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Global Market Report - 15 December

Lewis Jackson  |  15 Dec 2021Text size  Decrease  Increase  |  
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Australia

The ASX is poised to fall in line with Wall Street as investors watch Omicron and the US Federal Reserve.

The Australian SPI 200 futures contract was down 38 points or 0.5% at 7342 near 8.00 am AEST on Wednesday, suggesting a negative start to trading.

US stocks ended lower Tuesday ahead of the Federal Reserve's two-day policy meeting, which is expected to end with the central bank signalling a faster wind-down of its bond-buying program.

The S&P 500 fell 0.7%. The index also declined Monday, pulling the gauge back from a record notched last week. The tech-focused Nasdaq Composite Index fell 0.3%, while the Dow Jones Industrial Average slipped 1.1%.

The Australian dollar was buying 71.01 US cents near 8.00am AEST, down from the previous close of 71.29. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.42.

Locally, the S&P/ASX 200 closed flat at 7378.4 after rallying from an early sell-off. The benchmark slipped 0.5% in the first few minutes of trade before steadily rising through the session.
The heavyweight materials and financial sectors gained 0.7% and 0.2%, respectively, while property trusts and communications stocks also rose.

Gold miners Northern Star, Gold Road, Perseus, Silver Lake, and St Barbara gained between 1.5% and 3.4% after gold prices firmed.

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Big banks ANZ, Westpac and Macquarie all rose. Retailer Woolworths shed 7.8% after outlining Covid-related costs, and Afterpay shares dropped 4.1% to a seven-month low of A$90.83, as its shareholders voted in favour of its acquisition by Block.

Gold futures slipped 1% to $US1770.90 an ounce; Brent crude gave up 1.3% to $US73.39 a barrel; Iron ore lost 2% to US$111.90.

The yield on the Australian 10-year bond fell to 1.53%, with the US 10-year Treasury yield rose to 1.44%.

Asia

Chinese stocks closed lower, weighed by energy and auto stocks. The Shanghai Composite Index closed 0.5% lower, the Shenzhen Composite Index declined 0.1% and the ChiNext Price Index fell 0.1%. Energy stocks were among the worst performers, following news of China's first Covid-19 Omicron variant case. PetroChina fell 2.0%, China Coal Energy slid 3.4% and Sinopec declined 1.4%. Auto stocks were also pressured. Great Wall Motor slipped 3.7% and SAIC Motor was 2.1% lower. Investors await China data, including industrial production, retail sales and fixed asset investment, due later this week.

Japan's Nikkei Stock Average fell 0.7%, dragged lower by aviation and consumer-related stocks amid concern over the spread of Covid-19's Omicron variant. Japan Airport Terminal shed 4.2%, Japan Airlines dropped 2.8% and ANA Holdings closed 2.6% lower. Meanwhile, Toyota Motor rose 2.1% ahead of the company's presentation today on its battery electric vehicle (EV) strategy.

Hong Kong shares closed lower as property-related stocks fell amid renewed concerns that more companies could seek repayment extensions. Shimao Group fell 20% while Shimao Services declined 32%. Another notable decliner was Weibo, whose H-shares were down 9.6%, after it was fined by a Chinese regulator for publishing illegal content. The Hang Seng Index ended 1.3% lower while the Hang Seng Tech Index fell 2.3%.

Europe

European equities fell as the prospect of monetary tightening looms at Wednesday’s US Federal Reserve meeting. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies fell 0.8%.

In London, the FTSE 100 ended Monday down 0.2% with Rentokil Initial leading the losers. Shares in the UK pest-control services group dropped 12% after it said it planned to buy Terminix Global Holdings in a deal valuing the US-based rival at US$6.7 billion.

North America

US stocks ended lower Tuesday ahead of the Federal Reserve's two-day policy meeting, which is expected to end with the central bank signalling a faster wind-down of its bond-buying program.

The S&P 500 fell 0.7%. The index also declined Monday, pulling the gauge back from a record notched last week. The tech-focused Nasdaq Composite Index fell 0.3%, while the Dow Jones Industrial Average slipped 1.1%.

Investors are watching to see if the uptick in Covid-19 cases and the new Omicron variant change how quickly the Fed will end easy-money policies that have helped fuel this year's stock rally. The central bank, which concludes its meeting Wednesday, could also signal that it will raise interest rates sooner than expected next year to try to curb inflation.

"It's a fairly challenging backdrop for the market," said Hani Redha, a portfolio manager at PineBridge Investments. "Things have been fairly directionless in the lead-up to this. The market wants to see confirmation of what they're going to do."

Investors seem to be selling off assets that have been experiencing higher valuations, such as technology and consumer-discretionary stocks, and could be hurt more by higher interest rates, said Sam Stovall, chief investment strategist at CFRA Research.

"Investors were under the impression that Fed [Chairman Jerome] Powell has been sounding increasingly hawkish," Mr. Stovall said. "Investors are trying to lock in the profits now before the end of the year."

Inflation worries continue to be top of mind for many investors. The Labor Department said Tuesday that its producer-price index rose 0.8% in November from the prior month. It measures the prices that suppliers charge businesses and other customers.

Increased inflation is likely to persist into 2022, said Joseph Amato, president of Neuberger Berman Group LLC. Mr. Amato said 2022 is slated to be a transition year in which returns in the equity market might not be as strong as they were in the past few years.

"You're going from massive and long-term monetary stimulus -- and more recently fiscal stimulus -- to a period where you're going to see stimulus coming out of the system," Mr. Amato said.

Going into 2022, small-cap stocks are likely to be more insulated against a stronger dollar that could result from higher interest rates and inflation, since much of those companies' revenues are domestic, said Liz Young, SoFi's head of investment strategy.

"They're not as exposed to that foreign-exchange risk that multinational, large-caps would be," Ms. Young said.

The WSJ Dollar Index, which tracks the greenback against a basket of currencies, rose 0.2%.

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. On Tuesday, Pfizer said preliminary laboratory tests gave encouraging signs that the company's experimental Covid-19 pill for the newly infected could work against Omicron. Pfizer shares rose 0.5%.

Shares of meme stocks GameStop and AMC Entertainment were volatile after early declines. AMC rose 5.4% and GameStop gained 7.8%. Both companies reported news last week that hurt their share prices: GameStop posted a widening quarterly loss and AMC disclosed that its chief executive and chief financial officer had sold a combined $10.2 million of stock.

Tesla shares slipped 0.8% after CEO Elon Musk sold more stock Monday. Dogecoin jumped as much as 40% after Mr. Musk tweeted early Tuesday that Tesla would make some merchandise buyable with the cryptocurrency.

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

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