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Global Market Report - 24 June

Lewis Jackson  |  24 Jun 2021Text size  Decrease  Increase  |  
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Australia

Australian shares set to edge lower as investors favoured technology stocks on Wall Street and iron ore exports to China hit a new monthly record.

The Australian SPI 200 futures contract was down 25 points or 0.35 per cent to 7,199 near 6.30 am Sydney time on Thursday, suggesting a negative start to trading.

The Nasdaq has climbed to a record-high close, fuelled by a rally in Tesla Inc, while the S&P 500 dipped even as investors cheered data that showed a record peak for US factory activity in June.

The Dow Jones Industrial Average fell 0.21 per cent to end at 33,874.24 points while the S&P 500 lost 0.11 per cent to 4,241.84 and the Nasdaq Composite climbed 0.13 per cent to 14,271.73.

The Australian dollar was buying 75.76 US cents near 7.30am AEST, up from 75.51 at Wednesday’s close.

Locally, technology stocks were back in vogue on the ASX, but came at a cost to the wider market as investors re-evaluated yield.

Technology stocks were best and rose 1.1 per cent, materials were up 0.81 per cent, but the rest of the market fell.

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Market heavyweight CSL lost 2.09 per cent to $294.25 and the big four banks shed more than one per cent.

The benchmark S&P/ASX200 index closed lower by 43.7 points, or 0.6 per cent, to 7298.5.
The All Ordinaries closed down by 40.6 points, or 0.53 per cent, to 7552.1.

ThinkMarkets analyst Carl Capolingua said the move to technology stocks was a response to a short-term pullback in bond yields.

US bond yields particularly have dropped since US Federal Reserve officials last week brought forward estimates of rate rises to 2023.

The officials were responding to inflation concerns as the US economy surges from pandemic lows.

In Australia, Commonwealth Bank economists on Wednesday forecast the Reserve Bank to raise the cash rate in November next year to 0.25 per cent.

Mr Capolingua said earlier than expected rate increases would cap inflation, and limit the potential for higher rates.

This explained the losses in ASX financial shares. Investors in these stocks preferred a steeper yield curve, he said.

Technology providers can take longer to generate earnings and benefit from a less steep yield curve.

Financial software provider Bravura Solutions was one of the favourites and improved by 3.43 per cent to $3.62.

Afterpay rose 3.17 per cent to $122.90.

The same hunt for technology stocks played out on US markets, which have a greater weighting towards technology.

The tech-laden Nasdaq closed at a record high, while the Dow Jones Industrial Average and S&P 500 also closed higher.

Domestically, iron ore exports played a starring role in the nation's record trade surplus of $13.3 billion in May.

Iron ore exports to China rose 20 per cent to $12.7 billion, the third consecutive monthly record.

On the ASX, the big iron ore miners were all higher.

BHP was best and rose by 1.03 per cent to $47.16.

Meanwhile, some states and territories imposed travel restrictions on people from parts of Sydney or NSW due to a growing coronavirus cluster.

Western Australia and South Australia have prevented anyone from NSW entering.
Flight Centre dropped 3.52 per cent to $15.06.

Webjet was lower by 2.31 per cent to $5.08.

Woolworths will write-down the value of 13 of its CBD stores by about $50 million as the working from home trend affects sales.

The supermarket giant mentioned the charge while flagging its full-year earnings were likely to include a $57 million pre-tax net gain from significant items.

Shares were down 1.94 per cent to $42.51.

Fruit and vegetable grower Costa Group will buy citrus grower 2PH Farms for about $200 million.

Costa will raise $190 million from a share sale to help fund the purchase.

Trading of Costa shares had been paused. They last traded at $3.40.

Spot Gold was flat at $US1778.21 an ounce; Brent crude was up 0.5 per cent at $US75.16 a barrel, Iron ore was up 0.8 per cent at $US 216.01 a tonne.

The yield on the Australian 10-year bond closed at 1.56 per cent.

Asia

At the close, China's Shanghai Composite index was up 0.25 per cent at 3,566.22.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, was up 1.79 per cent, to 28,817.07.

Japan's Nikkei 225 Index closed down 0.03 per cent at 28,874.89.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was down 0.58 per cent at 453.76.

The German DAX rose 1.15 per cent to 15,456.39.

North America

The Nasdaq has climbed to a record-high close, fuelled by a rally in Tesla Inc, while the S&P 500 dipped even as investors cheered data that showed a record peak for US factory activity in June.

The Dow Jones Industrial Average fell 0.21 per cent to end at 33,874.24 points while the S&P 500 lost 0.11 per cent to 4,241.84 and the Nasdaq Composite climbed 0.13 per cent to 14,271.73.

Gains in Nvidia Corp and Facebook Inc extended a recent rebound in top-shelf growth stocks that fell out of favour in recent months as investors focused on companies expected to do well when the economy recovers from the pandemic.

Data firm IHS Markit said its flash US manufacturing Purchasing Managers' Index rose to a reading of 62.6 this month, beating estimates of 61.5, but manufacturers are still struggling to secure raw materials and qualified workers, substantially raising prices.

The "high level of today's surveys will provide some confirmation for the Fed that the time to begin taking its foot off the accelerator is not far away," said Jai Malhi, global market strategist at JP Morgan Asset Management.

On Tuesday, Fed Chair Jerome Powell reaffirmed the central bank's intent not to raise interest rates too quickly based only on the fear of coming inflation.

Powell's comments follow the Fed's projection a week ago of an increase in interest rates as soon as 2023, sooner than anticipated.

Since then, growth stocks, including major tech names like Tesla and Nvidia, have mostly rallied and outperformed value stocks, like banks and materials companies.

"People are ploughing money into what has worked. People are basically momentum-chasing and they're using the last three years of performance to figure out what to chase," said Mike Zigmont, head of trading and research at Harvest Volatility Management in New York.

Eight of the 11 major S&P sector indexes fell, with utilities down about 1.0 per cent and leading the way lower, followed by a 0.6 per cent dip in materials.

Tesla jumped 5.3 per cent after the electric vehicle maker said it had opened a solar-powered charging station with on-site power storage in the Tibetan capital Lhasa, its first such facility in China.

That trimmed the stock's loss in 2021 to about 7.0 per cent.

Extending investors' recent preference for growth stocks, the S&P 500 growth index edged up 0.01 per cent while the value index dipped 0.24 per cent.

The S&P 500 has gained about 13 per cent in 2021 while the Nasdaq and Dow are up about 11 per cent.

Nikola Corp rallied 4.3 per cent after the electric and hydrogen vehicle maker said it is investing $US50 million ($A66 million) in Wabash Valley Resources LLC to produce clean hydrogen in the US midwest for its zero-emission trucks.

Among so-called meme stocks, software firm Alfi Inc tumbled 26 per cent after more than doubling in value in the prior session while Torchlight Energy Resources Inc slumped 30 per cent, tumbling for a second day after announcing an upsized stock offering.

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

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