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Global Market Report - 16 June

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

Australian shares set to edge lower while Wall Street ended down as new economic data showed rising producer prices and falling retail sales in the US.

The Australian SPI 200 futures contract was down 12 points or 0.16 per cent to 7,377 near 7.30 am Sydney time on Wednesday, suggesting a negative start to trading.

Wall Street's main indices closed lower as data showing stronger inflation and weaker US retail sales in May spooked already-jittery investors awaiting the results of the Federal Reserve's latest policy meeting.

The Dow Jones Industrial Average fell 94.42 points, or 0.27 per cent, to 34,299.33, the S&P 500 lost 8.56 points, or 0.20 per cent, to 4,246.59 and the Nasdaq Composite dropped 101.29 points, or 0.71 per cent, to 14,072.86.

The Australian dollar was buying 76.89 US cents near 7.30am AEST, down from 77.06 at Tuesday’s close.

Locally, Commonwealth Bank and CSL shares have helped the Australian share market to a record high but some analysts are tipping the fertile environment will be slowly withdrawn from next month.

The Commonwealth Bank, the biggest company on the ASX, hit a record price before Reserve Bank meeting minutes showed favourable conditions may soon be eased.

Biotech company CSL gained 1.71 per cent to $301.72. Healthcare shares were best and climbed almost two per cent.

A broad-based rally helped the benchmark S&P/ASX200 index close higher by 67.2 points, or 0.92 per cent, to 7379.5.

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The All Ordinaries closed up by 55.8 points, or 0.74 per cent, to 7633.

The Reserve Bank's minutes of its June meeting were a popular talking point.

The bank outlined the options for its July decision on whether to continue quantitative easing efforts of buying $100 billion in bonds every six months.

The options were: continuing at the same pace, scaling back or spreading the purchases over a longer period, and reviewing the program more frequently. Stopping was unlikely.

Burman Invest chief investment officer Julia Lee said the decision would influence how much money was moving around the economy.

She said share market conditions were artificially stimulated by quantitative easing and low rates.

NAB economists have tipped the central bank to ease to buying $75 billion in bonds over six months.

Yet easing that stimulus may have consequences.

Ms Lee said: "The markets seem like they're addicted to low-cost funding, so when you pull back those conditions, there can be a violent reaction".

US markets overnight rose to record heights.

The US Federal Reserve has a two-day meeting this week and investors will look for signs that bond buying may be tapered.

Rising inflation has become a chief concern in the US after the economy's rapid recovery from the pandemic.

On the ASX, analytics software vendor Nuix chief executive Rod Vawdrey and chief financial officer Stephen Doyle are leaving.

Mr Vawdrey will continue in his role until full-year earnings are revealed, while Mr Doyle leaves this month.

Nuix, which joined the ASX last year, in February reduced its full-year earnings forecast and shares have steadily fallen.

Shares were up 4.15 per cent to $2.76.

US investment group Oaktree improved its offer to buy James Packer's shares in Crown Resorts.

Oaktree increased its offer from $3 billion to $3.1 billion and made other changes in its bid for Consolidated Press Holdings' shares.

Crown shares were lower by 0.57 per cent to $12.15.

Insurer Suncorp has fielded about 3,750 claims from customers following the heavy rain and flash flooding that continues to plague large parts of Victoria.

The claims are mostly for property damage since winds of up to 125km/h and heavy rain lashed the state from Wednesday night. Two people have died.

The insurer, which has brands AAMI, Apia and GIO, said claim numbers were expected to rise for weeks.

Shares were lower by 0.18 per cent to $11.20.

In banking, the Commonwealth hit a record $103.72 then closed higher by 2.06 per cent to $103.45.

Bank of Queensland will reduce the amount of money it sets aside for bad debts by $75 million.

Boss George Frazis said the improved economic outlook meant the bank could reduce its quarterly amount.

Shares were up 1.48 per cent to $8.90.

The big miners were all higher.

Rio Tinto was best and gained 1.23 per cent to $126.48. BHP and Fortescue rose by about half a per cent.

Spot Gold was down 0.5 per cent at $US1856.80 an ounce; Brent crude was up 1.5 per cent to $US73.94 a barrel. Iron ore was up 0.5 per cent at $US221.87.

The yield on the Australian 10-year bond closed at 1.50 per cent.

Asia

At the close, China's Shanghai Composite index was down 0.92 per cent at 3,556.56.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, was down 0.71 per cent, to 28,638.53.

Japan's Nikkei 225 Index closed up 0.96 per cent at 29,441.30.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up 0.11 per cent at 458.81.

The German DAX rose 0.36 per cent to 15,729.52.

North America

Wall Street's main indices closed lower as data showing stronger inflation and weaker US retail sales in May spooked already-jittery investors awaiting the results of the Federal Reserve's latest policy meeting.

The Dow Jones Industrial Average fell 94.42 points, or 0.27 per cent, to 34,299.33, the S&P 500 lost 8.56 points, or 0.20 per cent, to 4,246.59 and the Nasdaq Composite dropped 101.29 points, or 0.71 per cent, to 14,072.86.

Assurance from the Fed that rising prices are transitory and falling US Treasury yields have helped ease some concerns over inflation and supported US stocks in recent weeks.

All eyes are now on the central bank's statement at the end of its two-day policy meeting on Wednesday.

Data showed an acceleration in producer prices last month as supply chains struggled to meet demand unleashed by the reopening of the economy.

A separate report showed US retail sales dropped more than expected in May.

"There was a bit of a reaction to the economic data we got, which, for the most part, shows that the economy is starting to wean itself off stimulus, the recovery is slowing down a little and inflation is continuing to grow," said Ed Moya, senior market analyst for the Americas at OANDA.

"We're seeing some very modest weakness, and it'll be choppy leading up to the Fed decision. Right now, the Fed is probably in a position to show they are thinking about tapering but they're still a long way from actually doing it."

The Fed is likely to announce in August or September a strategy for reducing its massive bond buying program but will not start cutting monthly purchases until early next year, a Reuters poll of economists indicated.

The benchmark S&P 500, the blue-chip Dow Jones and the tech-focused Nasdaq have risen 13 per cent, 12.1 per cent and 9.2 per cent respectively so far this year, largely driven by optimism about an economic reopening.

However, the S&P 500 has been broadly stuck within a range, despite recording its 29th record-high finish of 2021 on Monday, versus 33 for all of last year.

Seven of the 11 major S&P sectors slipped.

Among them was communication services, which ended 0.5 per cent lower, having hit a record intraday high earlier in the session.

The largest gainer was the energy index, which rose 2.1 per cent on oil prices hitting multi-year highs on a positive demand outlook.

Exxon Mobil Corp had its best day since March 5, jumping 3.6 per cent.

In corporate news, Boeing Co gained 0.6 per cent after the United States and the European Union agreed on a truce in their 17-year conflict over aircraft subsidies involving the planemaker and its rival Airbus.

Having slumped 19 per cent on Monday, Lordstown Motors Corp shares rebounded 11.3 per cent after comments from the electric truck manufacturer's president on orders.

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

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