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Global Market Report - 17 December

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

Australian shares are on track to edge up as Wall Street falls amid a selloff in US tech.

The Australian SPI 200 futures contract was up 15 points or 0.2% at 7211 near 8.00 am AEST on Friday, suggesting a positive start to trading.

Major US stock indexes fell after major central banks around the world took steps to tighten monetary policy, reversing some of their big gains from the prior session.

The S&P 500 fell around 0.9%, with losses accelerating in the late afternoon. The Nasdaq Composite shed roughly 2.5% as tech stocks lagged behind the broader market. The Dow Jones Industrial Average dropped 0.1%.

The Australian dollar was buying 71.76 US cents near 8.00am AEST, up from the previous close of 71.71. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, extended its decline to 89.92.

Locally, the S&P/ASX 200 closed 0.4% lower at 7295.7, weighed by commodity stocks and biopharmaceutical company CSL. Despite a positive lead by US shares and better-than-expected local employment data, the benchmark closed at its lowest level in eight sessions.

The energy sector dropped 1.2% and materials edged 0.3% lower but health was the biggest loser, shedding 5.1% as CSL emerged from a trading halt. The stock shed 8.2% after completing its A$6.3 billion institutional placement.

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The financial sector was flat, while gains by WiseTech, Appen and Altium helped the tech sector add 2.1%.

The ASX 200 is down 0.8% so far this week.

Gold futures jumped 2% to $US1798.90 an ounce; Brent crude advanced 1.1% to $US74.69 a barrel; Iron ore added 4.6% to US$116.06.

The yield on the Australian 10-year bond rose to 1.56%, with the US 10-year Treasury yield slipping to 1.43%.

Asia

Chinese shares closed higher, with sentiment in Asian markets supported by the US Federal Reserve's decision to speed up its tapering. The Shanghai Composite Index was 0.8% higher, the Shenzhen Composite Index rose 0.6% and the ChiNext Price Index gained 0.7%. Energy stocks led gains, driven by signs of support from the government as it seeks to stave off fuel shortages over the winter. Yankuang Energy Group jumped 10% after the company unveiled plans to expand its coal-mining business.

Japanese stocks ended broadly higher, led by gains in electronics and auto stocks, as the Fed's signal for earlier rate increases weakened the yen. The Nikkei Stock Average rose 2.1%. Investors are focusing on any Covid-related developments and their policy implications ahead of the Bank of Japan's policy decision on Friday.

Hong Kong's Hang Seng Index finished 0.2% higher, snapping a four-session losing streak despite touching an intraday low last plumbed Sept. 25, 2020. Wuxi Biologics rebounded 11% from Wednesday's 19% decline, after the company said it will buy back up to US$500 million of shares. Chinese tech giants weakened, with Tencent Holdings 0.7% lower, Meituan dropping 1.4% and JD.com sliding 3.0%.

Europe

European stocks added to Wednesday’s gains as the European Central Bank struck a more dovish tone than its counterparts in the US and UK. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies rose 1.2%.

The European Central Bank kept its key interest rate on hold and said it wouldn't raise borrowing costs until inflation was durably above target. Diverging from the Fed, the ECB said it would phase out an emergency bond-buying program while boosting other stimulus measures.

In London, the FTSE 100 advanced 1.3% as the Bank of England became the first major central bank to raise rates since the pandemic began. The BoE raised its main interest rate to 0.25% from 0.1%, saying it was necessary to raise rates to bring inflation back to its 2% target.

North America

Major US stock indexes fell after major central banks around the world took steps to tighten monetary policy, reversing some of their big gains from the prior session.

The S&P 500 fell around 0.9%, with losses accelerating in the late afternoon. The Nasdaq Composite shed roughly 2.5% as tech stocks lagged behind the broader market. The Dow Jones Industrial Average dropped 0.1%.

US stocks jumped on Wednesday after the Fed decision, with the S&P 500 reversing earlier losses to notch a big one-day advance that put it right below its prior closing record. Some investors said markets had responded positively to the Federal Reserve's decision because it dialled down the risk of runaway growth in consumer prices. Though the central bank paved the way for three interest rate increases next year, analysts said that the Fed didn't come off as aggressive about raising rates as initially feared.

Still, concerns about the Fed's path and the spreading Covid-19 Omicron variant have stirred volatility lately and made some investors more cautious.

Since Thanksgiving, major indexes have been roiled with volatility stemming from the new Covid-19 variant and shifting Fed policy.

The tech sector has been particularly turbulent, as investors have rejiggered their outlooks on growth companies and fled some of the most crowded bets. The tech-heavy Nasdaq is notched its fourth consecutive session of moves greater than 1% in either direction. And though the S&P 500 has been hovering near its recent high, there have been big moves among individual stocks and sectors.

"There's a lot going on under the surface," said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors. "The underlying narrative and sentiment has changed."

A survey released Thursday by the American Association of Individual Investors showed that bullish sentiment among investors recently fell to a three-month low.

Apple lost 4.1% on Thursday, while Amazon shares slipped 2.1%. Tesla lost 4.2%. Meanwhile, shares of banks and energy companies outperformed.

Some analysts said that the prospect of higher interest rates has made growth stocks less attractive.

Adobe lost 10% after guidance that fell short of Wall Street forecasts, making it one of the biggest losers in the S&P 500. It is one of several software companies that has recorded a huge post-earnings move. Oracle shares recently surged around 15.6% after earnings this month, making it the company's biggest post-earnings jump in more than 10 years, according to brokerage Macro Risk Advisors. Intuit and Salesforce.com have also recorded some of their biggest post-earnings moves of the past decade.

Still, some investors said that Thursday's moves would prove to be a blip.

"There's a goldilocks interpretation," of the Fed, said Edward Park, chief investment officer at Brooks Macdonald, referring to a situation in which the Fed tames inflation but doesn't push rates high enough to kill the economic recovery.

Mr. Park said stocks are likely to keep rising through the end of the year. "You have people saying, you know, it's painful being in fixed income or cash."

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

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