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Global Market Report - 22 October

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

The ASX is set to edge slightly higher after the S&P 500 notched a new record in a late rally.

The Australian SPI 200 futures contract was up 2 points or 0.02 per cent at 7,389 near 8.00 am AEST on Friday, suggesting a positive start to trading.

The S&P 500 inched ahead to a new closing record, as investors parsed another batch of earnings reports and new data on the labour market.

The broad-based index hovered near the flatline for much of the day but closed higher, rising 13.59 points, or 0.3%, to 4549.78. It marked seven straight days of gains for the index, and its 55th record close of the year.

The tech-focused Nasdaq Composite Index rose 94.02 points, or 0.6%, to 15215.70. The Dow Jones Industrial Average ticked down 6.26 points, or 0.02%, to 35603.08.

The Australian dollar was buying 74.62 US cents near 8.00am AEST, down from the previous close of 75.13. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 88.18.

Locally, the S&P/ASX 200 closed flat at 7415.4 as losses among energy and consumer-related stocks pared gains. The benchmark sat 0.4% higher after recovering from an early stumble, but it drifted steadily lower to close just 1.7 points higher.

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The energy sector was the biggest loser, dropping 1.4% as Santos, Oil Search and Woodside gave up between 1.1% and 2.3%.

Travel stocks Corporate Travel Management, Webjet and Flight Centre shed between 2.3% and 5.8%, while drinks retailer Endeavour fell 2.2% as it warned of continued Covid-19-related uncertainty.

The heavyweight financial sector edged 0.3% higher as wealth manager Perpetual jumped 7.8% on its 1Q update, making it the best-performing ASX 200 component.

Australian consumer spending, a key ingredient of the expected coming economic recovery, is starting to normalize as lockdowns end, according to Westpac. The bank's card tracker index hit a new three-month high, with activity returning to normal quickly in New South Wales, Westpac says.

Gold futures rose 0.2% to $US1781.90 an ounce; Brent crude fell 1.2% to $US84.81 a barrel; Iron ore was 5.8% lower at US$116.93.

The yield on the Australian 10-year bond fell to 1.79%; The US 10-year Treasury note rose to 1.70.

Asia

China stocks ended Thursday mixed, as a range-bound trading pattern continued in the market. The benchmark Shanghai Composite Index rose 0.2% The ChiNext Price Index, a measure for emerging industries and startups, also shed 0.2%. Coal miners were among the top gainers, as the sector rebounded from earlier losses.

Hong Kong shares finished the session lower, snapping a four-day winning streak. Property developer Evergrande resumed trading and tumbled 12.5% even as regulators said the contagion risks are contained. The benchmark Hang Seng Index fell 0.4%.

Japanese shares closed broadly lower amid continued concerns about higher costs of borrowing and raw materials. Chip-related stocks fell especially sharply due in part to worries about slower demand growth as economies reopen after pandemic lockdowns. The Nikkei Stock Average fell 1.9%. Investors remained focused on any policy-related developments ahead of Japan's lower-house election later this month.

Europe

European stocks dropped as traders eyed economic concerns in China and further afield. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, fell 0.1%.

"Mining stocks have been unable to shake investor concerns sparked by yet another twist in the Evergrande saga," AJ Bell analyst Danni Hewson says.

"This week's slate of earnings reports from both sides of the Atlantic have added their own side of discomfort, with company after company warning that supply issues and price hikes won't be a flash in the pan."

In London, the FTSE 100 was 0.4% lower.

North America

The S&P 500 inched ahead to a new closing record Thursday, as investors parsed another batch of earnings reports and new data on the labour market.

The broad-based index hovered near the flatline for much of the day but closed higher, rising 13.59 points, or 0.3%, to 4549.78. It marked seven straight days of gains for the index, and its 55th record close of the year. The tech-focused Nasdaq Composite Index rose 94.02 points, or 0.6%, to 15215.70.

The Dow Jones Industrial Average ticked down 6.26 points, or 0.02%, to 35603.08. Shares of International Business Machines, a Dow component, fell $13.57, or 9.6%, to $128.33. The company reported weaker revenue than analysts had expected in the latest quarter.

"The craziest thing about what I see going on in markets is just an absolute tug of war between growth and value investments," said Jeff Powell, managing partner and chief investment officer at Polaris Wealth Advisory Group. "I've not seen a market like this in a really long time."

Stocks have risen in recent days, after solid earnings helped quell concerns that sent markets lower at the start of fall. Among those worries: a slowdown in China's economy, supply-chain blockages that have hampered sectors such as manufacturing, and inflation pressures.

Data showed jobless claims fell to a new pandemic low last week, a sign layoffs remain rare. Filings for initial unemployment benefits fell to 290,000 from 296,000 the week before, the Labor Department said. Meanwhile, existing-home sales rebounded in September, rising 7% from the prior month.

The shared-office company WeWork started trading publicly Thursday, two years after its planned initial public offering imploded. The company went public through a combination with BowX Acquisition Corp., a special-purpose acquisition company. Shares rose $1.40, or 13%, to $11.78.

Third-quarter earnings are being closely watched by investors. They could provide a clearer picture of the pandemic recovery than the previous couple of quarters did.

"Coming out of the depressed period of Covid and turning everything back on you had this amazing year-over-year comparison that was really easy to accomplish," said Kevin Philip, managing director at Bel Air Investment Advisors. "Now the question for a lot of people is... will the earnings after this big jump sustain themselves?"

Earnings reports will offer clues about consumer spending habits. "I would not bet against the American consumer," Mr. Philip said. "It's been a terrible bet."

AT&T shares fell $0.15, or 0.6%, to $25.76 after the company said it expected full-year earnings to reach the high end of its target. Blackstone shares gained $3.83, or 3%, to $132.52 on net income that almost doubled in the third quarter.

Of the 80 companies on the S&P 500 to have reported through Wednesday, 81% had topped analysts' earnings forecasts, according to FactSet, better than the roughly 75% that did so each quarter in 2019.

"We've gone through a period of hesitation that's brought a bit of volatility but I think stocks will keep trending higher," said Paul Jackson, head of asset allocation research at Invesco. He expects households to keep spending savings accumulated during the pandemic.

HP raised its dividend and outlook for the 2022 fiscal year, and shares jumped $1.98, or 6.9%, to $30.57. Tesla added $28.20, or 3.3%, to $894 after the auto maker said late Wednesday it had notched a third-straight record quarterly profit.

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

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