Global Market Report - 21 June
Australian shares are set to follow Wall Street down at the open, as US markets sold off Friday on the prospect of rate hikes as early as next year.
Australia
Australian shares are set to follow Wall Street down at the open, as US markets sold off Friday on the prospect of rate hikes as early as next year.
The Australian SPI 200 futures contract was down 111 points or 1.52 per cent to 7,168 near 7.30 am Sydney time on Monday, suggesting a negative start to trading.
The three main Wall Street indexes have all finished sharply lower after investors were spooked by hawkish interest rate comments by Federal Reserve official James Bullard.
The Dow Jones Industrial Average fell 534.22 points, or 1.58 per cent, to 33,289.23, the S&P 500 lost 56.07 points, or 1.33 per cent, to 4,165.79 and the Nasdaq Composite dropped 131.66 points, or 0.93 per cent, to 14,029.69.
The Australian dollar was buying 74.83 US cents near 7.30am AEST, down from 75.33 at Friday’s close.
Locally, shares on the ASX had their fifth consecutive week of gains - the best run this year - and ended the week at a record closing high.
Information technology shares gained most, 3.53 per cent, on Friday as investors rebounded from Thursday's US rate rise concerns.
Buy now, pay later providers thrived. Zip rallied by 9.85 per cent to $8.14. Afterpay climbed 6.45 per cent to $114.40.
The benchmark S&P/ASX200 index closed higher by 9.9 points, or 0.13 per cent, to 7368.9.
The index came within three points of an all-time intra-day high.
The All Ordinaries closed up 23.8 points, or 0.31 per cent, to 7624.3.
AMP head of investment strategy Shane Oliver pondered why investors returned to technology stocks.
"I suspect the market was worried the Fed Reserve was going to let inflation get out of hand. Now they're less worried," he said.
US Federal Reserve officials on Thursday fast-tracked their estimates of lifting rates to 2023.
The central bank raised economic growth and inflation estimates as the economy surges higher from the depths of the pandemic.
The US technology index, the Nasdaq, was the only one of Wall Street's main three to close higher on Friday.
Yet Mr Oliver was not too worried about the ASX's trajectory.
"We'll continue to move higher by year end. I don't think the Fed or RBA will move rates so much that it will threaten economic recovery," he said.
However he said the looming September quarter was usually rougher for the market.
US Federal Reserve moves to taper its bond-buying and any higher inflation figures from the US could pose concerns, Mr Oliver said.
The prospect of higher rates kept investors moving the US dollar higher.
The Aussie dollar was buying about 75 US cents for most of the day.
A higher US dollar weighed on most commodities such as oil, which are traded in US dollars, and their respective shares.
Energy shares had the greatest fall on the ASX of 1.9 per cent.
Santos was one of the biggest losers and shed 3.55 per cent to $7.34.
Materials shares fell 1.1 per cent even though the price of iron ore rose.
BHP slipped 2.45 per cent to $46.52. Fortescue and Rio Tinto lost less than one per cent.
The other heavyweight category, financials, was down 0.74 per cent.
The Commonwealth Bank fared worst of the big four and slipped 2.1 per cent to $103.69.
There were gains of about two per cent for consumer discretionaries and telecommunications.
Healthcare and industrials shares gained more than one per cent.
Woolworths had an eventful day.
Its pubs and liquor stores business Endeavour will debut on the ASX in the next couple of weeks after shareholders approved a demerger.
The Fair Work Ombudsman started Federal Court action against the supermarket giant over allegations it underpaid 70 salaried managers upwards of $1.1 million.
Woolworths in 2019 flagged the problem and pledged to compensate those affected.
Shares were lower by 1.57 per cent to $42.67.
BetMakers Technology Group climbed 12.96 per cent to $1.22 after completing the purchase of the racing, tote and digital businesses of Sportech.
The newly-acquired businesses are based in Europe, the UK and the US.
Infant formula provider Bubs soared by 29.33 per cent to 48 cents after a deal with Walmart to supply US consumers.
The Aussie Bubs range will be available via Walmart online from September.
Spot Gold was down at $US1767.90 an ounce; Brent crude was up at $US73.51 a barrel.
The yield on the Australian 10-year bond closed at 1.59 per cent.
Asia
At the close, China's Shanghai Composite index was down 0.01 per cent at 3,525.10.
The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, was up 0.85 per cent, to 28,801.27.
Japan's Nikkei 225 Index closed down 0.19 per cent at 28,964.08.
Europe
The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down 1.58 per cent at 452.05.
The German DAX fell 1.78 per cent to 15,448.04.
North America
The three main Wall Street indexes have all finished sharply lower after investors were spooked by hawkish interest rate comments by Federal Reserve official James Bullard.
The Dow Jones Industrial Average fell 534.22 points, or 1.58 per cent, to 33,289.23, the S&P 500 lost 56.07 points, or 1.33 per cent, to 4,165.79 and the Nasdaq Composite dropped 131.66 points, or 0.93 per cent, to 14,029.69.
The blue-chip Dow and the benchmark S&P 500, which started the week at record closing levels, slumped after Bullard, president of the St. Louis Federal Reserve, said he was among the seven officials who expected rate increases beginning next year to contain inflation.
Inflation, and how the US central bank will tackle it as the country comes out of the pandemic, had been front-and-centre of investors' minds in the run-up to this week's Fed policy meeting.
Therefore, since the Fed on Wednesday projected interest rate hikes would happen sooner than previously expected, and signalled it was reaching the point where it could begin talking about tapering its massive stimulus - as opposed to just thinking about it - Wall Street's main indexes have struggled.
"I'm not surprised to see the market sell off a little bit. I'm never surprised, given the strong run we've had for such a long period of time, when you see some periods of profit-taking," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
Bullard's comments spiked the CBOE volatility index, Wall Street's fear gauge, which initially hit its highest level since May 21 before dropping back a touch.
"Next week, you will have various Fed governors give speeches, and we'll have the same thing: some governors will be more hawkish and some will be more dovish, so you'll see some back-and-forth," Ghriskey added.
Other market ramifications from Bullard's comments have included further strengthening of the US dollar.
The index which tracks the greenback against six major currencies jumped to its highest level since mid-April and is on pace for its largest weekly gain in about 14 months.
While US crude prices - which traditionally suffer from a strong US dollar - initially fell on Friday, they rebounded after OPEC sources said the producer group expected limited US oil output growth this year.
The upward commodity move didn't translate into positive sentiment for US energy stocks, with the sector's index joining financials as the worst performers.
Friday was also "quadruple witching day," the quarterly simultaneous expiration of US options and futures contracts which bring about increased trading volume at the market close.
It was the largest options expiration in history, noted Randy Frederick, vice president of trading and derivatives for Charles Schwab.
