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Global Market Report - 22 December

Lewis Jackson  |  22 Dec 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to tick up as Wall Street rebounds after three days of losses.

The Australian SPI 200 futures contract was up 11 points or 0.15% at 7272 near 8.00 am AEST on Wednesday, suggesting a positive start to trading.

US stocks climbed Tuesday, resuming the seesaw action that has become markets' signature since the emergence of the Omicron Covid-19 variant.

The S&P 500 advanced 1.8%, the Nasdaq Composite rose 2.4% and the Dow Jones Industrial Average gained about 560 points, or 1.6%. All three indexes fell in the three previous trading sessions, pushed down by concerns over new Covid-19 lockdowns.

The Australian dollar was buying 71.49 US cents near 8.00am AEST, down from the previous close of 71.10. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, fell to 90.28.

Locally, the S&P/ASX 200 closed 0.9% higher at 7355.0, shrugging off a negative lead from global stocks amid gains by commodity and health stocks.

The benchmark opened higher and gained through a session that included the RBA reiterating that it doesn't expect the Omicron coronavirus variant to derail Australia's economic recovery.

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The health sector jumped 3.9% as CSL—the second-largest company on the ASX by market capitalization—added 4.9%, continuing its rally after dipping on a capital raise.

BHP, Fortescue and Rio Tinto added between 1.5% and 3.2% as the materials sector put on 0.9% despite weakness in lithium stocks. Energy shares rebounded from their week-opening selloff.

Gold futures slipped 0.3% to $US1788.50 an ounce; Brent crude rebounded 3.8% to $US74.21 a barrel; iron ore rose 2.6% to US$126.71 a tonne.

The yield on the Australian 10-year bond rose to 1.59%, with the US 10-year Treasury yield advancing to 1.47%.

Asia

Chinese stocks ended higher on broad-based gains, with property developers outperforming the wider market amid further signs of easing policy on the sector. Poly Developments, Greenland Holdings and Seazen Holdings each gained more than 5%. Related sectors rode the momentum higher, with Anhui Conch Cement adding 2.3% and home-appliance maker Midea Group rising 2.9%. The Shanghai Composite Index climbed 0.9%, the Shenzhen Composite Index rose 1.0% and the ChiNext Price Index was 0.5% higher.

Hong Kong's benchmark Hang Seng Index rose 1.0%, rebounding after the index on Monday closed at its lowest level since March 2020. Tech stocks led gains, as valuations have become attractive following consecutive days of declines. KGI Securities also noted signs of improving performance by Chinese tech giants' ADRs in the US market overnight. Meituan rose 4.5%, Xiaomi was up 4.4% and Tencent added 2.5%.

Japan's Nikkei Stock Average climbed 2.1% as US stock futures rose and the yen weakened. Equities in Asia including Japan are higher, thanks to a wave of short-covering sharply lifting US stock futures, Oanda says. Shionogi & Co. jumped 5.3% after saying Monday that its oral drug has high antiviral activity against Covid-19's Omicron variant.

Europe

European stocks advance as investors regained their poise after Monday's sharp losses. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies rose 1.5%.

In London, the FTSE 100 gained 1.4% with gains highlighting early-dip buying ahead of a likely brief wave of the Omicron coronavirus variant.

"UK Chancellor Rishi Sunak's decision to provide financial support for struggling businesses does bring some optimism, although traders will be aware that this is likely to be a precursor to further restrictions," IG Group senior market analyst Joshua Mahony says.

North America

US stocks climbed Tuesday, resuming the seesaw action that has become markets' signature since the emergence of the Omicron Covid-19 variant.

The S&P 500 advanced 1.8%, the Nasdaq Composite rose 2.4% and the Dow Jones Industrial Average gained about 560 points, or 1.6%. All three indexes fell in the three previous trading sessions, pushed down by concerns over new Covid-19 lockdowns.

Investors have a mix of concerns heading into the end of the year. The rise in Omicron cases could prolong the global supply-chain disruptions that have added to inflation. However, there are also signs that vaccine boosters offer protection against Omicron. The Biden administration said Tuesday that it is preparing to distribute 500 million free at-home Covid-19 testing kits to Americans to tackle rising cases.

Meanwhile, some investors are hoping that a version of Democrats' $2 trillion spending package can still be passed. Senate Majority Leader Chuck Schumer said Democrats would take up the legislation early next year, despite opposition from Sen. Joe Manchin.

Some traders were likely closing out positions before the end of the year, locking in gains. Omicron has whipsawed stocks since Thanksgiving, but the S&P 500 is still up more than 20% this year.

"The market is just rebounding after profit-taking in these last number of days because it's been such a strong year," said Linda Duessel, senior equity strategist at Federated Hermes. "We're running out of time here but there is still a chance for that Santa Claus rally, which we've been cheering for."

Investors said markets are having difficulty interpreting the long-term threat posed by the Omicron variant, signaling that some volatility could extend into next year.

"Everybody is trying to put decimal point accuracy on forecasts right now; that's kind of a fool's game," said Richard Bernstein, chief executive at Richard Bernstein Advisors.

General Mills shares fell 4% after the food company reported a quarterly profit that missed expectations. Micron Technology shares gained more than 10% after the memory-chip company posted strong results and provided better-than-expected forecasts. Rite Aid shares climbed 21% after the drugstore chain said that its plans to close stores will boost earnings. Nike shares rose 6.2% after the sneaker maker posted earnings and sales that topped analysts' expectations, despite persistent supply-chain challenges.

Investors are also eyeing what themes are going to drive the markets next year. Value stocks, such as financials, energy, utilities, materials and industrials, tend to do well when interest rates go higher. However, investors will need to keep adjusting their outlook as the pandemic progresses.

"With the equity markets, it's kind of like a biathlon," said Larry Adam, chief investment officer at Raymond James. "We've been skiing very rapidly and then in the second part of the biathlon, you have target practice, where you have to be much more precise and focused with sector, individual stock and industry calls.

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

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