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Global Market Report - 25 August

Lewis Jackson  |  25 Aug 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to rise and continue its recovery from last week’s sell-off after the S&P 500 and Nasdaq closed at new records. Today’s earning announcements include buy-now-pay-later heavyweights Afterpay and Zip.

The Australian SPI 200 futures contract was up 18 points or 0.24 per cent at 7,453 near 8.00 am Sydney time on Monday, suggesting a positive start to trading.

US stocks rose, giving the S&P 500 another record as the approval of Pfizer's Covid-19 vaccine continued to lift sentiment.

The S&P 500 gained 0.15%, pushing the benchmark index to its 50th record close of 2021. The Dow Jones Industrial Average added 0.1%, while the technology-heavy Nasdaq Composite advanced 0.5%, clinching its first close above 15000.

The Australian dollar was buying 72.55 US cents near 8.00am AEST, up from the daily low of from 72.50. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, fell to 87.59.

Locally, Australia's S&P/ASX 200 edged higher thanks to energy, materials and tech sectors, while several reporting stocks weighed.

Australia's S&P/ASX 200 edged 0.2% higher to close at 7503.0. The energy sub sector rose 2.8%, the materials sub sector added 0.8% and technology gained 0.5%.

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The three worst-performing ASX components all reported annual earnings. Online retailer Kogan.com shed 16% after scrapping its dividend, engineering company Monadelphous dropped 14% after warning of higher employment costs and Ansell gave up 9.2% after flagging supply constraints and lower demand for some of its PPE products.

Building-materials maker Boral fell 5.6% after warning of headwinds from Australia's latest Covid-19 lockdowns.

Big movers on the ASX included TPG Telecom, falling 5.78% and Whitehaven Coal rising 6.57%.

Iron-ore stocks are holding up pretty well given the sharp fall in the value of the commodity they mine, according to Citibank.

Iron ore related equities are down a weighted average of 11% versus a roughly 40% dive in iron ore's price in recent weeks, Citibank says. "Iron-ore equities are showing relative resilience," it says. "Taking into account dividend support and balance-sheet strength, any sell-off in the iron ore names is likely to be less than many worry as the dividend support will likely see investors move back into these names."

Iron ore miners Rio Tinto closed down 0.50%, BHP Group closed up 0.27% and Fortescue Metals Group closed down 4.27%.

Gold futures edged higher by 0.1% at $US1808.50 an ounce; Brent crude was up 3.4% at $US71.05 a barrel; Iron ore was up 6.8% at $US146.13.

The yield on the Australian 10-year bond closed higher at 1.15 per cent; The yield on the US 10-year note closed higher 1.29 per cent;

Asia

Turning to Asian markets, Chinese stocks finished higher Tuesday, building on Monday's upbeat performance, led by consumer-related sectors as the country's Covid-19 outbreak appeared to ease.

China still faces the risk of a sporadic virus outbreak, Nomura said, noting infections detected at Shanghai airport. The Shanghai Composite Index gained 1.1% to close at 3514.47. The Shenzhen Composite Index climbed 0.8% and the ChiNext Price Index closed 1.1% higher.

Hong Kong shares had their best day in three weeks, and the Hang Seng Index gained 2.5% to end at 25727.92 as tech rebounded from China's bruising regulatory crackdown and positive Covid news boosted casino shares.

Among tech stocks, Tencent added 8.8% as share buybacks helped boost sentiment, while Alibaba jumped 9.5% in its second-largest daily percentage gain since its 2019 debut. That propelled the Hang Seng TECH Index to surge 7.1% to 6446.18, though it remains down 41% from its February peak.

Japanese stocks also rose, led by gains in chip, airline and steel stocks, thanks partly to continuing hopes for Covid-19 vaccination progress. The Nikkei Stock Average finished 0.9% higher to 27732.10. Investors are focusing on Covid-19 infection trends and political developments in Japan.

Europe

Share markets in London and Europe closed up for the third consecutive day as investors look ahead to the Federal Reserve's Jackson Hole symposium on Friday when the central bank could detail its plans for tapering bond purchases.

The London’s FTSE 100 closed Tuesday up 0.24% to 7125.78 with some gains for airlines as Covid-19 vaccines look set to receive approvals from various regulators.

The pan-European STOXX 50 index, which tracks the return of the largest listed companies across 19 European countries, gained 0.04% to end Friday at 4178.08.

"Until recently, this looked the perfect platform to lay the groundwork for a September taper announcement but some concerning economic releases and a surge in Delta cases in the US may see the Fed adopt a more cautious stance for now," Oanda analyst Craig Erlam says.

North America

The S&P 500 on Tuesday notched its 50th record close of 2021 as economically-sensitive stocks lifted the market.

Shares of banks, oil producers and companies in the travel industry helped power the stock-market rally.

The S&P 500 rose 6.70 points, or 0.1%, to 4486.23, its ninth record this month. The Dow Jones Industrial Average added 30.55 points, or 0.1%, to 35366.26. The tech-heavy Nasdaq Composite gained 77.15 points, or 0.5%, to 15019.80, its first close above 15000.

Meme stocks also rallied. Companies that are favorites among retail traders, including GameStop and AMC, surged 28% and 20%, respectively, while other names including BlackBerry, Koss and Naked Brand Group also jumped.

The rally marks a reversal from the group's recent performance. Before Tuesday, many meme stocks in recent weeks have seen relatively muted daily moves. A catalyst behind Tuesday's jump wasn't immediately clear.

The full approval from US regulators for the Covid-19 vaccine from Pfizer and partner BioNTech has boosted broader market sentiment, raising hopes that more unvaccinated people will get the shot, potentially diminishing a threat to the economic outlook.

"The more that we have people vaccinated, the more that we have a chance at seeing the light at the end of the tunnel for Covid being the dominant headline of the day," said Beata Kirr, co-head of investment strategies at Bernstein Private Wealth Management.

Stocks have been grinding higher as investors weigh strong corporate earnings and the economic rebound against the global surge in Covid-19 cases, which is prompting fresh restrictions in some markets. Money managers are also assessing whether the Federal Reserve may slow down plans to pare back its easy-money policies because of signs that economic growth may be slowing.

"Markets are struggling for direction a little bit after we have had a huge run," said Mike Stritch, chief investment officer at BMO Wealth Management. "People are asking, what is the next catalyst to propel the market higher, or are the handful of risks that are out there enough to collectively give people a little more pause?" he said.

Energy stocks led the S&P 500's 11 sectors as oil prices rose, boosted by a decline in Covid-19 cases in China and signs of a pickup in travel activity in major cities. By midmorning Tuesday, traffic levels in Beijing were 12% higher than a week previously, according to Baidu Inc. data cited by analysts at Commerzbank.

Investors are looking ahead to comments from Fed officials at the central bank's Jackson Hole Symposium later in the week for insights into the pace at which the central bank would taper bond purchases. Chairman Jerome Powell speaks virtually at the event Friday.

"I feel a little less convinced that there will be a major announcement coming up this week," said Mr. Stritch. "I don't know if now is the right time for the Fed to be overly aggressive," he said.

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

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