Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


Global Market Report - 20 July

Lewis Jackson  |  20 Jul 2021Text size  Decrease  Increase  |  
Email to Friend


ASX shares are set to fall after the Dow had its worst fall in nearly nine months as doubts over the economic recovery intensified amid an expanding Delta outbreak.

The Australian SPI 200 futures contract was down 68 points or 0.94 per cent at 7,129 near 7.10 am Sydney time on Tuesday.

A surge in Delta variant infections has sparked a broad sell-off on Wall Street as investors fear renewed COVID-19 shutdowns and a protracted economic recovery.

The Dow Jones Industrial Average fell 724.56 points, or 2.09 per cent, to 33,963.29, the S&P 500 lost 68.36 points, or 1.58 per cent, to 4,258.8 and the Nasdaq Composite dropped 152.25 points, or 1.06 per cent, to 14,274.98.

The Australian dollar was buying 73.44 US cents near 7.40am AEST, down from 73.81 at Monday's close.

Locally, Australian shares ended lower Monday amid a broader sell-off in Asian markets, as worries over the economic impact of lockdowns in Sydney and Melbourne weighed on investor sentiment.

The benchmark S&P/ASX200 index on Monday lost 62.1 points, or 0.85 per cent, to 7286, while the broader All Ordinaries dropped 71 points, or 0.93 per cent, to 7559.70.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

The stumble in the local market was in line with its Asian peers as a relentless surge in coronavirus cases in a number of countries in the region underlines the risk to economic growth.

"It would seem the markets are really quite concerned about the global growth outlook," said Kyle Rodda, analyst at broker IG Markets.

"We're seeing the unwinding of the reflation trade that has been driving markets for pretty much the last six to nine months."

Most of the losses in the local market were focused in the heavyweight mining, energy and financial stocks, as investors dumped cyclical stocks amid signs of faltering economic growth.

The declines were led by mining, energy and financial stocks with traders keen to book some profits due to growing uncertainty over the local COVID-19 outbreaks.

NSW has already tightened restrictions, ordering a shutdown of all non-essential retail as well as construction sites in Sydney as infections show no signs of falling despite three weeks of lockdown.

On Monday, Victoria's premier also confirmed he will also be extending a lockdown in Melbourne after the city recorded 17 new COVID-19 cases.

The decisions have sparked concerns about the hit to Australia's economic recovery, with some economists estimating negative GDP in the September quarter as a result.

Materials shares led the slide, with BHP, Rio Tinto and Fortescue Metals each losing more than 2 per cent of their value. Gold miners were also on shaky ground, with Newcrest Mining down 2 per cent at $26.37, and Evolution Mining tumbling 8.7 per cent to $4.28.

Energy stocks took a hit after the OPEC+ grouping of oil exporting nations on Sunday agreed to boost production in a move designed to ease soaring crude oil prices.

Crude prices sank, along with the share prices of oil and gas majors Santos, Woodside Petroleum and Oil Search, dropping between 2-5 per cent.

Major banks also suffered collateral damage amid concerns over the rising impact of the extended lockdowns in Australia's two biggest cities. Shares in the Big Four banks, which have a significant exposure to the booming housing market, ended between 0.5-2.0 per cent lower.

The caution-first market sentiment was reflected in the gains among defensive sectors such as healthcare, utilities and consumer staples.

Shares in medical device maker Resmed jumped 2.4 per cent to $34.52, while biotech giant CSL gained 1.8 per cent at 282.74 each.

Shares in supermarket giants Coles and Woolworths also ended higher.

Meanwhile, the US dollar continued to firm up against a basket of currencies and the heightened local risk saw the Aussie dollar slip to its lowest level since last December.

By 1700 AEST, it was buying 73.81 US cents, sharply down from Friday's close of 74.31 US cents.

Spot Gold was down 0.2 per cent at $US1809.99 an ounce; Brent crude was down 6.6 per cent at $US68.74 a barrel, Iron ore was down 0.2 per cent at $US221.04 a tonne.

The yield on the Australian 10-year bond closed at 1.24 per cent.


At the close, China's Shanghai Composite index was down 0.01 per cent at 3,539.12.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 1.84 per cent at 27,489.78.

Japan's Nikkei 225 Index was down 1.25 per cent at 27,652.74.


The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down 2.30 per cent at 444.29.

The German DAX was down at 15,133.20.

North America

A surge in Delta variant infections has sparked a broad sell-off on Wall Street as investors fear renewed COVID-19 shutdowns and a protracted economic recovery.

The Dow Jones Industrial Average fell 724.56 points, or 2.09 per cent, to 33,963.29, the S&P 500 lost 68.36 points, or 1.58 per cent, to 4,258.8 and the Nasdaq Composite dropped 152.25 points, or 1.06 per cent, to 14,274.98.

All three major US stock indexes ended the session sharply lower, with the S&P and the Nasdaq suffering their largest one-day percentage drop since mid-May.

The blue-chip Dow had its worst day in nearly nine months.

The risk-off sentiment also sent US 10-year Treasury yields sliding, pulling rate sensitive banks stock prices with them.

"Much of it is related to the Delta (variant)," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

"There's some concern too that maybe the economy is not going to open up as quickly as everyone thinks, and the big boom that everyone's expecting is going to be more of a pop than a boom."

"We're woefully off of breakneck economic growth, and judging by the activity we're seeing we're overestimating a lot of the economic reports," Nolte added.

The highly contagious COVID-19 Delta variant, now the dominant strain across the globe, has caused a surge in new infections and deaths, nearly exclusively among unvaccinated people.

"Global availability of the vaccine has been an issue from day one," Nolte said.

"That's been out there for a long time. This is the latest iteration of that. We still have a long way to go."

Travel and leisure stocks plunged, with the S&P 1500 Airline index and the S&P 1500 Hotel and Restaurant index losing significantly more ground than the broader market.

The CBOE Volatility index, a gauge of investor anxiety, touched its highest level in two months.

All 11 major sectors in the S&P 500 closed deep in negative territory.

Second-quarter reporting season is under way, with 41 of the companies in the S&P 500 having reported.

Of those, 90 per cent have beaten consensus estimates, according to Refinitiv.

Among high-profile names, Netflix, Twitter, Johnson & Johnson, United Airlines and Intel, along with a host of industrials from Honeywell to Harley-Davidson are due to post results this week.

International Business Machines Corp results are expected shortly.

Analysts now expect year-on-year S&P 500 earnings growth of 72 per cent for the April to June period, substantially higher than the 54 per cent annual growth forecast at the beginning of the quarter, per Refinitiv.

Zoom Video Communications Inc announced a $US14.7 billion ($A20.1 billion) all-stock deal to buy cloud-based call centre operator Five9 Inc.

The teleconferencing services provider's shares fell on the news while Five9's jumped.

Tech tensions between the United States and China grew more heated with the US and its allies accusing officials in Beijing of a global hacking campaign while shares of Chinese tech firms listed on foreign exchanges dropped amid fears of regulatory crackdowns.

US-listed shares of China-based ride-hailing app Didi Global extended their decline.

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

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend