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Global Market Report - 15 November

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

The ASX is set to edge lower despite a positive lead from Wall Street on Friday.

The Australian SPI 200 futures contract was down 3 points at 7,435 near 8.00 am AEST on Monday, suggesting a negative start to trading.

Major US stock indexes rose Friday but finished the week with slim losses, snapping a five-week winning streak.

The S&P 500 0.7% on Friday. The Dow Jones Industrial Average moved up 0.5%. The tech-heavy Nasdaq Composite Index advanced 1%.

All three benchmarks closed near their highs for the day but ended the week with losses of less than 1%.

The Australian dollar was buying 73.28 US cents near 8.00am AEST, up from the previous close of 72.92. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 89.12.

Locally, the S&P/ASX 200 closed 0.8% higher at 7443.0, as miners rallied. Almost all sectors gained ground, with only healthcare stocks closing lower, down 0.2%.

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Ansell finished 2.6% lower, floundering after it told investors yesterday that it had faced supply-chain interruptions. Resmed fell 1.6% and Ramsay Healthcare lost 1.3%.

Miners dominated with Rio Tinto, BHP and Fortescue up 3.4%, 2.8% and 1.9%, respectively. Link rose 3.5% after receiving a proposal for its Banking, Credit Management business.

AusNet climbed 0.8% after it was confirmed that the Federal government has no objection to Brookfield Asset Management's proposed acquisition of AusNet.

Reserve Bank leaders will be speaking in public this week as inflation concerns build in markets. Assistant Governor Luci Ellis is appearing at a parliamentary committee today. Governor Philip Lowe will give a speech on inflation trends tomorrow. 

The ASX 200 lost 0.2 % for the week.

Gold futures rose 0.25% to $US1868.50 an ounce; Brent crude fell 0.8% to $US82.17 a barrel; Iron ore was up 3.1% US$89.69.

The yield on the Australian 10-year bond fell to 1.79%; The US 10-year Treasury yield slipped to 1.56%.

Asia

Chinese stocks finished mixed on Friday as losses by the property sector offset gains among industrial shares. Despite signs of potential policy easing for developers, confidence among home buyers and financial institutions still appears weak and it will take time to be rebuilt, Ping An Securities says. The Shanghai Composite Index rose 0.2%, the Shenzhen Composite Index was 0.4% higher and the ChiNext Price Index dropped 0.1%.

Hong Kong stocks extended a rebound for a fourth consecutive day. The benchmark Hang Seng Index rose 0.3% to hit its highest closing so far this month. Chinese property developers continued to track up on potential financing easing. Longfor rose 2.5% and China Resources Land was up by 2.1%.

The Nikkei Stock Average closed 1.1% higher supported by gains in auto stocks. Toyota Motor was among the best performers, rising 2.4% after it projected global production to rise in December from a year earlier. Honda Motor rose 1.3% and Nissan Motor was 0.8% higher.

Europe

European markets posted gains for the week, with the luxury sector in the lead. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies rose 0.3% on Friday to end the week 0.68% higher.

In London, The FTSE 100 index closed down 0.4%. Covid vaccine maker AstraZeneca fell 6.8% after posting third-quarter results that missed expectations.

North America

Major US stock indexes rose Friday but finished the week with slim losses, snapping a five-week winning streak.

The S&P 500 0.7% on Friday. The Dow Jones Industrial Average moved up 0.5%. The tech-heavy Nasdaq Composite Index advanced 1%.

All three benchmarks closed near their highs for the day but ended the week with losses of less than 1%.

The S&P fell 0.3% this week, interrupting a streak of gains that kicked off when US companies began to report strong earnings in mid-October. The Dow and Nasdaq slipped 0.6% and 0.7%, respectively, for the week.

Stocks retreated after data showed inflation rose to a three-decade high in October and broadened to an array of goods and services. Investors have been focused on whether worker shortages will keep pushing wages higher, which could feed back into inflation. Fresh data on Friday showed that the US economy has had more than 10 million open jobs since June. The so-called quits rate was 3% in September, a record.

Corporate executives have also been citing inflation on earnings calls -- the term has cropped up on calls of 285 companies in the third quarter, the most since at least 2010, according to FactSet.

This fall's stock rally included the S&P 500's longest run of record highs since 1997. It was driven by expectations that central banks would keep rates at low levels, said Edward Park, chief investment officer at Brooks Macdonald. "The more we get these very high CPI prints the more that is brought into question," he said, referring to the consumer-price index.

Signs that the flare-up in inflation will last longer than central bankers had forecast prompted traders to bet the Federal Reserve would raise borrowing costs by summer. Traders in federal-funds futures have been assigning a more-than 70% probability to a rate rise by June, according to CME Group, up from just over 50% a week ago.

The yield on benchmark 10-year Treasury notes rose to 1.583% Friday, from 1.451% last week, the biggest one-week yield gain in around a month. Yields rise as bond prices fall. The yield on the two-year Treasury note, which is typically more sensitive to expectations for monetary policy, rose to 0.522% this week and finished its largest one-week yield gain since October 2019.

Investors stepped back into the stock market toward the end of the week, stoking a rally in major indexes. Some investors said they remained optimistic about the economy despite a recent stretch of turbulence and high inflation figures.

"We do believe that there's still a fair amount of gas in the tank economically ," said Giorgio Caputo, a portfolio manager at J O Hambro Capital Management.

Investors were focused on electric-vehicle makers in trading throughout the week, and there have been big swings in those companies.

Lordstown Motors dropped $1.21, or 18%, to $5.68 Friday after the company reported a loss for the third quarter. Rivian Automotive, which went public this week, rose $6.96, or 5.7%, to $129.95. Rivian has jumped this week, soaring above the $78 initial offering price set Tuesday.

In corporate news, Johnson & Johnson shares rose 1.2% after The Wall Street Journal reported that the healthcare company intended to split in two.

Some analysts have said that they expect stocks to keep rising through the end of the year, building on their strong gains. And bullish options activity has picked up lately, with many traders positioning for a rally in coming weeks.

"I think what you'll see is some modest appreciation" in stocks through the end of the year, said Michael Underhill, chief investment officer at Capital Innovations.

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

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