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Global Market Report - 25 November

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

The ASX is set to edge higher following gains on Wall Street as iron ore passes US$100.

The Australian SPI 200 futures contract was up 9 points or 0.1% at 7,402 near 8.15 am AEST on Thursday, suggesting a positive start to trading.

A rally in shares of technology companies pushed stocks higher Wednesday, as investors shrugged off concerns about elevated inflation.

The S&P 500 rose 0.2% in afternoon trading after wobbling throughout the day. The Dow Jones Industrial Average was about flat, down nearly 9 points. The Nasdaq Composite was up 0.4%.

The Australian dollar was buying 71.95 US cents near 8.00am AEST, down from the previous close of 72.26. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.48.

Locally, the S&P/ASX 200 closed 0.15% lower at 7399.4, as strength in energy producers and providers was more than offset by weakness elsewhere.

The benchmark followed a mixed lead from US equities by spending the session bouncing on either side of the gain-line in a narrow 43-point range.

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Oil Search, Woodside, Santos and Beach gained between 0.7% and 2.4% amid a rise in oil prices.

The heavyweight financial and materials sectors, which comprise about 45% of the ASX 200 by market capitalization, slipped by 0.3% and 0.2%, respectively.

Tech stocks led losses as Afterpay edged 0.2% lower and Technology One lost 8.6% after several analysts downgraded their recommendation on the stock.

Gold futures rose 0.2% to $US1790.50 an ounce; Brent crude was 0.2% lower at $US82.16 a barrel; Iron ore was up 2.9% to US$102.75.

The yield on the Australian 10-year bond slipped to 1.85%; The US 10-year Treasury yield edged down to 1.64%.

Asia

Chinese stocks ended mixed on Wednesday, with the benchmark Shanghai Composite Index edging 0.1% higher and the Shenzhen Composite Index flat. The ChiNext Price Index closed 0.4% lower. Consumer goods and service providers lead the gainers as investors pinned hope on rising demand as the year-end holiday season nears.

Hong Kong's Hang Seng Index rose 0.1%, breaking a five-day losing streak. Gains were partly boosted by the financial sector, amid rising US bond yields on market expectations for the Fed to tighten monetary policy, analysts say.

Japan's Nikkei Stock Average slipped 1.6%, amid worry over US rate increases after Fed Chair Powell's renomination. With the overnight weakness of tech-heavy Nasdaq, losses on Japan's benchmark index were led by technology names.

Europe

European stocks were flat after a mixed session in Asia as traders wait on US economic data on GDP, inflation and unemployment among others due later in the day. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies edged up 0.09%.

In London, the FTSE 100 index was 0.27% higher.

North America

A rally in shares of technology companies pushed stocks higher Wednesday, as investors shrugged off concerns about elevated inflation.

The S&P 500 rose 0.2% in afternoon trading after wobbling throughout the day. The Dow Jones Industrial Average was about flat, down nearly 9 points. The Nasdaq Composite was up 0.4%.

US stocks have swung between gains and losses this week as investors have digested a slew of data in a trading week shortened by the Thanksgiving holiday. On Wednesday, new figures showed that household spending rose 1.3% in October from a month earlier, while personal income increased 0.5%. Weekly jobless claims, meanwhile, fell sharply to the lowest level in 52 years.

Yet other data released Wednesday complicated the picture of the US economic recovery. Consumer sentiment in the US fell to its lowest level in a decade, data from the University of Michigan showed. Meanwhile, an inflation gauge, the core personal-consumption expenditures price index, rose 4.1% from a year ago, the most since 1991. The index is the Fed's preferred measure of inflation and excludes volatile food and energy prices.

At the same time, minutes from the Federal Reserve's November meeting provided fresh context about how central bankers are assessing the inflation situation. The minutes signalled that while officials generally anticipate that the inflation rate will diminish significantly during 2022, some also highlighted that price increases had become more widespread.

"Many participants pointed to considerations that might suggest that elevated inflation could prove more persistent," the minutes said.

Earlier this month, Fed officials confirmed plans to shrink the central bank's monthly bond purchases. Wednesday's minutes from that meeting showed that some officials said that, if inflation continues to surge, the Fed should be prepared to adjust the pace of the asset purchases and raise the target range for overnight interest rates sooner than anticipated.

US stock indexes struggled to find direction after the minutes were released. They initially fell before turning higher. Stock trading will be closed Thursday.

Jamie Cox, managing partner for Harris Financial Group, said before the minutes were released that recent strong economic data could spur the Fed to accelerate its timeline for tightening monetary policy. If that is the case, he said, cyclical stocks "could really get some legs under them." Cyclical stocks tend to outperform their growth counterparts during periods of rising interest rates.

On Wednesday, however, growth and technology stocks were a bright spot in the market. Chip makers Advanced Micro Devices and Nvidia extended their recent climb, rising 5% and 2.8%, respectively. Tesla added 0.8%.

The yield on the benchmark 10-year Treasury note ticked down to 1.644% Wednesday, from 1.665% Tuesday. Yields move inversely to prices.

In corporate news, Nordstrom skidded 30%, while Gap fell 24%. Both retailers reported disappointing earnings due to supply-chain issues late Tuesday.

Even as inflation and fresh coronavirus lockdowns weigh on investors' minds, many say there are few places outside of the stock market for large, consistent returns. The S&P 500 is up about 25% year-to-date and hovers close to its all-time-high.

"We have had fantastic earnings; the bond market is behaving itself; inflation is up, but rates are very low. As I sit here with five to six weeks left to the year, I have a hard time not being optimistic," said Tim Holland, chief investment officer at Orion Advisor Solutions. "As long as rates are low and earnings are growing, I think it's very difficult not to lean into stocks."

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

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