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Global Market Report - 16 August

Lewis Jackson  |  16 Aug 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to start the week lower. Wall Street edged higher Friday while August data showed US consumer sentiment slumped to its lowest level in a decade.

The Australian SPI 200 futures contract was down 9 points or 0.1 per cent at 7,536 near 7.00 am Sydney time on Monday, suggesting a negative start to trading.

US stocks have held near the unchanged mark and notched a second straight week of gains as a climb in Walt Disney shares boosted the Dow Industrials and S&P 500 but a sharp drop in consumer sentiment kept the investor optimism in check.

The Dow Jones Industrial Average rose 13.22 points, or 0.04 per cent, to 35,513.07, the S&P 500 gained 6.91 points, or 0.15 per cent, to 4,467.74 and the Nasdaq Composite added 6.02 points, or 0.04 per cent, to 14,822.29.

The Australian dollar was buying 73.67 US cents near 7.20am AEST, up from 73.42 US cents at Friday’s close.

Locally, investors pushed the ASX to a record close as they look for more bumper payouts next earnings week.

Shares in biotech CSL rose by more than two per cent prior to its full-year earnings on Wednesday, while consumer discretionaries were also popular.

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The big banks were almost all higher. The Commonwealth was the exception as investors trimmed its share price from the record reached after Wednesday's full-year earnings.

The benchmark S&P/ASX200 index closed higher by 40.7 points, or 0.54 per cent, to 7628.9 on Friday.

The All Ordinaries closed up 37.2 points, or 0.47 per cent, to 7897.7.

ThinkMarkets analyst Carl Capolingua had been watching earnings news and was impressed by the share buybacks and higher dividends.

The Commonwealth Bank, IAG, Rio Tinto and Telstra were some of those to deliver better shareholder rewards.

Mr Capolingua expected many payouts would find their way back to the market.
"What are you going to do with that cash," he said.

"You can't go overseas. You've probably already bought a new car. You don't want your money earning next to zero per cent in a bank.

"So if you think stocks are doing well now, wait for when that cash starts to find a home.
"I look at the ASX200 and think there is not much between us and 8000 points."

Mr Capolingua said coronavirus lockdowns plaguing the nation were the main drawback for momentum.

Still, the market gained 1.2 per cent for the week.

The main weights on Friday were the big miners.

China's plans to limit steel production for environmental reasons continues to lower demand and the price for iron ore.

Investors will be keen to hear what BHP leaders say about the iron ore outlook when they give full-year earnings on Tuesday.

BHP shares sunk by 0.34 per cent to $52.81. Iron ore specialist Fortescue lost almost one per cent to $22.30. Rio Tinto was little changed at $120.36.

Stocks in the US have helped ASX momentum.

The Dow and S&P 500 had record closing tallies for the third consecutive day.

The number of Americans filing claims for unemployment benefits fell again last week as the economic recovery from the pandemic continued.

Investors next week will examine the minutes of the US Federal Reserve board's previous meeting for hints on when the central bank may start easing monetary support.

In more ASX earnings reports, retailer Baby Bunting's sales dived more than six per cent in six weeks amid lockdowns.

The company has kept its stores open across Australia but told investors sales were down to start the financial year.

Baby Bunting had a full-year net profit after tax of $17.5 million and paid a higher dividend of 8.3 cents per share.

There were some share price records for bigger names.

Macquarie Bank shares traded for a record $164.89 and closed higher by 0.83 per cent to $164.48.

Wesfarmers, which owns Bunnings and Officeworks, had its shares hit a record $65.30. They closed up 0.93 per cent to $65.12.

Domino's Pizza shares jumped before its full-year earnings on Wednesday. Shares were up by more than two per cent to $127.62.

Spot Gold was up 1.5% at $US1779.75 an ounce; Brent crude was down 1% at $US70.59 a barrel; Iron ore was down 0.5 per cent to $US162.07.

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

Asia

At the close, China's Shanghai Composite index was down 0.24 per cent at 3,516.30.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 0.48 per cent at 26,391.62.

Japan's Nikkei 225 was down 0.14 per cent at 27,977.15.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up at 475.83.

The German DAX was up at 15,977.44.

North America

US stocks have held near the unchanged mark and notched a second straight week of gains as a climb in Walt Disney shares boosted the Dow Industrials and S&P 500 but a sharp drop in consumer sentiment kept the investor optimism in check.

The Dow Jones Industrial Average rose 13.22 points, or 0.04 per cent, to 35,513.07, the S&P 500 gained 6.91 points, or 0.15 per cent, to 4,467.74 and the Nasdaq Composite added 6.02 points, or 0.04 per cent, to 14,822.29.

Walt Disney rose in one of the biggest boosts to both the Dow and benchmark S&P after its profit topped market expectations as its streaming services added more customers than expected and its pandemic-hit US theme parks returned to profitability.

But a report from the University of Michigan dented optimism after it showed the university's preliminary consumer sentiment index fell to 70.2, its lowest level in a decade, suggesting that the Delta variant of the coronavirus was affecting consumers.

"That is concerning, the consumer is by all accounts in an extremely strong position but there is this kind of COVID fatigue that is really starting to wear on people's sentiment," said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky.

"Regardless of lockdown or full reopen, the consumer is healthy enough to spend and kind of keep the economy afloat, it will be different names and different sectors that become the beneficiaries of it."

The report sent the yield on the 10-year US Treasury note lower and in turn helped lift mega-cap growth names, such as Microsoft Corp, while online retail giant Amazon slipped.

US stocks have managed to slowly grind to new highs over the past few sessions as investor confidence in economic recovery was bolstered by a strong earnings season, the passage of a large infrastructure bill and data showing inflation may be increasing at a slower pace than feared.

After data from earlier this week showed consumer price increases slowed in July while producer prices posted their biggest annual rise in more than a decade, investors are now looking ahead to the meeting of central bankers in Jackson Hole, Wyoming, later this month for cues on policy.

In recent days, several Fed officials said it is nearly time for the US central bank to begin pulling back on its monetary support, including the tapering of its asset purchases.

DoorDash Inc rose, reversing earlier losses after the food-delivery firm's loss widened more than expected in the second quarter.

Airbnb Inc slipped after it flagged a hit to its current-quarter bookings by the Delta variant and a slowing pace of US vaccination.

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

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