in addition there's an expectation this is the peak of year-on-year inflation numbers," said Edward Park, chief investment officer at investment firm Brooks Macdonald.

The Federal Reserve will hold a 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. Investors are waiting to see whether officials signal a faster end to stimulus and how they characterize inflation.

Friday's movements suggest that "the market is now comfortable with this idea that the Fed is going to have a more accelerated path to tapering and other forms of policy normalization," said David Jilek, chief investment strategist at Gateway Investment Advisers LLC.

The Omicron variant has so far caused mostly mild cases of Covid-19 in a small group of largely vaccinated people in the US, federal data show. In recent weeks, stocks have swung back and forth amid conflicting headlines on the Omicron variant and mixed signals on the health of the economy. 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.

David Kelly, chief global strategist at J.P. Morgan Asset Management, said 2022 could see less uncertainty about the economy and the pandemic, as the economy has adapted to the pandemic's developments.

"Covid will have a diminishing impact on markets because Covid will have a diminishing impact on the economy," Mr. Kelly said.

In individual stocks, Oracle shares gained 16%, or $13.86, to $102.63 after the database giant reported second-quarter results that beat estimates. Broadcom shares added 8.3%, or $48.26, to $631.68 after the company posted better-than-expected results and strong January-quarter guidance, raised its dividend and announced a stock-repurchase program.

Chewy shares shed 8.1%, or $4.54, to $51.76 after the online pet products retailer posted disappointing results, reflecting higher-than-expected supply chain and labor costs.

Tesla and SpaceX Chief Executive Elon Musk late Thursday said he might quit jobs, without providing details about which positions he might relinquish or how serious he was about it. He said on Twitter he was "thinking of quitting my jobs & becoming an influencer full-time wdyt," using an abbreviation for "What do you think?" Tesla shares rose 1.3%, or $13.23, to $1,017.03 Friday.

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

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