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Global Market Report - 21 July

Lewis Jackson  |  21 Jul 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rebound as traders on Wall Street bought the dip and US corporate earnings continued to beat forecasts.

The Australian SPI 200 futures contract was up 49 points or 0.68 per cent at 7,210 near 7.10 am Sydney time on Wednesday, suggesting a positive start to trading.

Wall Street has ended sharply higher, bouncing back from a multi-day losing streak as a string of upbeat earnings reports and revived economic optimism fuelled a risk-on rally.

The Dow Jones Industrial Average rose 550.48 points, or 1.62 per cent, to 34,512.52, the S&P 500 gained 64.72 points, or 1.52 per cent, to 4,323.21 and the Nasdaq Composite added 223.89 points, or 1.57 per cent, to 14,498.88.

The Australian dollar was buying 73.32 US cents near 7.30am AEST, up from 73.18 at Tuesday's close.

Locally, Australian shares ended lower on Tuesday for a second straight session as the growing uncertainty due to widening coronavirus lockdowns kept investors nervous.

The benchmark S&P/ASX200 index lost 33.8 points, or 0.46 per cent lower, at 7252.20, while the broader All Ordinaries index fell 33.9 points, or 0.45 per cent, to 7525.80.

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Local investors latched on to the dampened sentiment across the region amid fears the spreading Delta variant of the coronavirus will hurt global economic recovery.

"Markets have been jittery because of the lockdown uncertainty. No one knows exactly how long some of these are going to last and there's also been a spike in cases," CommSec market analyst Steven Daghlian said.

"The market is being quite cautious, and it wouldn't be surprising to see the volatility continue until we get a bit more clarity."

NSW reported another 78 cases on Tuesday, with infections showing no signs of falling despite three weeks of lockdown.

Neighbouring Victoria reported 13 new cases, prompting it to extend lockdown for at least seven days, while South Australia announced it will also enter a seven-day lockdown.

The decisions have sparked concerns about the hit to economic recovery.

The nervousness was most visible in mining shares, with heavyweights BHP and Rio Tinto sliding more than 2.5 per cent, while Fortescue Metals lost 1.0 per cent.

BHP shares were also affected by the global miner reporting a dip in fourth quarter iron ore production, even as annual output for many of its other divisions also declined.

Energy stocks also suffered after oil prices plunged over worries about future demand and by an OPEC+ agreement to increase supply. Still, the damage was limited by a 6.2 per cent surge in Oil Search shares to $3.90 after confirmation that rival Santos is pursuing an unsolicited takeover bid for the company.

Energy suppliers AGL and Origin ended more than 2 per cent lower.

Defensive sectors such as healthcare and consumer staples continued to defy the market trend. Protective clothing maker Ansell and Biotech giant CSL were among the major gainers, rising nearly 2 per cent each.

JB Hi-Fi shares also jumped 3.7 per cent at $49.51 after the white goods retailer reported preliminary full year results showing sales were up 12.6 per cent and net profit had soared 67.4 per cent.

ANZ was the only one of the Big Four banks in the green, closing 0.6 per cent higher at $27.32.

Spot Gold was down 0.1 per cent at $US1811.27 an ounce; Brent crude was up 1 per cent at $US69.27 a barrel.

The yield on the Australian 10-year bond closed at 1.18 per cent.

Asia

At the close, China's Shanghai Composite index was down 0.07 per cent at 3,536.79.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 0.84 per cent at 27,259.25.

Japan's Nikkei 225 Index was down 0.96 per cent at 27,388.16.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up 0.52 per cent at 446.61.

The German DAX was down at 15,216.27.

North America

Wall Street has ended sharply higher, bouncing back from a multi-day losing streak as a string of upbeat earnings reports and revived economic optimism fuelled a risk-on rally.

The Dow Jones Industrial Average rose 550.48 points, or 1.62 per cent, to 34,512.52, the S&P 500 gained 64.72 points, or 1.52 per cent, to 4,323.21 and the Nasdaq Composite added 223.89 points, or 1.57 per cent, to 14,498.88.

All three major US stock indexes gained more than 1.0 per cent with the blue-chip Dow, on the heels of its worst day in nine months, leading the charge.

The S&P notched its first advance in four days and the Nasdaq posted its first gain in six.
"It's a buy-the-dip mentality coming into the market," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

Economically sensitive small caps and transports outperformed the broader market.
Benchmark US Treasury yields bounced back from five-month lows after their biggest single-session decline since February in the prior session.

This bolstered rate-vulnerable banks.

"The economically sensitive stocks are up today," Carlson added.

"When the 10-year (Treasury yield) goes down in a short period of time, that typically doesn't happen with an economy that's supposed to be growing. Firming in the 10-year (yield) indicates that perhaps the economy isn't going to be falling off a cliff."

Mounting concerns over the highly contagious Delta variant of COVID-19, now responsible for the majority of new infections, have sparked sell-offs in recent sessions as worldwide vaccination efforts gather momentum.

"Things like the Delta variant can certainly impact in the margins," Carlson said.

"It doesn't take a whole lot of fear in some investors to create what we saw yesterday."

Second-quarter reporting season has hit full-stride, with 56 of the companies in the S&P 500 having posted results.

Of those, 91 per cent have beaten consensus, according to Refinitiv.

Analysts now expect annual S&P earnings growth of 72.9 per cent for the April-June period, a significant improvement over the 54 per cent growth seen at the beginning of the quarter.

Halliburton Co rose after a bounce-back in crude prices boosted oilfield services demand, leading the company to post its second consecutive quarterly profit.

Peloton Interactive Inc advanced following its announcement that it would provide UnitedHealth Group's fully insured members free access to its live and on-demand fitness classes.

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

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