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Global Market Report - 20 August

Lewis Jackson  |  20 Aug 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to open higher after a mixed session in New York where cyclicals slumped and tech increased. Investors are balancing earnings growth against the Delta variant.

The Australian SPI 200 futures contract was up 34 points or 0.46 per cent at 7,409 near 7.00 am Sydney time on Friday, suggesting a positive start to trading.

The S&P 500 has risen in choppy trading, with gains in tech shares countering losses in cyclical sectors, as investors took the pulse of the economic rebound and gauged when the Federal Reserve might temper its monetary stimulus.

The Dow Jones Industrial Average fell 63.34 points, or 0.18 per cent, to 34,897.35, the S&P 500 gained 5.63 points, or 0.13 per cent, to 4,405.9 and the Nasdaq Composite added 15.87 points, or 0.11 per cent, to 14,541.79.

The Australian dollar was buying 71.48 US cents near 7.45am AEST, down from 71.83 US cents at Thursday’s close.

Locally, heavy losses have continued for the iron ore giants, contributing to a fourth consecutive ASX loss as a resurgent coronavirus entangles the global economy.

BHP and Fortescue each lost more than six per cent as China's reduced appetite for steel causes the iron ore price to keep falling.

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BHP shares have lost more than 13 per cent in the past two days.

The other major iron ore miner, Rio Tinto, had its shares decline by more than five per cent on Thursday.

ANZ analyst Daniel Hynes said China was continuing to restrict steel production for environmental benefit.

"This should see prices for steel and iron ore remain under pressure," he said.

Energy shares were also widely sold. The more infectious Delta variant of COVID-19 has spread around the world and lowered demand for travel and oil.

The benchmark S&P/ASX200 index closed lower by 37.5 points, or 0.5 per cent, to 7464.6.

The All Ordinaries closed down 35.4 points, or 0.46 per cent, to 7735.3.

Also moving lower was the Aussie dollar, which slipped to buy 71 US cents.

NAB head of foreign exchange strategy Ray Attrill cited investor concern about an economic slowdown in China and restrictions elsewhere due to the coronavirus spreading.

"When global risk sentiment is poor, commodity currencies and the Aussie dollar suffer more than most," he said.

He dismissed any impact from Australian unemployment data, which showed the jobless rate unexpectedly fell to 4.6 per cent in July, with lengthy lockdowns in Melbourne and NSW likely to turn the momentum.

Investor confidence was also down in the US overnight as Wall Street's main indexes dropped.

Minutes from the Federal Reserve's policy meeting last month showed officials felt the US employment benchmark for reducing support to the economy "could be reached this year".

On the ASX, Origin Energy had a troubling story for investors.

The company posted a full-year loss of $2.3 billion and flagged continuing vulnerability in its energy markets business due to lower power prices and higher fuel costs.

Origin will pay an unfranked final dividend of 7.5 cents a share, down from 10 cents a year ago.

Shares were down 4.12 per cent to $4.19.

Casino operator Star Entertainment is selling stakes in two properties and a plane used to fly VIP customers, after COVID-19 troubles.

Star outlined in its full-year earnings report that it is looking to sell and leaseback stakes in its Sydney and Treasury Brisbane casinos.

Star posted a net profit after tax of $57.9 million but will not pay a final dividend.

Shares were up 6.78 per cent to $3.62.

Treasury Wine Estates has preserved its full-year profit despite losing a big chunk of its key China market and amid the coronavirus pandemic.

The owner of brands such as Penfolds, Wolf Blass and Lindeman's on Thursday reported net profit for the year to June 30 rose 1.8 per cent to $250 million.

Shares were down 1.5 per cent to $12.50.

In banking, most of the big four were lower. The Commonwealth fared worst of the group and shed 0.55 per cent to $99.22.

Spot Gold was down 0.5% at $US1779.74 an ounce; Brent crude was down 2.4% at $US66.57 a barrel; Iron ore was down at $US132.66.

The yield on the Australian 10-year bond closed at 1.08 per cent.

Asia

At the close, China's Shanghai Composite index was down 0.57 per cent at 3,465.55.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 2.13 per cent at 25,316.33.

Japan's Nikkei 225 was down 1.10 per cent at 27,281.17.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down at 467.24.

The German DAX was down at 15,765.81.

North America

The S&P 500 has risen in choppy trading, with gains in tech shares countering losses in cyclical sectors, as investors took the pulse of the economic rebound and gauged when the Federal Reserve might temper its monetary stimulus.

The Dow Jones Industrial Average fell 63.34 points, or 0.18 per cent, to 34,897.35, the S&P 500 gained 5.63 points, or 0.13 per cent, to 4,405.9 and the Nasdaq Composite added 15.87 points, or 0.11 per cent, to 14,541.79.

Tech also supported the Nasdaq on Thursday, while economically sensitive sectors such as energy and materials were weak.

Data showed that the number of Americans filing new claims for unemployment benefits fell to a 17-month low last week, pointing to another month of robust job growth.

Stocks had sold off sharply a day earlier after minutes from the Fed's July meeting showed officials felt it was possible that a key benchmark for decreasing support "could be reached this year."

"It's very much investors grappling with the growth outlook for the global economy, and how aggressive the Fed will taper when they get around to it," said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago.

Technology shined among S&P 500 sectors, helped by Nvidia Corp shares. The chip company forecast third-quarter revenue above Wall Street expectations late on Wednesday as it benefits from a boom in demand.

Consumer staples and real estate - generally considered defensive sectors - were higher.
Financials and industrials were among the sectors in the red.

In company news, shares of US department store chains Macy's Inc and Kohl's Corp both rose sharply, following increased annual sales forecasts.

A rebound in the US economy including a stellar second-quarter corporate earnings season on top of accommodative monetary policy has underpinned positive sentiment for equities, with the S&P 500 up about 100 per cent since its March 2020 pandemic low.

But with the market in a period that has seasonally been weak historically, investors have said stocks may be due for a significant drop, with the S&P 500 yet to experience a 5 per cent pullback this year.

Focus is shifting to the Fed's annual research conference in Jackson Hole, Wyoming, next week for any read about the central bank's next steps.

"The key economic variable continues to be inflation," said Jeff Mortimer, director of investment strategy at BNY Mellon Wealth Management. "Is it temporary, is it permanent, what number will the Fed tolerate in order to achieve its full employment mandate?"

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

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