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Global Market Report - 25 March

Lewis Jackson  |  25 Mar 2022Text size  Decrease  Increase  |  
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Australia

Australian shares are set to go higher after a rally on Wall Street saw the Nasdaq Composite more than recoup yesterday’s losses.

ASX futures were up 38 points or 0.5% at 7386 as of 8.00am AEST, suggesting a positive start to the day.

The S&P 500 rose 1.4% in a broad-based rally that saw all 11 sectors end higher. The technology-focused Nasdaq Composite Index climbed 1.9% and the Dow Jones Industrial Average gained 1%. All three indexes declined in the previous session as concerns about rising energy prices and supply shortages again rattled investors.

March has seen a global rally in equities that is paring the steep losses notched by benchmarks at the start of this year. The S&P 500 closed down 5.2% this year, compared to a 13% loss on 14 March. The local S&P/ASX 200 has narrowed its year-to-date losses to 2.7% amid a boom in commodity prices.

The market looks like the February lows won't be breached and equities are entering a more temperate period where investors will try and digest everything that has happened so far, said JMP Securities analyst Mark Lehmann. "We've had a lot in a very short time," he said. "The market's trying to figure itself out."

Equities could remain volatile as long as the headwinds that have weighed on equities remain: Russia’s war in Ukraine, the onset of an interest rate tightening cycle, soaring commodity prices and the uncertain consequences these factors will have for global jobs and growth.

Locally, S&P/ASX 200 edged 0.2% higher to 7387.1, racking up a third consecutive close higher thanks to gains by commodity stocks.

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Energy explorers Beach, Santos and Woodside put on between 0.6% and 2.8% amid higher oil prices, while the materials sector added 1% on gains by iron-ore and gold miners.

BHP and Rio Tinto rose by 1.8% and 2.05%, respectively, while gold miners Gold Road, Regis, Northern Star, Newcrest and Silver Lake rose between 1.2% and 2.4%.

The country's heavyweight financial sector pared overall gains, pulling back 0.4% after recent strength.

Wealth managers Pendal, Challenger and Pinnacle gave up between 2.6% and 3%. The ASX 200 is up 1.3% so far this week.

Crown was found unsuitable to hold a casino license in Perth due to breaches including anti-money-laundering rules, according to a report released on Thursday. The casino will be allowed to stay open while Crown makes changes to its operations. Shares closed up 0.2%.

Brickworks said on Thursday it was seeing potential early signs of softening construction activity in Australia, which could affect demand at its local building-products division.

In commodity markets, iron ore fell 10 cents US$146.35 per tonne; Brent Crude lost 3.1% to US$117.80; gold futures added 1.3% to $1967.70.

US bond yields resumed their climb on Thursday after easing on Wednesday. The US 10-Year Treasury Note yield moved up to 2.37%. The yield on the Australian 10-year bond edged lower to 2.76%. Yields rise when prices fall.

The Australian dollar continued its rally amid booming commodity prices and was buying 75.11 US cents as of 8.00am AEST, up from the previous close of 74.96. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, was higher at 91.48.

Asia

Chinese stocks ended lower, weakening from a broad rally that started late last week amid signs of an easing in US-China tensions over Russia's invasion of Ukraine. The benchmark Shanghai Composite Index fell 0.6%, while the Shenzhen Composite Index was down 0.9%. The tech-heavy ChiNext Price Index held up relatively better, ending 0.4% lower. Property stocks led the downturn, as the sector pulled back from strong gains over the past several sessions amid supportive policy signals and fund-raising progress by several large developers. Liquor makers further weighed on the market amid continuing worries over China's consumption slowdown due to the country's latest Covid-19 outbreak.

Hong Kong's Hang Seng Index is down 0.7%, tracking a weak performance on Wall Street. US markets performed poorly on Wednesday after a sharp rise in oil prices, KGI Securities says. Tencent leads declines, off 4.1%, while JD.com falls 1.2% and Alibaba Group is 1.0% lower. Property stocks also fall. Country Garden Services Holdings sheds 2.1% and China Overseas Land & Investment drops 1.9%. Stocks in the property sector could face pressure thanks to debt concerns, KGI notes. Gainers include China Mobile, which rises 3.0% after reporting 2021 results.

Japanese stocks pared losses early in the day to finish with a slight gain helped by metal and energy stocks. Sumitomo Metal Mining rose 3.4% and Inpex added 2.0%. Toyota Motor climbed 2.9%, thanks in part to a weaker yen. The Nikkei Stock Average rose 0.25%. Investors remain focused on the war in Ukraine as the Biden administration prepares additional sanctions on Moscow.

Europe

European stocks closed lower as investors continue to monitor the latest headlines on the Russia-Ukraine conflict. The pan-European Stoxx Europe 600 fell 0.2%.

The ongoing war in Ukraine is causing investors to remain cautious about European equities, IG analyst Chris Beauchamp says. "Meanwhile, London has made some small gains, helped by further strength in yields which has boosted financial shares," he says.

In London, the FTSE 100 rose on Thursday, closing 0.1% higher. Fresnillo led the index, with shares in the Mexican gold miner up 5.7%. British American Tobacco jumped 4.0% after being raised to overweight by J.P. Morgan on the potential of the vaping market, which also helped peer Imperial Brands, CMC Markets said.

Shares in investment manager M&G rose 2.5% after announcing a 500 million pound (US$660.4 million) share buyback program. On the red end of the UK market, clothing retailer Next fell 3.3% after reporting earnings for the year ended Jan. 30 and lowering guidance for the current period due to the effects of the Ukraine war.

Russia's stock market jumped in its first limited trading session since the West unveiled punishing sanctions nearly a month ago. The benchmark MOEX index added about 4%.

The increase is unlikely to be interpreted as a sign that all is well with the Russian economy. Only 33 shares out of 50 shares on the index were allowed to trade. To prevent a steep selloff, Russia's central bank banned short selling, and blocked foreigners, who make up a huge chunk of the market, from selling their shares.

The move will also help prevent the ruble from weakening, as foreign investors would likely sell their ruble-denominated shares and then move out of the ruble for the dollar or euro. Russia's currency has trimmed some of its losses against the dollar in recent sessions, trading at 98 rubles to the dollar Thursday.

North America

US stocks rose Thursday, with Wall Street indexes recouping most of Wednesday's losses, led by gains among semiconductor and materials stocks.

The S&P 500 rose 1.4%, the technology-focused Nasdaq Composite Index climbed 1.9% and the Dow Jones Industrial Average gained 1%. All three indexes declined in the previous session as concerns about rising energy prices and supply shortages again rattled investors.

All 11 sectors in the S&P 500 rose. The tech segment climbed 2.7%, followed by materials with a 2% gain. Energy, by far 2022's best performing sector, was the worst performing group on Thursday but still managed to eke out a 0.1% gain.

Stocks have come under pressure this year amid rising inflation, mixed economic signals, the war in Ukraine and the continuing disruptions from the pandemic. The S&P 500 is down 5.2% in 2022, while the Nasdaq, off 9.3%, is in its longest bear market since 2008.

That slump, however, comes on the back of a long rally. Wednesday marked the two-year anniversary of the stock market's pandemic lows. Since then, the S&P 500 and Nasdaq have doubled, while the Dow is up nearly 90%.

The market looks like the February lows won't be breached and equities are entering a more temperate period where investors will try and digest everything that has happened so far, said JMP Securities analyst Mark Lehmann. "We've had a lot in a very short time," he said. "The market's trying to figure itself out."

Thursday's market gains followed a bag of mixed economic data.

The number of Americans applying for first-time unemployment benefits fell to 187,000 in the week ended March 19 -- the lowest level since September 1969 -- down from 215,000 in the week prior.

But new orders for durable goods -- products designed to last at least three years -- fell 2.2% in February from the month prior after auto production was again held back by supply-chain bottlenecks and Boeing Co. had a relatively weak month for aircraft orders.

Investors have grappled with how Russia's war with Ukraine will put additional pressure on supply chains that are already disrupted from Covid-19. A climb in oil prices, which remain above $100 a barrel, have added to concerns that consumers could see higher prices for energy and even products like plastic wrap or lawn fertilizer. Federal Reserve officials have pencilled in a series of additional interest-rate increases to limit inflation this year.

US crude fell 2.3% to $112.34 a barrel.

"Through mid-February, it was all about rising rates, and then it was all about the war, and what's concerning now is that they've combined," said Daniel Morris, chief market strategist at BNP Paribas Asset Management. "The challenge in this environment is what do you buy. You can't sit in cash. It is a 'least-bad option'-type of market."

Among individual stocks, shares of Nikola rose 52 cents, or 5.7%, to $9.66 after the company confirmed that production has begun on its electric commercial truck, the Tre. Uber gained $1.64, or 5%, to $34.70 after saying it would list all New York City taxis on its app.

In the semiconductor industry, Nvidia rose $25.16, or 9.8%, to $281.50 and Intel rose $3.35, or 6.9%, to $51.62, its biggest one-day gain since January 2021, as investors bet booming demand for chips would overwhelm short-term logistics issues.

In bond markets, the yield on the benchmark 10-year Treasury note ticked up to 2.340% from 2.320% Wednesday. Yields and prices move inversely.

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

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