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Global Market Report - 19 May

Lewis Jackson  |  19 May 2021Text size  Decrease  Increase  |  
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Shares to open lower as US stocks fall following declines in telecoms and weak homebuilding data.

The Australian SPI 200 futures contract was down 79 points or 1.1 per cent to 6982 near 7.00 am Sydney time on Wednesday, suggesting a negative start to trading.

US stocks ended down on Tuesday, slumping on a sharp decline in telecom stocks and weak housing starts data that overshadowed better-than-expected earnings from Walmart and Home Depot.

The Dow Jones Industrial Average fell 267.13 points, or 0.78 per cent, to 34,060.66, the S&P 500 lost 35.46 points, or 0.85 per cent, to 4,127.83 and the Nasdaq Composite dropped 75.41 points, or 0.56 per cent, to 13,303.64.

Locally, Commonwealth Bank shares notched a record and edged closer to $100 per share as the biggest players on the Australian market led gains on Tuesday.

Commonwealth shares peaked at $98.84 as investors expect banks to thrive on an economy rebounding from the coronavirus recession.

A late slip let the shares close lower by 0.03 per cent to $97.76.

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The 20 biggest companies on the market rose 0.84 per cent - more than any other recognised group.

The giants helped the benchmark S&P/ASX200 index close higher by 42.4 points, or 0.6 per cent, to 7066 on Tuesday.

The All Ordinaries closed up 43.3 points, or 0.6 per cent, to 7299.1 points.

The top shares were commodity-based.

Energy shares rose 1.63 per cent. Beach and Woodside were up more than two per cent.

Materials shares increased 1.63 per cent, helped by rising iron ore prices.

The mining giants enjoyed the benefits. BHP climbed 1.85 per cent to $50.52. Fortescue gained 2.03 per cent to $23.57. Rio Tinto climbed 2.12 per cent to $128.71.

South32 increased full-year production forecasts for four sites. Shares rose 2.36 per cent to $3.03.

There was strong trade across Asian markets, despite Wall Street stocks having closed lower.

Several major US retailers including Walmart report earnings this week. Investors will study whether rising prices and inflation affected sales.

The minutes of the Reserve Bank of Australia's May board meeting followed a well-worn script.

The board was determined to keep interest rates low until inflation returns to target levels. The board does not expect this until 2024 at the earliest.

On the ASX, analytics software vendor Nuix rose 11.46 per cent to $3.50 after its leaders vowed to improve performance.

Fibre cement supplier James Hardie posted a nine per cent gain in full-year net profit after tax, helped by US sales.

Hardie's profit for the 12 months to March 31 was $US262.8 million.

No final dividend was declared. The company said ordinary payouts would return this financial year.

Shares were lower by 4.51 per cent to $40.20.

On Wednesday, workers' wages data will be published by the Australian Bureau of Statistics.

Economists expect the index will rise 0.5 per cent, slightly less than the 0.6 per cent recorded three months earlier.

This will leave the annual rate at just 1.4 per cent, well short of what the RBA wants.

Gold was up 0.1 per cent at $US1869.13 an ounce; Brent crude was down 1 per cent to $US68.75 a barrel. Iron ore was up 3 per cent to $US224.44 a tonne.

The yield on the US 10-year Treasury note closed at 1.64 per cent, while the Aussie 10-year bond closed at 1.77 per cent.

Meanwhile, the Australian dollar was buying 77.93 US cents around 7:00am, up from 77.70 this time Tuesday.


China stocks inched higher on Tuesday, led by gains in energy and transport firms, though Sino-US tensions capped further gains.

At the close, the Shanghai Composite index was up 0.32 per cent at 3,529.01, while the blue-chip CSI300 index was up 0.05 per cent.

The US Senate voted 86-11 Monday to open debate on a measure authorizing more than $110 billion for basic and advanced technology research over five years in the face of rising competitive pressure from China.

Investors reaction to the latest headline on Sino-US competition was mixed. An index tracking China’s semiconductor firms slipped 0.6 per cent, while the CSI IT index rose 0.2 per cent.

The Hang Seng index rose 1.4 per cent, to 28,593.81, while the China Enterprises Index also gained 1.4 per cent, to 10,654.30, both up for the third consecutive session.

India’s blue-chip Nifty index closed at a two-month high on Tuesday, boosted by banking stocks, as daily coronavirus cases declined for a fifth straight day.

The NSE Nifty 50 index rose 1.24 per cent to close at 15,108.10, and the benchmark S&P BSE Sensex also rose 1.24 per cent to 50,193.33. Last week, they lost 0.9 per cent each.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.61 per cent, while Japan’s Nikkei index closed up 2.09 per cent.


European stocks rose on Tuesday, with Germany’s equity index hitting a record high on optimism around several countries easing economic restrictions, falling unemployment rate in the United Kingdom and strong earnings reports from companies.

The pan-European STOXX 600 index rose 0.2 per cent to end just shy of its record high hit last week, with the travel and leisure index leading gains, while technology stocks rose 0.6 per cent.

The German DAX hit a record high and Italy’s FTSE MIB added 0.1 per cent.

Inflation worries due to gains in commodity prices and supply chain issues have raised fears of central banks dialling back unprecedented fiscal and monetary policy support.

“Should we have inflation globally, then cyclical stocks see better performance normally than growth stocks,” UniCredit strategist Christian Stocker said.

“The weight of cyclical stocks is much higher in Europe and from a relative point of view, it is an advantage for European equities.”

UK stocks cheered data that showed Britain’s unemployment rate fell more than expected to 4.8 per cent in the first quarter when the country was under a tight lockdown, while hiring rose further in April.

“The UK jobs market is mounting a recovery, after the hardship caused by the pandemic,” said Hugh Shields, financial trader at Spreadex.

“With the latest lockdown restrictions being eased, and further easing on the 21st of June, one can only presume this number will soon return to pre-COVID 19 rates or better.”

As the earnings season draws to a close, analysts expect the profits of STOXX 600 companies to jump 90.2 per cent in the first quarter and 93.4 per cent in the second, as per Refinitiv IBES data.

The world’s biggest maker of hearing aids, Sonova Holding, surged 11.5 per cent after predicting strong growth this year due to a market recovery and new products.

Winston cigarettes maker Imperial Brands rose 1.5 per cent after it reiterated its full-year outlook.

Telecoms took a hit as the UK mobile operator Vodafone fell 8.9 per cent after reporting a 1.2 per cent drop in full-year adjusted earnings, citing the effect of COVID-19 on roaming revenue and handset sales.

French telecoms group Iliad slumped 10.2 per cent after saying it would revise down a key cash flow target as it steps up spending on 5G networks.

North America

US stocks ended down on Tuesday, slumping on a sharp decline in telecom stocks and weak housing starts data that overshadowed better-than-expected earnings from Walmart and Home Depot.

The Dow Jones Industrial Average fell 267.13 points, or 0.78 per cent, to 34,060.66, the S&P 500 lost 35.46 points, or 0.85 per cent, to 4,127.83 and the Nasdaq Composite dropped 75.41 points, or 0.56 per cent, to 13,303.64.

AT&T Inc shed 5.8 per cent, among the biggest percentage decliners in the benchmark S&P 500. It extended declines from Monday, when the telecoms firm said it would cut its dividend payout ratio as a result of its $43 billion media asset deal with Discovery Inc.

T-Mobile and Verizon Communications also dropped 3.71 per cent and 1.31 per cent.

Eight of 11 major S&P sectors ended the session in the red, with Energy and Industrials having largest percentage decline, according to Refinitiv data. Utilities were basically flat.

The three main indexes opened higher after Walmart, the world’s biggest retailer, raised its full-year earnings forecast and Home Depot reported quarterly same-store sales above estimates.

“Those are both emblematic of strength in the corporate sector and also of the consumer. I mean, you can’t have Walmart and Home Depot have blowout earnings without the consumer really stepping up spending stimulus checks, adopting ecommerce, as well as getting back into stores”, said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky. “And a lot of the bull thesis for the market right now is still built on a really strong reopening of the economy.”

Despite its strong results, Home Depot’s shares went down 1.02 per cent, under pressure due to the lack of a solid outlook and the housing data.

Latest data showed US homebuilding fell more than expected in April, likely pulled down by soaring prices for lumber and other materials.

Minutes from the Fed’s April policy meeting will be parsed on Wednesday for the central bank’s view of the economy.

“The market is bracing for a transition,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey. “So there’s a little bit of de-risking going on.”

Wall Street has been volatile in recent days, with investors worried that an overheating economy could prompt the Federal Reserve to rein in its monetary support following a spike in volatility last week after strong inflation readings.

Fund managers recently trimmed their overweight positions on technology stocks to a three-year low as inflation worries left growth stocks vulnerable to a pullback, and turned overweight on UK stocks for the first time in seven years, a survey from Bank of America showed.

With Reuters

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

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