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Global Market Report - 19 March

Lex Hall  |  19 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to follow Wall St lower amid anxiety over rising bond yields and a new covid lockdown in France.

The Australian SPI 200 futures contract was down 37 points, or 0.6 per cent, at 6,675 points at 8.30am Sydney time on Friday, suggesting a negative start to trading.

Wall Street ended sharply lower on Thursday, with the Nasdaq tumbling 3 per cent, hit by rising Treasury yields and fresh worries about the coronavirus pandemic in Europe.

Losses in US stocks accelerated after France’s prime minister imposed a month-long lockdown on Paris and several other regions due to the health crisis.

The Dow Jones Industrial Average rose 0.58 per cent to end at 33,015.37 points, while the S&P 500 gained 0.29 per cent to 3,974.12. The Nasdaq Composite climbed 0.4 per cent to 13,525.20. The Nasdaq remains down about 4 per cent from its 12 February record-high close.

Locally, a surging labour market has driven the number of jobs in the nation above pre-pandemic levels and slashed the unemployment rate to 5.8 per cent, a result that reveals a workforce recovery running 10 months ahead of the Reserve Bank’s forecast, The Australian reports.

Australia's share market declined throughout the trading session and closed lower after the Aussie dollar rose on the US Federal Reserve's economic projections.

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The S&P/ASX200 benchmark index closed down 49.3 points, or 0.73 per cent, to 6,745.9 on Thursday.

The All Ordinaries closed lower by 44.4 points, or 0.63 per cent, at 7,003.6.

There were falls of more than one per cent in health, property, industrials, information technology and utilities.

Earlier the Federal Reserve projected a rapid jump in US economic growth this year as the covid-19 crisis winds down, and repeated a pledge to keep its target interest rate near zero for years to come.

Gold was down 0.7 per cent at $US1,733.86 an ounce; Brent oil was down 7.4 per cent to $US62.98 a barrel; Iron ore was up 0.3 per cent to $US166.62 a tonne.

Meanwhile, the Australian dollar was buying 77.65 US cents at 8.30am, down from 78.26 US cents at Thursday’s close.

Asia

China stocks rose on Thursday, driven by gains in consumer and healthcare firms, after the US Federal Reserve pledged to maintain an accommodative monetary policy and projected a rapid jump in US economic growth this year.

The blue-chip CSI300 index rose 0.8 per cent, to 5,141.77, while the Shanghai Composite Index gained 0.5 per cent to 3,463.07.

In Hong Kong, the Hang Seng Index closed 1.28 per cent higher at 29,405.72. It is also up 2.6 per cent since the start of the week.

Around the region, MSCI's Asia ex-Japan stock index was firmer by 1.04 per cent, while Japan's Nikkei index closed up 1.01 per cent.

Europe

Automakers lifted the German DAX share index to a record high on Thursday, while broader European stocks inched towards all-time highs after the US Federal Reserve vowed to keep interest rates low despite forecasting a surge in economic growth.

An index of euro zone’s top 50 companies gained 0.5 per cent, briefly surpassing its peak hit in February last year, before the covid-19 pandemic hammered financial markets.

Germany’s blue-chip DAX rose 1.2 per cent, France’s CAC 40 was up 0.1 per cent, while Britain’s FTSE 100 reversed declines after the Bank of England said Britain’s economic recovery was gathering pace and left policy rates unchanged.

“That tells us the Bank is much more closely aligned with the Federal Reserve’s attitude to recent market moves than the ECB’s,” said James Smith, developed markets economist at ING.

The pan-European STOXX 600 rose 0.4 per cent, but eased from early highs due to losses in utilities, chemicals and food & beverage stocks.

With the 10-year US Treasury yield rising after the Fed decision, economically sensitive sectors such as automakers, banks and miners led the gains in Europe.

A recent rise in government bond yields has stoked worries about a pickup in inflation as trillions in dollars of stimulus help global economies emerge from the pandemic shock.

However, European stocks have benefited as a rise in yields sparked rotation into some of the cheaply valued sectors such as banks and energy on hopes of a strong economic rebound.

“We expect further upside for bond yields in response to sharp acceleration in global growth, rising inflation and reduced monetary policy accommodation,” said Milla Savova, European equity strategist at Bank of America Merrill Lynch.

“In combination with our expectations for a euro area PMI rebound and rising oil price, this would imply around a further 15 per cent outperformance of value versus growth by late Q3.”

Volkswagen jumped 6.0 per cent, sealing its position as the most valuable company in Germany’s DAX after it overtook software maker SAP on Wednesday.

Its shares have racked up a 41.8 per cent gain so far this week and are on course to record the biggest weekly gain ever after it stepped up its switch to fully electric vehicles.

Swiss lender Credit Suisse gained 2.5 per cent after it said it was overhauling its asset management business amid regulatory investigations into its dealings with collapsed Greensill Capital.

Telecoms equipment maker Nokia slipped 5.7 per cent despite forecasting a pick-up in profit margins to 10 per cent-13 per cent in 2023.

Swiss online pharmacy chain Zur Rose fell 12.6 per cent to the bottom of STOXX 600 after disappointing full-year results and outlook.

North America

Wall Street ended sharply lower on Thursday, with the Nasdaq tumbling 3 per cent, hit by rising Treasury yields and fresh worries about the coronavirus pandemic in Europe.

Losses in US stocks accelerated after France’s prime minister imposed a month-long lockdown on Paris and several other regions due to the health crisis.

It was the Nasdaq’s steepest one-day drop since 25 February.

The S&P 500 energy sector index tumbled 4.7 per cent as oil prices fell, in part due to worries about rising covid-19 cases in Europe.

“That last hit was from news of the Paris lockdown. It wasn’t received that well,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey. “Here in the United States, we anticipate this big reopening and the virus is looking good, but we are not looking outside of the US, and it’s not all good.”

The Russell 1000 value index, which is heavily composed of cyclical stocks such as financials and energy, lost 0.6 per cent, while the Russell 1000 growth index, which includes technology stocks, dropped more than 2 per cent.

The yield on the benchmark 10-year Treasuries crossed 1.75 per cent to hit a 14-month high a day after the Fed projected the strongest growth in nearly 40 years as the covid-19 crisis winds down. The Fed also repeated its pledge to keep its target interest rate near zero for years to come.

“The Fed just saying they are not going to raise rates until 2023 really means nothing,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “The Fed is on the sidelines, but if bond yields keep going up, that is what really hurts the economy.”

Apple Inc and Amazon.com Inc both dropped more than 3 per cent. Tech and other growth stocks are particularly sensitive to rising yields because their value rests heavily on earnings far into the future, which are discounted more deeply when bond yields rise.

A recent US$1.9 trillion spending stimulus sparked fears of rising inflation and contributed to the jump in longer-end Treasury yields.

Underscoring the staggered recovery in the labour market, data showed the number of Americans filing for jobless benefits unexpectedly rose last week.

A separate report indicated the Philly Fed business index jumped more than expected, to its highest level since 1973.

The Dow Jones Industrial Average fell 0.46 per cent to end at 32,862.3 points, while the S&P 500 lost 1.48 per cent to 3,915.47. The Nasdaq Composite dropped 3.02 per cent to 13,116.17.

The S&P 500 and the Dow both closed at record highs on Wednesday.

Accenture rose 1 per cent after the IT consulting firm raised its full-year revenue forecast and reported second-quarter revenue above analysts’ estimates, as more businesses used its digital services to shift operations to the cloud.

Dollar General Corp dropped 4.65 per cent after the retailer forecast annual same-store sales and profit below estimates, indicating that a pandemic-fuelled rush for lower-priced goods may be waning faster than expected.

AMC Entertainment climbed more than 3 per cent after the movie theatre operator said it would have 98 per cent of its US locations open from Friday.

With Reuters

is senior editor for Morningstar Australia

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