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Global Market Report - 22 March

Lex Hall  |  22 Mar 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to weaken following a mixed end to trading on Wall Street last week and wild weather lashing Sydney and its outskirts.

The Australian SPI 200 futures contract was down 15 points, or 0.2 per cent, at 6,661 points at 8.30am Sydney time on Monday, suggesting a negative start to trading.

The Nasdaq ended higher on Friday, lifted by Facebook and energy shares, while the S&P 500 lost ground as US Treasury yields took a break from a recent surge.

The Dow Jones Industrial Average fell 0.71 per cent to end at 32,627.97 points, while the S&P 500 lost 0.06 per cent to 3,913.1. The Nasdaq Composite climbed 0.76 per cent to 13,215.24.

Locally, talk was circling on Sunday that US private equity giant Blackstone Group, a 10 per cent shareholder in the James Packer-backed company—which has applied to the NSW gaming regulator for probity approval to increase its stake—had made a highly opportunistic approach to the Crown board to make a takeover offer for the gaming giant through its adviser Morgan Stanley. UBS is advising Crown, The Australian reports.

Wild weather in Sydney is also likely to put pressure on listed insurance providers.

Last Friday, Australia's share market closed lower for a third consecutive day and finished down for the week as investors remained jittery about the prospect of inflation.

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The S&P/ASX200 benchmark index closed lower by 37.7 points, or 0.56 per cent, to 6,708.2 on Friday.

The All Ordinaries closed lower by 40.5 points, or 0.58 per cent, at 6,963.1.

For the week, the ASX200 was down 0.87 per cent.

US markets were lower as bond yields rose despite US Federal Reserve assurances a day earlier it would not raise rates soon and would help a recovering economy.

Gold was up 0.5 per cent at $US1,745.23 an ounce; Brent oil was up 2.0 per cent to $US64.53 a barrel; Iron ore was down 3.1 per cent to $US161.39 a tonne.

Meanwhile, the Australian dollar was buying 77.03 US cents at 8.30am, down from 77.44 US cents at Friday’s close.

Asia

The Shanghai Composite Index fell 1.7 per cent from a two-week high and capped a fourth straight weekly slide.

In Hong Kong, the Hang Seng Index sank 1.4 per cent to 28,990.94 at the close, snapping a four-day winning streak and trimming this week’s advance to 0.9 per cent.

In Japan, the Nikkei 225 fell 1.41 per cent.

Europe

European stocks slid on Friday after France imposed fresh regional lockdowns to curb the spread of the coronavirus, amid concern over the pace of vaccination campaigns in some countries, while bank stocks led sectoral declines.

The pan-European STOXX 600 fell 0.8 per cent, with France’s CAC 40 dropping 1.1 per cent after the nation imposed a new four-week lockdown from Friday in 16 regions badly hit by the covid-19 crisis.

“The new lockdown will have a significant impact on economic activity and further deteriorate France’s economic outlook for the first part of 2021,” said Charlotte de Montpellier, economist, France and Switzerland, at ING.

“The current slow pace of the vaccination campaign leaves little hope for a full lifting of the restrictions after the end of the 4-week lockdown.”

French hotel group Accor, Air France and catering company Sodexo were flat to lower.

Concerns over the pace of vaccination gained ground after Britain said it will have to slow its rollout next month due to a supply crunch caused by a delay in shipment.

“We are in this awkward phase where we are clearly seeing light at the end of the tunnel even through slow vaccination,” said Philipp Lisibach, chief global strategist at Credit Suisse in Zurich.

“Nonetheless, in the summer we expect that many countries will be in a position to lift some of the restrictions and we expect that this is going to be the kick-off of a sharp economic reacceleration in Europe.”

European stocks still gained 0.2 per cent for the week as a rally in automakers and signs that the US Federal Reserve will maintain low interest rates despite an expected surge in economic growth outweighed concerns about rising yields.

Automakers fell 1.6 per cent after a strong run, ending with the sector’s best weekly performance since early February. The banks index tumbled 2.3 per cent, posting the biggest declines among European sectors on Friday.

Lenders were particularly affected by downbeat sentiment spilling over from Wall Street after the Fed said it would not extend a temporary capital buffer relief put in place to ease a pandemic-driven stress in the funding market.

Europe’s biggest utility Enel rose 3.0 per cent after it stuck to its targets for the year after beating earnings expectations.

German sportswear makers Adidas and Puma fell more than 2 per cent each after Nike’s disappointing full-year revenue forecast.

Evolution Gaming gained 3.8 per cent after Goldman Sachs started coverage of the Swedish casino games developer with a “buy” rating.

North America

The Nasdaq ended higher on Friday, lifted by Facebook and energy shares, while the S&P 500 lost ground as US Treasury yields took a break from a recent surge.

Reversing a recent trend, so-called growth stocks mostly outperformed value stocks viewed as likely to benefit most as the economy recovers from the coronavirus pandemic.

The yield on US 10-year notes, which has risen sharply in the past seven weeks on growth expectations, hovered near a 14-month peak at $1.742 per cent.

“What we see today is a more stable rate environment across the curve after multiple weeks of rising interest rates, and we are seeing some degree of reversal of leadership in the equity market,” said Bill Northey, senior investment director at US Bank Wealth Management in Minneapolis.

Facebook Inc rallied 4.1 per cent and provided the biggest boost to the Nasdaq and the S&P 500 after Chief Executive Mark Zuckerberg said Apple Inc’s imminent privacy policy changes on ad sales would leave the social network in a “stronger position.”

The S&P 500 banks index dropped 1.6 per cent after the US Federal Reserve said it would not extend a temporary capital buffer relief put in place to ease a pandemic-driven stress in the funding market.

“Banks have had such a significant up move this year and this news has only acted as a catalyst for profit taking,” said Art Hogan, chief market strategist at National Securities in New York.

Optimism about a $1.9 trillion fiscal package and the Fed’s promise to maintain its ultra-loose policy stance for years has accelerated a shift into economy-linked stocks, powering the S&P 500 and the Dow to record levels this week.

However, the Nasdaq is still about 6 per cent below its Feb. 12 all-time closing high as technology and high-growth stocks have lost favor in recent months, with their valuations looking less attractive as Treasury yields rise.

The S&P 500 growth index rose 0.35 per cent, outperforming the value index’s 0.48 per cent dip.

Several bond managers believe the recent pace of the rise in yields has been unsettling and also worry the market could be viewed as disorderly if the momentum continues.

The Dow Jones Industrial Average fell 0.71 per cent to end at 32,627.97 points, while the S&P 500 lost 0.06 per cent to 3,913.1. The Nasdaq Composite climbed 0.76 per cent to 13,215.24.

For the week, the S&P 500 and Nasdaq fell 0.8 per cent, while the Dow lost 0.5 per cent.

Trading was orderly despite Friday being quadruple witching, the once-in-a-quarter simultaneous expiration of various derivatives, which often spurs heavy trading volume and some volatility.

“I think you saw a lot of the movement yesterday with that big selloff at the end of the day. A lot of that was to do with people closing out positions,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

Volume on US exchanges was 16.5 billion shares, compared with the 14.4 billion average for the full session over the last 20 trading days.

Visa Inc fell more than 6 per cent, erasing almost $30 billion of market capitalization after reports that the company is being investigated by the US Department of Justice.

FedEx Corp rallied 6.1 per cent after the US delivery firm said quarterly profit jumped more than expected on higher prices and surging volume from pandemic-fueled e-commerce deliveries during the holiday shipping season.

Nike Inc fell 4 per cent after the sports apparel maker missed quarterly sales estimates due to shipping issues and a pandemic-related slump at brick-and-mortar stores.

With Reuters

is senior editor for Morningstar Australia

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