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Global Market Report - 17 August

Lewis Jackson  |  17 Aug 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to open higher after Wall Street notched record highs and new data showed the Chinese economy slowed faster than expected in July.

The Australian SPI 200 futures contract was up 9 points or 0.12 per cent at 7,509 near 7.30 am Sydney time on Tuesday, suggesting a positive start to trading.

The benchmark S&P 500 and the Dow industrials hit record highs as investors moved into defensive sectors and stocks recovered from losses earlier in the session, shaking off glum economic data out of China.

The Dow Jones Industrial Average rose 110.02 points, or 0.31 per cent, to 35,625.4, the S&P 500 gained 11.71 points, or 0.26 per cent, to 4,479.71 and the Nasdaq Composite dropped 29.14 points, or 0.2 per cent, to 14,793.76.

The Australian dollar was buying 73.36 US cents near 7.30am AEST, down from 73.40 US cents at Monday’s close.

Locally, mixed reaction to the latest company earnings and the extension of coronavirus lockdowns have put a dampener on the ASX to start the week.

Investors sent four big name stocks plunging by at least seven per cent or more after publishing earnings on Monday.

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These were Beach Energy, Bendigo Bank, Lend Lease and Seven West Media.

The biggest of these, property giant Lend Lease, gave an earnings outlook which reflected global concerns about the spread of the virus' Delta variant.

Lend Lease said lockdowns would hamper construction this financial year and lead to a low point for profitability.

Shares closed lower by 7.55 per cent to $11.64.

Bendigo Bank reported full-year cash profit rose 51 per cent but revealed pressure was building from low interest rates.

Extended lockdowns for the ACT and Melbourne will also put pressure on customers with loans.

A higher final dividend was not enough to satisfy investors who sent shares lower by almost 10 per cent to $10.00.

Losses for the miners, energy providers and most of the banks ensured the market's biggest loss for more than two weeks.

The benchmark S&P/ASX200 index closed lower by 46.4 points, or 0.61 per cent, to 7582.5.

The All Ordinaries closed down 48.1 points, or 0.61 per cent, to 7849.6.

IG Markets analyst Kyle Rodda said there were renewed concerns for global economic growth due to the Delta spread.

A raft of Chinese data published on Monday showed a slowdown in the world's second biggest economy.

Figures on July retail sales, industrial production and urban investment all missed forecasts.

The trend may be likely to get worse given the tightening in coronavirus restrictions.

Mr. Rodda said the figures rammed home the idea that the Chinese economy was slowing.

There were pockets of optimism in the ASX however.

BlueScope Steel and JB Hi-Fi's full-year profits were well received.

BlueScope revealed a $500 million share buyback as well as a special dividend. Its shares were higher by 0.63 per cent to $25.65.

JB Hi-Fi posted a 67 per cent jump in profit and lifted its dividend as customers forced to work from home spent on home appliances and technology.

The retailers' shares were up 2.5 per cent to $49.53.

BHP and Woodside confirmed they are discussing the sale of BHP's petroleum business.

BHP shareholders would be paid in Woodside shares, if a sale eventuates.

BHP shares were up early and ended closing lower by 1.4 per cent to $52.07.

The miner fared better than its major rivals. Fortescue lost 1.93 per cent to $21.87. Rio Tinto fell 1.55 per cent to $118.49.

Woodside shares were down 4.55 per cent to $21.18 amid the downbeat mood for energy.

Sydney Airport rejected a revised takeover bid by an expanded group of infrastructure investors, saying the new offer still undervalues the company.

The operator of Australia's biggest airport said it had received a revised takeover proposal from the investors with an indicative price of $8.45 a share, or $22.80 billion.

Talks may yet continue between the two groups.

Airport shares closed lower by 0.65 per cent higher at $7.70.

Among the big four banks, ANZ fared worst. Shares were down 2.71 per cent to $28.73.

Spot Gold was up 0.4% at $US1786.95 an ounce; Brent crude was down 1.3% at $US69.68 a barrel; Iron ore was up 0.9 per cent to $US163.52.

The yield on the Australian 10-year bond closed at 1.16 per cent.

Asia

At the close, China's Shanghai Composite index was up 0.03 per cent at 3,517.34.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 0.8 per cent at 26,181.46.

Japan's Nikkei 225 was down 1.62 per cent at 27,523.19.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down at 473.45.

The German DAX was up at 15,925.73.

North America

The benchmark S&P 500 and the Dow industrials hit record highs as investors moved into defensive sectors and stocks recovered from losses earlier in the session, shaking off glum economic data out of China.

The Dow Jones Industrial Average rose 110.02 points, or 0.31 per cent, to 35,625.4, the S&P 500 gained 11.71 points, or 0.26 per cent, to 4,479.71 and the Nasdaq Composite dropped 29.14 points, or 0.2 per cent, to 14,793.76.

Economically sensitive groups such as energy, materials and financials were weaker after China's factory output and retail sales growth slowed sharply and missed expectations in July, as new COVID-19 outbreaks and floods disrupted business operations.

But healthcare gained 1.1 per cent, the best-performing S&P 500 sector. Utilities and consumer staples -- also generally regarded as defensive sectors -- further bolstered market gains.

The S&P 500 and the Dow both posted record high closes on Monday for their fifth straight sessions, even after the major indexes were initially well in the red.

"There is just huge amounts of liquidity, massive amounts of cash out there, both on corporate balance sheets and in private investors' pockets, and because of that every tiny dip that there is, people look for bargains and they buy and they keep it buoyant," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

A rebound in the US economy including a stellar second-quarter corporate earnings season along with accommodative monetary policy has underpinned positive sentiment for equities.

The S&P 500 has gained 100 per cent since its March 2020 low.

"The overall environment remains supportive of risk assets, so there is a gravitational pull upward for stocks," said Kristina Hooper, chief global market strategist at Invesco.

Investors are looking for signs about when the Federal Reserve will rein in its easy money policies, with minutes from the central bank's latest meeting due on Wednesday.

A resurgence in COVID-19 cases and the impact on the economy are keeping markets on edge, with investors watching earnings reports from major retailers due later in the week.

Investors were also digesting news from Afghanistan, where thousands of civilians desperate to flee the country thronged Kabul airport after the Taliban seized the capital.

In company news, Tesla shares fell 4.3 per cent after US auto safety regulators said they had opened a formal safety probe into the company's driver assistance system Autopilot after a series of crashes involving emergency vehicles.

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

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