Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Global Market Report - 24 May

Lewis Jackson  |  24 May 2022Text size  Decrease  Increase  |  
Email to Friend

Australia

Australian shares are set to open high after banking stocks powered a rally on Wall Street and pushed the S&P 500 away from bear territory a day after the index briefly crossed the threshold.

ASX futures were up 19 points or 0.3% at 7172 as of 8.00am AEST on Tuesday, pointing to a modest pop at the open.

The S&P 500 advanced 1.9% on Monday. At one point on Friday, the S&P 500 slid so far it was on track to close at least 20% below its January peak -- what would have been considered a bear market -- before regaining ground. Monday's rally gave investors some breathing room. The S&P 500 is now off about 17.2% from its January high.

The Dow Jones Industrial Average rose 2% powered by strong performance at major banks, while the tech-focused Nasdaq Composite Index was up 1.6%.

Financials fared best on the S&P 500, rising 3.2%. JPMorgan Chase was up 6.2% at $124.60 after offering updated guidance during a presentation on Monday, painting a better picture of economic prospects. The bank said it expects to benefit from loan growth and rising interest rates.

"Big picture, the near-term credit outlook, especially for the US consumer, remains strong," said Chief Financial Officer Jeremy Barnum on Monday.

Locally, the S&P/ASX 200 closed flat at 7148.9 as weakness in the financial and health sectors offset strength among commodity stocks. The benchmark index faded after it had been up by as much as 0.7% in early trade, apparently building on the late momentum that on Friday helped the S&P 500 avoid closing in bear-market territory.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Banks--Commonwealth, ANZ, Westpac and NAB--lost between 0.1% and 0.9%, while CSL's 0.7% decline was the biggest factor in the health sector's 0.2% fall.

The energy sector added 0.3%, while miners Rio Tinto, BHP and Fortescue put on between 1.1% and 2.8% amid higher iron-ore prices.

Elders was up 8.9% to an all-time high of $14.92 after the agribusiness raised its interim dividend on the back of a strong half-year performance.

Incitec Pivot fell 3.7% to $3.60 after announcing plans to spin its fertiliser business into a new company, Incitec Pivot Fertilisers, and rename itself after its mining explosive subsidiary, Dyno Nobel.

In commodity markets, Brent crude oil rose 0.8% to US$113.47 a barrel. Iron ore edged 0.2% lower to US$135.95. Gold advanced 0.3% to US$1858.70.

Local bonds edged lower on Monday as risk appetite rose. Yield on Australian 2 Year government bonds popped to 2.47% while the 10 Year increased to 3.32%. Overseas saw a similar pattern with the yield on US Treasury 2 Year notes up at 2.62%, while the 10 Year rose to 2.85%. Yields rise as prices fall.

The Australian dollar traded at 71.03 US cents as of 7.00am AEST, up from the previous close of 70.38 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies declined to 94.76.

Asia

Chinese stocks ended the session mixed, pulling back from the gains made Friday when sentiment was boosted by the PBOC cutting a key lending rate. Essence Securities analysts say in a note that muted market turnover in recent sessions indicates that overall buying interest remains low despite Friday's upturn. The benchmark Shanghai Composite Index edged up 0.29 points to 3146.86, the Shenzhen Composite Index rose 0.6% to 1994.76 and the tech-heavy ChiNext Price Index fell 0.3% to 2410.12. Commercial-vehicle makers, such as bus producers and truck manufacturers, led the gains, while there was weakness among property-related stocks like developers, construction companies and home-appliance makers.

Hong Kong stocks ended lower, as the market followed its China counterpart to retreat from a rebound Friday that was driven by Beijing's rate cut. The benchmark Hang Seng Index fell 1.2% to settle at 20470.06. Alibaba Health Information led losses with a 9.7% plunge, after the Alibaba-controlled company said a shareholder had transferred some of its 6.9% stake. Other tech stocks further weighed on the market, as electronics makers AAC Technologies and Sunny Optical fell 6.9% and 3.3%, respectively.

Japanese stocks ended higher, retaking gains notched near the opening bell thanks to gains in insurance companies that posted strong results despite economic uncertainty over higher operations costs. Tokio Marine Holdings was up 7.6% after projecting a 2.3% rise in fiscal-year net profit and announcing a share buyback. Sompo Holdings was 7.9% higher after posting a 58% rise in fiscal-year net profit and announcing a share-repurchase program. Investors are paying attention to President Biden's visit to Japan as well as movements in the prices of crude and other commodities. The Nikkei Stock Average closed up 1% at 27001.52.

Europe

European shares rose amid market talk about potential European Central Bank interest-rate rises and following an upbeat start to trading on Wall Street. The pan-European Stoxx Europe 600, French CAC 40 and German DAX all gained more than 1%.

"ECB President Christine Lagarde indicated rate rises would start in July, helping to lift the share prices of German and European banks and push the euro to its highest level in nearly four weeks against the US dollar," CMC Markets analyst Michael Hewson says.

London’s FTSE 100 closed up 1.56% on Monday, standing head and shoulders above its European peers. The strong performance helped the FTSE 100 consolidate its position as a more defensive index, with basic resources and the telecoms sector both doing well, CMC Markets UK chief market analyst Michael Hewson says.

Vodafone posted its second successive day of strong gains after last week's news that Etisalat had built a stake in the business, Hewson says in a research note. Elsewhere on the index, house builders edged higher after the latest Rightmove house price index for May showed a better-than-expected gain on both the monthly and annual measure, as a lack of supply helped support prices despite higher rate concerns, Hewson says.

North America

US stocks rose, led by the financial sector, as the S&P 500 pushed away from bear-market territory after flirting with such levels in a volatile trading session Friday.

The broad-market benchmark advanced 1.9% on Monday. At one point Friday, the S&P 500 slid so far it was on track to close at least 20% below its January peak -- what would have been considered a bear market -- before regaining ground. Monday's rally gave investors some breathing room. The S&P 500 is now off about 17.2% from its January high.

The Dow Jones Industrial Average rose 2% powered by strong performance at major banks, while the tech-focused Nasdaq Composite Index was up 1.6%.

All 11 of the S&P 500's sectors were up on Monday. Financials fared the best, rising 3.2%. JPMorgan Chase was up 6.2% at $124.60 after offering updated guidance during a presentation on Monday, painting a better picture of economic prospects. The bank said it expects to benefit from loan growth and rising interest rates.

"Big picture, the near-term credit outlook, especially for the US consumer, remains strong," said Chief Financial Officer Jeremy Barnum on Monday. Goldman Sachs rose 3.2%, or $9.81, to $316.61, while the KBW Nasdaq Bank Index jumped 4.1%.

Other stocks that would benefit from a stronger economy rose as well. Deere rose 7%, or $22.05, to $335.36. Caterpillar was up 3.2%, or $6.33, to $204.15. Discount retailer Ross Stores gained 9.6%, or $6.88, to $78.75.

Stocks have retreated in recent weeks as investors debated how aggressively the Federal Reserve will raise interest rates to tame elevated inflation. Price pressures have eroded some corporate earnings, but money managers also worry that tightening financial conditions too much risks weighing on economic growth.

Inflation concerns were exacerbated in recent months as China implemented lockdowns to contain the spread of Covid-19, adding strain to supply chains. Russia's war against Ukraine has also caused European countries to shift away from Moscow's oil and gas, adding to prices.

"This year, we're dealing with several issues, which in and of themselves would ordinarily be the top story in any given year," said Hugh Gimber, a global markets strategist at J.P. Morgan Asset Management. "Yet markets are having to deal with them all at the same time." That has lent to heightened volatility, he said.

While a 20% selloff generally defines a bear market, what a bear market defines is just a change in the business cycle from expansion to contraction, said Shawn Snyder, head of investment strategy at Citi Personal Wealth Management. For investors, he said, that means the next important key is the sign that a bottom has been hit.

While the bottom likely hasn't come yet, Mr. Snyder said investors are already looking for it. On average, the market takes 132 trading days to go from a high to the start of a bear market, and 213 trading days to hit the low, according to Dow Jones Market Data. Monday was the 97th trading day from the S&P 500's peak, so investors may have some way to go.

"This is one of those times you turn your screens off and go on vacation and hope it looks better when you return," Mr. Snyder said.

Among other individual equities, shares of VMware jumped 25%, or $23.72, to $119.43 after The Wall Street Journal reported that Broadcom is in advanced talks to buy the technology company. Broadcom shares fell 3.1%, or $16.83, to $526.36.

Investors will also be looking to earnings reports from retail stocks this week, seeking clues about how inflation and the lingering effects of the Covid-19 pandemic are affecting consumers. Macy's, Dollar General and Costco are among the companies set to report.

Macy's added 1.2%, or 21 cents, to $18.37. Dollar General was up 3.6%, or $6.82, to $194.42. Costco rose 3.1%, or $13.05, to $429.48.

In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 2.857% from 2.785% Friday. Yields and prices move inversely.

US crude prices rose less than 0.1% to $110.29 a barrel. Gas prices at the pump remained in record territory over the weekend, averaging about $4.59 a gallon nationwide.

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

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend