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Global Market Report - 22 June

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

Australian shares look set to rebound after Wall Street rallied strongly as investors returned to the "reflation" trade.

The Australian SPI 200 futures contract was up 89 points or 1.24 per cent to 7,244 near 7.10 am Sydney time on Tuesday, suggesting a positive start to trading.

Wall Street has rallied, with the Dow completing its strongest session in over three months as investors piled back in to energy and other sectors expected to outperform as the economy rebounds from the pandemic.

The Dow Jones Industrial Average rose 1.76 per cent to end at 33,876.97 points while the S&P 500 gained 1.40 per cent to 4,224.79 and the Nasdaq Composite climbed 0.79 per cent to 14,141.48.

The Australian dollar was buying 75.38 US cents near 7.30am AEST, up from 74.85 at Monday's close.

Locally, stocks have had their worst day in more than four weeks on the Australian market as investors began believing warnings of higher rates in a year or two.

The ASX200 fell 1.81 per cent and its biggest category, financial stocks, shed 3.42 per cent.
The market's biggest player, the Commonwealth Bank, lost 5.43 per cent to $98.06.

Deep Data Analytics chief executive Mathan Somasundaram traced the falls to rate rise estimates in the US.

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"The market finally started to price in a rate rise," he said of the ASX.

Rates have been low since last year as financial authorities guide economies' recovery from the pandemic.

Wall Street plunged late last week after Federal Reserve official James Bullard said he saw rate increases beginning as early as next year to curb rising inflation.

Investors were already edgy after the central bank brought forward estimates of when rates will rise.

The benchmark S&P/ASX200 index closed lower by 133.6 points, or 1.81 per cent, to 7235.3 on Monday.

The All Ordinaries closed down by 139.1 points, or 1.82 per cent, to 7485.2.

Mr Somasundaram was interested in what Federal Reserve chair Jerome Powell will tell US Congress on Wednesday as part of his regular appearances.

"The US Fed speakers will try and calm the market," Mr Somasundaram said.

"It will be a fine line they have to walk, and be interesting to see whether the market gets spooked."

Investors have piled in to the US dollar since the rate rise talk.

The Aussie dollar was buying less than 75 US cents for most of Monday.

Commodities trade in the US dollar, and Mr Somasundaram noted investors were selling such stock as the rising greenback made them expensive.

ASX energy and materials shares lost almost two per cent.

Miners Fortescue and Rio Tinto lost about 2.7 per cent each. BHP shed about two per cent.
Shares in industrials and utilities lost about two per cent.

Domestically, retail sales gained only 0.1 per cent for May due to the impact of Victoria's coronavirus lockdown.

In April, spending climbed by 1.1 per cent.

NSW officials are yet to restrict movement as they monitor a virus outbreak from Bondi.
On the ASX, banks were hard hit by the prospect of rate rises that could stifle demand for their services.

Bendigo Bank lost 5.32 per cent to $10.33.

Bank of Queensland shed about five per cent to $8.78. Federal treasurer Josh Frydenberg has approved the bank's $1.32 billion purchase of Members Equity Bank.

Investors may have weighed up the Commonwealth Bank's sale of its general insurance business in their haste to offload the stock.

The bank has sold CommInsure General Insurance to the Hollard Group for more than $625 million.

The CommInsure General Insurance name will remain.

Building products supplier Boral will sell its North American business for $US2.15 billion ($2.9 billion).

The sale to Westlake Chemical Corporation will give Boral more surplus capital.

The company said it will assess how to give this capital to shareholders.

Boral shares closed up by 1.33 per cent to $6.87.

Biopharmaceuticals provider Starpharma plunged 9.41 per cent to $1.54 after it stopped selling its antiviral nasal spray in the UK.

A UK regulator has raised concern with claims about the product and COVID-19.

Starpharma is trying to resolve the dispute so it can continue selling the spray.

Spot Gold was up at $US1783.75 an ounce; Brent crude was up at $US74.92 a barrel, Iron ore was down at $US 208.15 a tonne.

The yield on the Australian 10-year bond closed at 1.52 per cent.

Asia

At the close, China's Shanghai Composite index was up 0.12 per cent at 3,529.18.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, was down 1.08 per cent, to 28,489.00.

Japan's Nikkei 225 Index closed down 3.29 per cent at 28,010.93.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up 0.70 per cent at 455.23.

The German DAX rose 1.00 per cent to 15,603.24.

North America

Wall Street has rallied, with the Dow completing its strongest session in over three months as investors piled back in to energy and other sectors expected to outperform as the economy rebounds from the pandemic.

The Dow Jones Industrial Average rose 1.76 per cent to end at 33,876.97 points while the S&P 500 gained 1.40 per cent to 4,224.79 and the Nasdaq Composite climbed 0.79 per cent to 14,141.48.

The small-cap Russell 2000 and the Dow Jones Transports Average, considered a barometer of economic health, both jumped about 2.0 per cent.

The S&P 500 value index, which includes banks, energy and other economically sensitive sectors and has led gains in US equities so far this year, surged 1.9 per cent, outperforming a 0.9 per cent rise in the growth index.

That was a stark reversal from last week, when the Fed's hawkish signals on monetary policy sparked a round of profit taking that wiped out value stocks' lead over growth this month and triggered the worst weekly performance for the Dow and the S&P 500 in months.

"The overall theme here is the market still does not know whether it wants easy money or tight money and it's in a tug of war," said Randy Frederick, vice president of trading and derivatives at Charles Schwab.

All 11 S&P 500 sector indexes rose, with energy jumping 4.3 per cent and leading the way, followed by financials, up 2.4 per cent.

Microsoft Corp rose 1.2 per cent to close at an all-time high.

The S&P 500 has traded in a tight range this month as investors juggled fears of an overheating economy with optimism about a strong economic rebound.

Focus this week will be on US factory activity surveys and home sales data while Fed Chair Jerome Powell testifies before Congress on Tuesday.

Cryptocurrency stocks, including miners Riot Blockchain , Marathon Patent Group and crypto exchange Coinbase Global, tumbled between 1.0 per cent and 4.0 per cent on China's expanding crackdown on bitcoin mining.

Moderna Inc rallied 4.5 per cent after a report said the drug maker is adding two new production lines at a COVID-19 vaccine manufacturing plant in a bid to prepare for making more booster shots.

Market participants are girding for a major trading event on Friday, when the FTSE Russell completes the annual rebalancing of its indexes, potentially affecting trillions of US dollars in investments.

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

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