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Global Market Report - 19 August

Lewis Jackson  |  19 Aug 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to open lower following a downward lead from Wall Street, where the Federal Reserve’s July minutes suggested its support could begin to taper this year.

The Australian SPI 200 futures contract was down 49 points or 0.7 per cent at 7,378 near 7.45 am Sydney time on Thursday, suggesting a negative start to trading.

Wall Street's main indexes have dropped after the release of minutes from the Federal Reserve's policy meeting last month showed officials felt the employment benchmark for decreasing support for the economy "could be reached this year."

The Dow Jones Industrial Average fell 377 points, or 1.07 per cent, to 34,966.28, the S&P 500 lost 47.64 points, or 1.07 per cent, to 4,400.44 and the Nasdaq Composite dropped 130.27 points, or 0.89 per cent, to 14,525.91.

The Australian dollar was buying 72.36 US cents near 7.45am AEST, down from 72.61 US cents at Wednesday’s close.

Locally, investors did not like what they read in BHP and CSL's full-year reports and caused a third consecutive day of losses for shares.

BHP shares plunged more than seven per cent to $47.70 on Wednesday after the mining giant revealed plans to stop trading on the FTSE 100 in the UK. Those shares will move to the ASX.

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Shaw and Partners chief investment officer Martin Crabb said the UK shares were trading at a discount to the Australian ones and investors responded.

"We have two classes of shares that have to come together," he said.

"There is a gap in the price, and that gap has to become zero."

Mr Crabb said BHP's Australian shares may be under pressure for months until investors traded away the perceived difference.

The iron ore trader also raised profit and sold its oil and gas business to Woodside.

CSL also lifted profit but disappointed investors by forecasting lower profit this financial year.
The cost of collecting blood plasma to make medicines remains elevated.

Shares closed lower by 1.47 per cent to $293.56.

The heavyweights' losses ensured the market followed Wall Street and closed lower.

Mr Crabb said a third day of losses followed concerns global economic growth may be slower than expected.

The coronavirus' Delta strain is impeding progress.

The Reserve Bank of New Zealand was tipped to raise rates on Wednesday, but kept them on hold after the nation entered lockdown.

US retail sales fell more than expected in July, according to figures published overnight.

"People are saying this is going to take longer to heal," Mr Crabb said of economic recovery from the pandemic.

"But the market is not positioned for that. The market is positioned for cyclical recovery.

"That is why we're seeing people buy the retailers and supermarkets and long duration bonds, because they are defensive."

The benchmark S&P/ASX200 index closed lower by 8.9 points, or 0.12 per cent, to 7502.1.

The All Ordinaries closed down 2.6 points, or 0.03 per cent, to 7770.7.

The coronavirus continued to rage in Australia after NSW reported a record daily infection count of 633. Three people died.

Millions of people across the nation remain in lockdown.

Coles gave an uncertain outlook as sales return to normal levels amid lengthy lockdowns in major cities.

The supermarket giant said trading had been mixed in the current quarter. Supermarket sales were up one per cent in the first seven weeks of the financial year.

Full-year profit rose 7.5 per cent to $1.01 billion.

Shares closed little changed at $18.34.

The recipient of BHP's oil and gas business, Woodside, swung to a first-half profit.

Woodside posted a first-half profit of $US317 million ($A437 million) on the back of a rebound in oil and gas prices.

Shares closed down 2.12 per cent to $20.29.

BHP's chief rivals did not have enjoyable days on the market either.

Fortescue lost 0.6 per cent to $21.45. Rio Tinto shed 2.3 per cent to $113.69.

Betting and lotteries operator Tabcorp said the demerger of its lotteries and Keno business would take place by June next year.

The group posted a full-year net profit after tax of $269 million after a loss the prior year.

Shareholders will receive a fully franked final dividend of seven cents per share. This is higher than the same payout last year.

Shares were down 0.82 per cent to $4.81.

The banks all improved. Westpac was best of the big four and higher by 1.41 per cent to $25.81.

Spot Gold was down 0.2% at $US1788.20 an ounce; Brent crude was down 1.2% at $US68.23 a barrel; Iron ore was down 4.6 per cent to $US153.39.

The yield on the Australian 10-year bond closed at 1.14 per cent.

Asia

At the close, China's Shanghai Composite index was up 1.11 per cent at 3,485.29.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed up 0.47 per cent at 25,867.01.

Japan's Nikkei 225 was up 0.59 per cent at 27,585.91.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up at 474.42.

The German DAX was down at 15,965.97.

North America

Wall Street's main indexes have dropped after the release of minutes from the Federal Reserve's policy meeting last month showed officials felt the employment benchmark for decreasing support for the economy "could be reached this year."

The Dow Jones Industrial Average fell 377 points, or 1.07 per cent, to 34,966.28, the S&P 500 lost 47.64 points, or 1.07 per cent, to 4,400.44 and the Nasdaq Composite dropped 130.27 points, or 0.89 per cent, to 14,525.91.

Most S&P 500 sectors ended lower, with energy and consumer staples among the weakest performers.

The minutes of the July 27-28 Fed meeting showed different groups worried about inflation and the need to prepare to combat it, with others saying it would take time, and require patience from the Fed, to put Americans back to work.

Investors are looking for signs about when the central bank will rein in its easy money policies, including tapering its bond-buying program, which have been a crucial support as the S&P 500 has roughly doubled from its March 2020 low.

"The Fed minutes did nothing to dispel the thought that tapering will begin soon," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "We are closer to the end than the middle of tapering, and people don't know how to react to it."

Focus now shifts to the Fed's annual research conference in Jackson Hole, Wyoming, next week for any read about the central bank's next steps. Many analysts expect the Fed to announce its plan to taper asset purchases as early as the Sept. 21-22 policy meeting.

"We have gotten a rash of both earnings and economic data over the past several weeks that broadly is pointing to a positive outlook for the fundamental backdrop to the market," said Craig Fehr, investment strategist at Edward Jones. "The one wildcard at this stage is going to be the role Fed stimulus is going to play."

In company news, shares of Lowe's Cos Inc jumped after the home improvement chain's quarterly report. Lowe's said professional builders and handymen were rushing back to its stores, boosting sales.

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

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