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Global Market Report - 20 May

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

Local shares to open slightly higher while global markets dipped on newly released minutes showing the Fed considered discussions about tapering bond purchases.

The Australian SPI 200 futures contract was up 4 points or 0.1 per cent to 6932 near 7.00 am Sydney time on Thursday, suggesting a positive start to trading.

Wall Street’s main indexes closed lower on Wednesday after minutes from an April Federal Reserve meeting showed participants agreed the US economy remained far from the central bank’s goals, with some considering discussions on tapering its bond buying program.

The Dow Jones Industrial Average fell 164.62 points, or 0.48 per cent, to 33,896.04, the S&P 500 lost 12.15 points, or 0.29 per cent, to 4,115.68 and the Nasdaq Composite dropped 3.90 points, or 0.03 per cent, to 13,299.74.

Bitcoin and ethereum fell as much as 30 per cent and 45 per cent, respectively, but they significantly stemmed their losses in afternoon trading after two of their biggest backers -- Tesla Inc chief Elon Musk and Ark Invest’s chief executive officer Cathie Wood -- reiterated their support for bitcoin.

Locally, investors sent shares to their biggest loss since February on Wednesday as analysts pondered whether the Australian market may be easing into a new phase.

The benchmark S&P/ASX200 index closed lower by 134.3 points, or 1.9 per cent, to 6931.7.

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The All Ordinaries closed down 133.4 points, or 1.83 per cent, to 7165.7 points.

Shares plunged from the opening of trade and closed lower by 1.9 per cent. All categories were down.

Materials shares were most affected and declined by 3.02 per cent.

BHP, Fortescue and Rio Tinto lost more than three per cent.

Energy shares dropped 2.79 per cent after reported progress between the United States and Iran on lifting economic sanctions. This could mean more supply of Iranian oil.

Whitehaven Coal lost 6.23 per cent to $1.35.

Industrials shares lost 2.27 per cent.

Pepperstone chief market strategist Chris Weston said investors were wary of how regulators might act on surging economies.

"People are looking ahead and see tough times in liquidity because they expect central banks will take action," he said.

Australian wages have not surged. They rose by only 0.6 per cent in the first three months of 2021.

This was slightly higher than the 0.5 per cent rise expected by economists.

On the ASX, EML Payments plummeted 45.63 per cent to $2.80 after concerns about its Irish subsidiary's anti-money laundering controls.

Ireland's central bank has written to the company raising significant regulatory concerns.

The Commonwealth Bank was the biggest loser of the big four.

Shares dropped 2.5 per cent to $95.32.

Artificial intelligence provider Appen climbed 17.44 per cent to $13.20 after outlining changes to structure and financial reporting.

The company has created the divisions of global, enterprise, China and government.

Appen will report in US dollars as most of its earnings are in this currency.

Online travel agent Webjet will not pay a final dividend as it continues battling the pandemic.

The company declared a net loss of $156.6 million for the nine months to March 31 as it changed its financial year end.

Shares were up 0.64 per cent to $4.70.

On Thursday, unemployment figures for April will be the first full set since the JobKeeper wage subsidy ended in March.

Most experts do not expect a change to the jobless rate of 5.6 per cent.

The Australian dollar was buying 77.71 US cents at 1726 AEST, lower from 78.02 US cents at Tuesday's close.

Gold was down 0.3 per cent at $US1863.39 an ounce; Brent crude was down 3.2 per cent to $US66.52 a barrel. Iron ore was down 3.7 per cent to $US216.16 a tonne.

The yield on the US 10-year Treasury note closed at 1.68 per cent, up from 1.64 per cent yesterday. The Aussie 10-year bond closed at 1.76 per cent, down from 1.77.

Meanwhile, the Australian dollar was buying 77.27 US cents around 7:00am, down from 77.93 this time Wednesday.

Asia

China shares ended lower on Wednesday after three straight sessions of gains, dragged down by property and energy firms, while digital currency-related stocks fell after Beijing banned financial and payment companies from the cryptocurrency business.

At the close, the Shanghai Composite index was down 0.51 per cent at 3,510.96, while the blue-chip CSI300 index was down 0.3 per cent.

China has banned financial institutions and payment companies from providing services related to cryptocurrency transactions, and warned investors against speculative crypto trading.

Hong Kong markets were closed for a holiday.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.38 per cent, while Japan’s Nikkei index closed down 1.28 per cent, and India’s NSE Nifty 50 fell 0.15 per cent to 15,084.05.

Europe

European stocks posted their worst daily fall in one week on Wednesday, tracking weakness on Wall Street, as investors grew wary of rising inflationary pressures increasing the odds of an early tightening of monetary policy.

The pan-European STOXX 600 index fell 1.5 per cent, but was trading less than 2 per cent below its all-time high. Miners, travel and technology stocks were the top decliners.

A jump in regulated electricity and gas bills and clothing and footwear prices saw British consumer price inflation more than double in April, data showed on Wednesday.

Central bank policymakers expect the surge to be temporary, but investors are worried that the price rises may last for a prolonged period, pushing central banks to counter it with policy tightening.

“The worries that you see around inflation and long-bond yields starting to tick up, particularly in the US, are concerns on a global equity level and they will impact Europe,” said Aaron Barnfather, European equities portfolio manager at Lazard Asset Management.

“But Europe has lot less risks because we haven’t performed as well, and from the quantitative easing point of view, the ECB has been clear that they will continue for some period of time.”

European Central Bank chief Christine Lagarde said on Tuesday it was “essential that monetary and fiscal support are not withdrawn too soon.”

Investors will be watching for more clues on inflation when the US Federal Reserve releases its minutes from the latest policy meeting later on Wednesday.

Meanwhile, bitcoin and ether tumbled to 3-1/2-month lows following China’s move a day ago to ban financial and payment institutions from providing cryptocurrency services.

“The collapse across the entire realm of cryptocurrencies has many fearful of the economic implications of such capital destruction,” said Joshua Mahony, senior market analyst at IG.

A volatility gauge of European equities rose to its highest in almost a week.

Chip stocks came under pressure, with ASM International, ASML and Infineon Technologies each down more than 2 per cent on concerns about a global semiconductor shortage.

A report by the German Economic Institute showed bottlenecks in the supply of raw materials could cost Germany a rapid recovery from the economic impact of the coronavirus pandemic, with two-thirds of the sectors reporting supply constraints.

European banks posted the smallest declines, helped by rising euro zone government bond yields.

British infrastructure investor John Laing Group surged 11.2 per cent after US private equity firm KKR agreed to buy the company in a deal valued at about 2 billion pounds ($2.84 billion).

North America

Wall Street’s main indexes closed lower on Wednesday after minutes from an April Federal Reserve meeting showed participants agreed the US economy remained far from the central bank’s goals, with some considering discussions on tapering its bond buying program.

The Dow Jones Industrial Average fell 164.62 points, or 0.48 per cent, to 33,896.04, the S&P 500 lost 12.15 points, or 0.29 per cent, to 4,115.68 and the Nasdaq Composite dropped 3.90 points, or 0.03 per cent, to 13,299.74.

The S&P 500 added to losses after the release of the minutes revealed a number of Fed policymakers thought that if the economy continued rapid progress, it would become appropriate “at some point” in upcoming meetings to begin discussing a tapering of the Fed’s monthly purchases of government bonds, a policy designed to keep long-term interest rates low.

“There continues to be a view and a perspective from the participants, as well as the Fed staff that these inflationary pressures that are beginning to become evident will remain transitory in their view and will likely recede as we transition into 2022,” said Bill Northey, senior investment director at US Bank Wealth Management in Minneapolis.

Strong inflation readings and signs of a worker shortage in recent weeks have fueled fears and roiled stock markets despite reassurances from Fed officials that the rise in prices would be temporary.

All three main indexes hit their session lows in morning trade after opening sharply lower, then partially recovered before the release of the Fed minutes pressured them anew.

Contributing to a risk-off mood on Wednesday, Bitcoin and ether plunged in the wake of China’s move to ban financial and payment institutions from providing cryptocurrency services.

The two main digital currencies fell as much as 30 per cent and 45 per cent, respectively, but they significantly stemmed their losses in afternoon trading after two of their biggest backers -- Tesla Inc chief Elon Musk and Ark Invest’s chief executive officer Cathie Wood -- reiterated their support for bitcoin.

Crypto-exchange operator Coinbase Global, miners Riot Blockchain and Marathon Digital Holdings saw their shares sharply decline on Wednesday.

With Reuters

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

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