Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Global Market Report - 16 December

Lewis Jackson  |  16 Dec 2021Text size  Decrease  Increase  |  
Email to Friend

Australia

The ASX is set to rise in line with Wall Street where markets cheered the Fed’s hawkish turn.

The Australian SPI 200 futures contract was up 37 points or 0.5% at 7350 near 8.00 am AEST on Thursday, suggesting a positive start to trading.

US stocks turned higher after Federal Reserve officials approved plans to wind down the central bank’s pandemic stimulus efforts more quickly. The move to respond to high inflation clears a path for interest-rate hikes beginning in the Northern hemisphere spring.

The S&P 500 rose 1.6%, reversing earlier declines and ending the day near a record. The Dow Jones Industrial Average added 1.1%. The Nasdaq Composite Index surged 2.15%.

The Australian dollar was buying 71.60 US cents near 8.00am AEST, up from the previous close of 71.04. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 90.22.

Locally, the S&P/ASX 200 closed 0.7% lower at 7327.1 with losses in almost every sector. The volatile tech sector was the worst performer, as the benchmark followed the negative lead from global equities.

Afterpay dropped 3.1% to a fresh seven-month low of A$88.00. The heavyweight financial and materials sectors, which together account for almost half of the ASX 200's market capitalization, fell 0.2% and 0.9%, respectively.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Bank stocks Commonwealth and Macquarie slipped, while gold stocks effectively gave back gains from the prior two sessions.

Travel stocks Qantas, Flight Centre and Webjet gave up between 0.6% and 0.95%, as the number of Australian Covid-19 cases continued to rise.

Gold futures added 0.4% to $US1779.50 an ounce; Brent crude advanced 1.1% to $US74.48 a barrel; Iron ore lost 0.8% to US$111.00.

The yield on the Australian 10-year bond rose to 1.55%, with the US 10-year Treasury yield higher at 1.46%.

Asia

Chinese shares closed lower after China released a series of mixed economic data for November. The Shanghai Composite Index fell 0.4%, the Shenzhen Composite Index declined 0.6% and the ChiNext Price Index gave up 0.9%. Weaker-than-expected retail sales weighed on sentiment in consumer stocks. Substantial pressure on both household consumption and private investment in China suggests that Beijing might need to provide more policy easing as it shifts its focus from derisking and deleveraging to stabilizing growth, HSBC says.

Japan's Nikkei Stock Average edged 0.1% higher amid a wait-and-see mode ahead of the FOMC meeting outcome later in the day. There are heightened expectations of a hawkish outcome, given stronger-than-expected jump in US producer prices released overnight, OCBC says. Toyota Motor advanced 3.6% after announcing plans to sell 3.5 million battery EVs annually by 2030.

Hong Kong shares fell amid declines by biotechnology companies after the Financial Times reported that the US was planning to place some Chinese companies involved in the sector on its investment and export blacklists. Wuxi Biologics slid 19% while Sino Biopharmaceutical lost 5.0%. Consumer stocks also fell, as sentiment was soured by weaker-than-expected China retail sales data for November. The Hang Seng Index closed 0.9% lower.

Europe

European stocks bounced in closing trade as investors awaited the much-anticipated US Federal Reserve policy statement and press conference, expected after markets close. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies rose 0.3%.

In London, the FTSE 100 ended down 0.6%.

North America

US stocks turned higher after Federal Reserve officials approved plans to wind down the central bank’s pandemic stimulus efforts more quickly. The move to respond to high inflation clears a path for interest-rate hikes beginning in the Northern hemisphere spring.

The S&P 500 rose 1.6%, reversing earlier declines and ending the day near a record. The Dow Jones Industrial Average added 1.1%. The Nasdaq Composite Index surged 2.15%.

Major indexes had pulled back this week as investors awaited the update from the US central bank. Some investors said that uncertainty about the Fed's next moves, rather than unhappiness with the potential changes in monetary policy, may have caused stocks to slip in recent sessions.

Accommodative monetary policy has helped propel US indexes to dozens of records since the arrival of the coronavirus pandemic sent stocks swooning in early 2020. But surging consumer prices have intensified the focus by Fed officials on curbing inflation. Investors are eager for the central bank to shed light on its plans for ending asset purchases and raising rates.

"There's a lot on the table for the Fed that investors are concerned about," said Alex Chaloff, co-head of investment strategies at Bernstein Private Wealth Management.

US inflation hit a 39-year high in November and producer prices also leapt.

"What's really coming in context is that inflation is hotter for longer than expected and the Fed is acknowledging it," said Esty Dwek, chief investment officer at FlowBank, before the Fed's afternoon announcement. "There's also the view that new variants are not just a concern for growth, but a concern for inflation."

Oil prices rose after the Fed statement Wednesday, with global benchmark Brent crude adding 1.1%. The International Energy Agency said Tuesday it had reduced its forecast for 2022 energy demand, due to Omicron, and cut its supply outlook.

In Europe, the energy crisis intensified, with benchmark European gas prices having jumped by more than a quarter over the past week. Falling temperatures and fears of disruption from the military buildup on Russia's border with Ukraine have sent prices higher.

More information is emerging about the Omicron variant. The first large real-world study showed that the efficacy of two Pfizer shots declined against the strain, both for infection and hospitalization. The variant accounts for about 3% of cases in the US

"Companies and consumers have become very good at adapting to these variants," Ms. Dwek said. The key risk is supply-chain disruptions lasting longer than expected because of China's zero-Covid policy, she added.

Retail sales rose by a seasonally-adjusted 0.3% in November, slowing from October's pace. Economists had predicted an 0.8% increase amid the holiday shopping season.

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

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend