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Global Market Report - 20 October

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

The ASX is set to follow Wall Street higher as Q3 earnings in the US inspire confidence. 

The Australian SPI 200 futures contract was up 41 points or 0.55 per cent at 7,383 near 8.00 am AEST on Wednesday, suggesting a positive start to trading.

US stocks rose as investors parsed earnings reports for insight into how companies are coping with inflation and supply-chain disruptions.

The S&P 500 gained 0.7%, while the Dow Jones Industrial Average added 0.6%, or about 200 points. The tech-heavy Nasdaq Composite rose 0.7%.

Third-quarter earnings season is in its early days, with about 10% of S&P 500 companies having reported. Of those, roughly four out of five have beaten profit forecasts, according to FactSet.

The Australian dollar was buying 74.74 US cents near 8.00am AEST, up from the previous close of 74.10. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 88.17.

Locally, the S&P/ASX 200 closed 0.1% lower at 7374.9 after giving up early gains.

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Weakness among commodity stocks offset strength elsewhere, with iron ore miners Fortescue, BHP and Rio Tinto losing between 1.2% and 3.25%.

The energy sector also fell amid losses by Soul Pattinson, Woodside and Worley.

The heavyweight financial sector edged lower by 0.2% despite Zip Co. putting on 5.2% amid largely positive analyst reaction to its 1Q performance.

That left the tech, health and consumer discretionary sectors as the best performers. Xero, WiseTech and Afterpay added between 1.8% and 2.7%, while Cochlear added 1.9% after reiterating its FY guidance.

BHP's first-quarter production was soft, says Macquarie bank, with better-than-expected petroleum and energy coal output being offset by misses for metallurgical coal, copper and iron-ore output volumes.

Spot gold rose 0.3% to $US1769.24 an ounce; Brent crude rose 1.2% to $US85.30 a barrel; Iron ore was down 28 cents to US$124.04.

The yield on the Australian 10-year bond fell to 1.72%; The US 10-year Treasury note rose to 1.64.

Asia

Chinese stocks ended the session higher Tuesday, showing signs of recovery from the range-bound trading pattern so far this month. The benchmark Shanghai Composite Index rose 0.7%. The agriculture sector, with companies such as hog raisers, led the gains, amid recent increase in pork prices in China.

Hong Kong shares ended higher for the third consecutive trading day, partly driven by hopes that Beijing may introduce more policy support in the coming months after China's 3Q GDP growth missed expectations. The benchmark Hang Seng Index rose 1.5%.

The Nikkei Stock Average closes 0.7% higher as gains in e-commerce, chip and shipping stocks help offset some losses in energy, airline and auto stocks. Investors are focusing on developments in economic policy ahead of Japan's lower-house election later this month.

Europe

European stocks were mostly higher Tuesday after US equities rallied after strong corporate earnings.

"US markets are helping to drive European indices higher, as fears over rising inflation and the impending period of monetary tightening are put on the back burner for now," IG analyst Joshua Mahony says.

The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, rose 0.3%.

In London, the FTSE 100 was 0.2% higher.

North America

US stocks rose Tuesday as investors parsed earnings reports for insight into how companies are coping with inflation and supply-chain disruptions.

The S&P 500 gained 0.7%, while the Dow Jones Industrial Average added 0.6%, or about 200 points. The tech-heavy Nasdaq Composite rose 0.7%.

Third-quarter earnings season is in its early days, with about 10% of S&P 500 companies having reported. Of those, roughly four out of five have beaten profit forecasts, according to FactSet.

A handful of strong reports have helped calm fears of how badly inflation and supply-chain problems would affect corporate results, said Lamar Villere, portfolio manager at investment firm Villere & Co.

"I wouldn't say the fog has been lifted or the fear is gone, but at least you've got some reasonably positive data points," he said.

Traders rewarded some companies that reported Tuesday. Shares of Johnson & Johnson rose 2.4% after the company logged a larger profit in its third quarter than a year earlier, lifted by higher sales in its pharmaceutical, medical-device and consumer-health divisions. Travelers shares climbed 1.6% after the insurance company beat estimates for revenue and core income per share.

Procter & Gamble shares, however, fell 1.1% after the consumer-product giant said it was raising prices on a host of household staples, as costs for freight and raw materials rose faster than anticipated.

Inflation is expected to be stickier than originally anticipated by central-bank officials, exacerbated by continued supply-chain disruptions, higher energy costs and labor shortages. Some investors expect supply problems will pinch companies' sales.

"Will the market look through some of these supply constrained sales shortfalls?" said Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management. "I think the market should, because I don't think the consumer is going to walk away and not buy even if they have to wait a month or two."

Most sectors of the S&P 500 advanced, led by health care and utilities stocks, while the consumer discretionary group pulled back.

Bitcoin's dollar value rose about 3.9%, trading at $63,859 Tuesday. The first bitcoin-focused exchange-traded fund rose in its debut Tuesday. Cryptocurrency analysts said they will be watching to see how strong flows into the fund are, to assess whether the cryptocurrency's recent price rally will hold.

In bond markets, the yield on the benchmark 10-year US Treasury note ticked up to 1.634% Tuesday from 1.583% Monday. Yields rise when bond prices fall.

Fresh data showed that construction of new homes in the US decreased in September after rising in August. Builders have been caught between strong demand from buyers -- spurred in part by low interest rates -- and shortages of materials, labor and lots.

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

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