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Global Market Report - 19 October

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

The ASX is set to open lower after Wall Street ended mixed amid gains for the tech giants.

The Australian SPI 200 futures contract was down 20 points or 0.3 per cent at 7,337 near 8.00 am AEST on Tuesday, suggesting a negative start to trading.

US stocks ended trading mixed as investors weighed a strong start to earnings season against concerns that mounting inflation, supply-chain problems and an energy crunch could be risks for global growth.

The S&P 500 rose 0.3% while the Dow Jones Industrial Average lost about 0.1%. The tech-heavy Nasdaq Composite gained 0.8%. All three indexes slid to start the day, but pared their losses as the session continued.

"Many of the companies we are looking at are citing very strong demand, and we can work with a situation where demand is strong and supply is problematic because eventually we will work through supply problems," said Christopher Harvey, head of equity strategy at Wells Fargo Securities.

The Australian dollar was buying 74.09 US cents near 8.00am AEST, down from the previous close of 74.19. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 88.43.

Locally, the S&P/ASX 200 closed 0.3% higher at 7381.1 as gains by mining and financial stocks offset weakness elsewhere.

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Shares in 11 of the 12 largest companies by market capitalization rose, including NAB, Westpac, ANZ and Commonwealth Bank, which put on between 0.5% and 1.6%.

The materials sector rose 1.0%, helped by Fortescue, BHP and Rio Tinto adding between 0.9% and 1.9%. CSL, the only decliner among the top dozen stocks, fell 1.1%, pulling the health sector down by 1.0%.

The tech sector slipped amid losses by Afterpay, Xero and WiseTech Global. Buy-now-pay-later provider Zip Co. gave up 1.5% after a 1Q trading update.

Gold futures fell 0.2% to $US1765.70 an ounce; Brent crude fell 0.9% to $US84.07 a barrel; Iron ore was down 0.7% US$124.32.

The yield on the Australian 10-year bond rose to 1.74%; The US 10-year Treasury note rose to 1.59.

Asia

Chinese stocks ended the session mixed Monday, as the market extended its range-bound trading pattern seen so far this month. The benchmark Shanghai Composite Index fell 0.1%, while the Shenzhen Composite Index rose 0.1%. The ChiNext Price Index was largely unchanged, edging up by 0.16 point.

Hong Kong shares extended a broad upturn so far this month despite the disappointing Chinese growth data. The benchmark Hang Seng Index rose 0.3%. Chinese sportswear makers led gains and Macau casino operators lent further support.

Japan's Nikkei Stock Average fell 0.1%, dragged by declines in pharmaceutical and food stocks despite some gains in energy and auto companies. Investors are focusing on any policy developments ahead of Japan's lower-house election later this month.

Europe

European stocks ended Monday lower, with the pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, down 0.5%.

In London, the FTSE 100 closed 0.4% lower.

North America

US stocks ended trading mixed as investors weighed a strong start to earnings season against concerns that mounting inflation, supply-chain problems and an energy crunch could be risks for global growth.

The S&P 500 rose 0.3% while the Dow Jones Industrial Average lost about 0.1%. The tech-heavy Nasdaq Composite gained 0.8%. All three indexes slid to start the day, but pared their losses as the session continued.

The US stock market has been on a bumpy ride for the last month and a half, dogged by concerns about inflation and slowing growth. Investors have been digesting the possibility that inflationary pressures could last longer than expected as supply-chain bottlenecks and labor shortages continue to flare. Signs of slowing economic growth in the US and abroad also have added to concerns.

A strong start to third-quarter earnings season, however, has alleviated some of the uneasiness among investors in recent days. Nearly 81% of S&P 500 companies that have reported so far have beat earnings-per-share expectations, according to FactSet data through Monday morning.

"Many of the companies we are looking at are citing very strong demand, and we can work with a situation where demand is strong and supply is problematic because eventually we will work through supply problems," said Christopher Harvey, head of equity strategy at Wells Fargo Securities. "We're trying to ascertain if we've had a peak in supply-chain issues... [and whether] this might be as bad as it gets."

On Monday, supermarket chain Albertsons reported higher sales, with executives saying consumers are still spending heavily on groceries. The Boise, Idaho-based company is passing on some price increases to customers but said that it is offering cheaper alternatives. Its shares rose 3.3%.

This week, investors will receive earnings results from a wide range of companies, including Procter & Gamble, Netflix and American Airlines. They also will parse new data on the housing market.

Data released Monday by the Federal Reserve showed that US industrial production—a measure of factory, mining and utility output—pulled back in September, falling 1.3% compared with the previous month. Economists surveyed by The Wall Street Journal had expected a 0.2% increase. Monday's report cited supply-chain snarls and the lingering effects of Hurricane Ida as reasons for the decline.

New data Monday also showed China's economy grew 4.9% in the third quarter from a year prior, a sharp slowdown from the second quarter's 7.9% rate. The deceleration reflected a range of factors, including a crackdown on the technology, private-education and real-estate sectors; power shortages; and disruptions to the supply chain.

The weaker growth data are "a reminder that China is expected to lose some of its momentum, but also how these global issues like the energy crisis and supply chain issues will filter through to global growth," said Edward Park, chief investment officer at U.K. investment firm Brooks Macdonald. "There's just a bit of rebasing of expectations for China and the rest of the world."

Technology stocks performed well: Tesla added 3.2%, while Twitter and Facebook jumped 3.3%.

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

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