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Global Market Report - 22 April

Lewis Jackson  |  22 Apr 2022Text size  Decrease  Increase  |  
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Australian shares are poised to decline alongside Wall Street as investors dumped bonds and technology stocks amid firming expectations of more aggressive policy tightening from the US Federal Reserve.

ASX futures were down 65 points or 0.9% at 7497 as of 8.00am on Friday, suggesting a negative start to the last trading day before a three-day weekend.

The S&P 500 fell 1.5%, erasing its 1% gain on Wednesday from upbeat earnings. The Dow Jones Industrial Average was down 1%. The Nasdaq Composite dropped 2.1%, adding to losses from a day earlier after a selloff in Netflix shares led the technology sector lower.

Tesla shares jumped 3.2% after the electric-vehicle maker reported $3.3 billion in quarterly profits late Wednesday, its highest profit to date.

Bonds resumed their selloff along the yield curve after Wednesday’s brief rally. The US 10 year Treasury note rose to 2.91%, while the 2 Year hit 2.68% as market pricing firmed on 0.5% rate hikes at the US Federal Reserve’s next three meetings. That would take US interest rates to a range between 1.75% and 2% by July.

Fed Chairman Jerome Powell said a 0.5% rate hike “will be on the table” at the central bank’s May meeting in comments on Thursday in Washington D.C. He also appeared to support “frontloading” rate hikes. Once the position of the bank’s most hawkish members, doing several large hikes in quick succession to reach the “neutral” level of slightly above 2% is gaining sway as the Fed grapples with rising inflation.

Locally, the S&P/ASX 200 closed 0.3% higher at 7592.8 on Thursday, finishing just short of a record after a five-day winning streak.

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The benchmark index shrugged off negative leads by both the S&P 500 and Nasdaq Composite to follow the DJIA higher.

The heavyweight financial sector added 1.1% as banks ANZ, Westpac, NAB and Commonwealth gained between 0.3% and 1.0%.

Wealth manager Challenger jumped 9.8% and was the best performing index component, followed by pallet supplier Brambles, which rose 8.0% after raising its annual guidance.

Takeover target Ramsay Health Care rose another 3.7%, but materials and tech stocks pared overall gains.

The ASX 200 closed 0.5% short of its August 2021 record of 7628.92.

In commodity markets, iron ore gave up 0.4% to US$150.05 per tonne; gold futures lost 0.4% to $1,948.20; Brent crude oil added 1.9% to US$108.83.

In local bond markets, the yield on the Australian 10 Year bond eased to 3.08%.

The Australian dollar was buying 73.69 US cents as of 7.00am, down from the previous close of 74.49. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 93.23.


Chinese stocks ended lower, in line with weakness in their Hong Kong counterparts, as concerns over the country's slowing economy and uncertain pandemic policy continued to weigh on sentiment. The benchmark Shanghai Composite Index fell 2.3% to settle at 3079.81, while the Shenzhen Composite Index was 3.1% lower at 1923.81. The ChiNext Price Index declined 2.2% to end at 2312.46. The tourism sector led losses, with tourism agency China CYTS Tours losing 6.8% and tourism-attraction site operator Emei Shan Tourism falling 8.7%.

Hong Kong stocks ended the session lower, extending a losing streak for the third day as sentiment remains weak due to China's Covid-19 resurgence and expectations of a substantial economic slowdown in 2Q. The benchmark Hang Seng Index fell 1.3% to settle at 20682.22. Chinese internet giants led the downturn, tracking the sector's deep losses on Wall Street overnight. JD.com dived 6.5% and Meituan fell 4.9%.

Japan's Nikkei Stock Average ended 1.2% higher at 27553.06, led by gains in electronics and machinery stocks amid easing concerns over higher borrowing costs. Nikkei has been helped by the BOJ conducting rate-capping operations in the JGB market, said Oanda's senior market analyst Jeffrey Halley in an email. Lasertec Corp. climbed 6.3%, Disco Corp. rose 4.3% and Daifuku gained 4.1%, while Tokyo Electron added 3.6% and Renesas Electronics rose 3.05%. USD/JPY was at 128.17, compared with 128.69 as of Wednesday's Tokyo stock market close.


The Stoxx Europe 600 rose 0.3% and the German DAX gained 1%. France’s CAC 40 advanced 1.4% after a pre-election debate in which incumbent, pro-business President Emmanuel Macron was judged by polls to have beaten far-right challenger Marine Le Pen.

Airline stocks rallied after United Airlines and American Airlines become the latest US carriers to say they expect a return to profit. Akzo Nobel gained 6.5% after the Dulux paint maker reported 1Q earnings ahead of analysts' expectations. Kinnevik slumped 10.0% after the investment company said 1Q net asset value dropped.

London’s FTSE 100 index closed flat, down 0.02% on Thursday as weakness in basic resources caused it to lag the wider market, CMC Markets UK Chief Market Analyst Michael Hewson says in a research note.

Anglo American and Antofagasta came out with disappointing first-quarter production reports, following that of Rio Tinto on Wednesday, Hewson says. Rentokil shares were on the up though, finishing 1.8% higher, after a rise in first-quarter revenue and comments that it was trading in line with expectations.

ITV finished the day as the top gainer, up 6.5%, with British Airways owner International Consolidated Airlines Group close behind at 6.2% up. Anglo American was the furthest in the red after a guidance cut, finishing down 8.8%.

North America

US stocks slid Thursday, erasing their gains from earlier in the day after a selloff in government bonds picked up steam.

Investors this year have had to weigh signs of solid economic activity against fears that the Federal Reserve will tighten monetary policy too quickly, potentially tripping up markets. Many credit stocks' strong run over the past few years in part to extraordinary levels of monetary support from central banks.

With the Fed preparing to raise rates several more times this year and unwind its $9 trillion balance sheet, some money managers say they worry risky assets will struggle to hold on to the momentum of prior years. Fed Chairman Jerome Powell signalled Thursday that the central bank was likely to raise interest rates by a half percentage point at its meeting next month.

Anxiety over the Fed's projected rate-increase path helped fuel selling in Treasurys. The yield on the 10-year US Treasury note jumped from 2.836% Wednesday to 2.917% Thursday, the highest level since December 2018.

The renewed push higher in bond yields put fresh pressure on the stock market. Higher rates can put pressure on stocks because they reduce the premium that investors get from holding riskier assets instead of Treasurys.

The S&P 500 fell 1.5%. The Nasdaq Composite dropped 2.1%, adding to losses from Wednesday after a selloff in Netflix shares led the technology sector lower. The Dow Jones Industrial Average was down 1%.

Some analysts say they believe even as the Fed normalizes monetary policy, US stocks still have room to run, given the strength of the economy. So far, about 80% of the S&P 500 companies that have posted earnings results for the latest quarter have beaten analysts' expectations, according to FactSet.

"Despite so many negative macro headlines, like the Russia-Ukraine conflict, inflation, and China's zero-COVID policy, US corporate profits continue to be resilient," said Michael Arone, chief investment strategist for SPDR at State Street Global Advisors.

Tesla shares jumped $31.58, or 3.2%, to $1,008.78 after the electric-vehicle maker reported $3.3 billion in quarterly profits late Wednesday, its highest profit to date. American Airlines Group shares rose 74 cents, or 3.8%, to $20.22 after the carrier reported that revenue more than doubled in the first quarter.

Beyond earnings, data on employment has shown the US labour market is on solid footing, Mr. Arone said.

"I don't think the rise in rates will matter too much until you see economic data fall over," he said.

Technology shares, which tend to be sensitive to changes in interest rates, were among the worst performers in the market Thursday.

Advanced Micro Devices slipped $4.17, or 4.4%, to $89.85, while Salesforce lost $9, or 4.8%, to $177.23.

Meanwhile, oil prices rose on signs that Russian oil production is falling and Europe is moving toward putting an end to imports of Russian crude. US crude-oil prices added 1.6% to $103.79 a barrel. Germany said Wednesday it would stop buying Russian oil by the end of the year.

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

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