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Global Market Report - 22 September

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

The ASX is set to edge lower after a mixed close on Wall Street. Investors look to the US Federal Reserve meeting, due Thursday morning Sydney time.

The Australian SPI 200 futures contract was down 14 points or 0.1 per cent at 7,225 near 8.00 am Sydney time on Wednesday, suggesting a negative start to trading.

US stocks finished mixed, following earlier losses. Fears about China's property sector had helped fuel a global selloff in stocks and commodities on Monday.

The Dow Jones Industrial Average slipped 0.2%. The S&P 500 retreated 0.1% and the Nasdaq Composite advanced 0.2% following the two indexes' worst one-day pullback since May.

To those who felt like markets had been overdue for some kind of pullback following a relatively sanguine summer, Monday's retreat appeared to have delivered on that front.

Now, investors say, the focus shifts to how markets will fare as the pace of the global economic recovery cools and central bankers prepare to wind down some of the support they lent to markets at the start of the pandemic.

The Australian dollar was buying 72.32 US cents near 8.00am AEST, down from the previous close of 72.49. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, fell to 87.79.

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Locally, the S&P/ASX 200 closed 0.4% higher at 7273.8, as energy stocks helped the benchmark index turnaround from yesterday's three-month low.

Almost all sectors finished higher, with energy stocks the best performer, gaining 1.5%. Whitehaven Coal was up 3.6%, while Woodside Petroleum gained 1.7%. Miners Fortescue, Rio Tinto and BHP gained between 0.3% and 0.6%.

The tech sector gained 1.3%, with Wisetech Global up 5.1% and Computershare gaining 1.4%. Gas pipeline operator APA Group lost 4.7% after it made a bid to acquire AusNet for A$9.96 billion

Gold futures rose 0.8% to $US1775.80 an ounce; Brent crude was up 0.6% at $US74.36 a barrel; Iron ore was up 5 cents to $US93.08.

The yield on the Australian 10-year bond fell to 1.27%; The yield on the US 10-year note rose to 1.323%.

Asia

Markets in mainland China were closed for a holiday.

Hong Kong shares ended the session higher after a selloff on Monday. The benchmark Hang Seng Index rose 0.5% to settle at 24221.54, after falling to its lowest closing in nearly a year during the past session.

China Evergrande shares dropped another 0.4%, taking its year-to-date decline to almost 85%. Other Chinese and Hong Kong property developers regained some ground from yesterday's steep losses. Country Garden jumped 8.9% and CK Asset climbed 4.1%.

Japanese stocks ended lower, dragged by especially sharp falls in machinery and steel stocks, as concerns grow about troubles at the Chinese property sector. The Nikkei Stock Average fell 2.2%.

Europe

The FTSE 100 closed Tuesday 0.96% higher, as European markets staged a rebound from Monday's losses.

The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, was up 0.9%.

"European markets have been much more adept at holding their gains today than their US counterparts, where pre-FOMC nerves have clearly put pressure on the S&P 500, Dow and Nasdaq," says IG analyst Chris Beauchamp.

"Evidently investors there are concerned that the tapering announcement may come with hints of what the Fed might do next regarding rate increases as well."

North America

US stocks ended mixed in a choppy trading session after fears about China's property sector helped fuel a broad and punishing selloff at the start of the week.

Markets began the week on a tumultuous note. Worries about China Evergrande Group, which has the biggest debt burden of any publicly traded real-estate management or development company in the world, prompted a rush out of relatively risky assets such as stocks and commodities.

While Evergrande shares retreated again Tuesday, finishing close to a 10-year low, broader markets gained steadier footing. Hong Kong's Hang Seng fell as much as 1.3% but then rose 0.5% by the end of the trading day. Oil prices climbed, as did shares of energy companies.

To those who felt like markets had been overdue for some kind of pullback following a relatively sanguine summer, Monday's retreat appeared to have delivered on that front. Now, investors say, the focus shifts to how markets will fare as the pace of the global economic recovery cools and central bankers prepare to wind down some of the support they lent to markets at the start of the pandemic.

"We are at a pivot point: We are moving away from maximum policy accommodation, and at the same time, the V-shaped recovery is over and it poses some real questions about what is next," said David Donabedian, chief investment officer at CIBC Private Wealth.

The Dow Jones Industrial Average fell 50.63 points, or 0.1%, to 33919.84, giving up earlier gains. The S&P 500 retreated 3.54 points, or 0.1%, to 4354.19 and the Nasdaq Composite advanced 32.49 points, or 0.2%, to 14746.40. Both indices had suffered their biggest one-day pullback since May on Monday.

Even those who feel stocks will be able to continue rising expect a bumpier stretch over the next few months. Federal Reserve officials kicked off a two-day monetary policy meeting Tuesday that will be scrutinized by investors for insight into the central bank's plans for its bond purchases and interest rates. Many investors credit much of the stock market's recovery from the pandemic-fueled downturn to extraordinary levels of support from the Fed, as well as fiscal stimulus.

"We have had a great run but it is going to get tougher from here, with lower returns and more volatility," said Mr. Donabedian.

Some investors cautioned there could be more fallout over the coming months stemming from Evergrande's troubles.

"Evergrande is not an isolated incident," said Dave Wang, a portfolio manager at Nuvest Capital in Singapore. "There are, and will be, more property developers defaulting."

Given the sector's contribution to the economy, "markets are pricing in the possible contagion impact," Mr. Wang said.

Universal Music Group jumped in its stock market debut. Shares of the company, which was spun off from French media group Vivendi, leapt 36% from their reference price.

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

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