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Global Market Report - 25 October

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

The ASX is set to rise after a mixed Friday on Wall Street where tech giants slipped.

The Australian SPI 200 futures contract was up 30 points or 0.4 per cent at 7,416 near 8.00 am AEST on Monday, suggesting a positive start to trading.

US stocks were mixed but finished higher for a third consecutive week.

The blue-chip Dow Jones Industrial Average edged up about 0.2% to a new record high. The S&P 500 index shed around 0.1%, and the technology-heavy Nasdaq Composite fell 0.8%.

Stocks have risen in recent days after strong earnings results from some of the biggest US corporations. Most S&P 500 companies that have reported earnings have beat analysts' expectations, and profits are expected to jump around 35% in the latest quarter from the prior year, according to Refinitiv data.

The Australian dollar was buying 74.68 US cents near 8.00am AEST, just off the daily low of 74.53. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, slipped to 88.05.

Locally, the S&P/ASX 200 closed flat at 7415.5 on Friday, after bouncing between narrow gains and losses.

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The energy and materials sectors were the biggest losers, dropping 2.1% and 1.2%, respectively, after the price of oil and iron ore fell overnight.

Fortescue, Rio Tinto and BHP dropped by between 0.7% and 2.2% as the materials sector completed a 1.4% loss for the week.

Consumer and health stocks rose strongly, but the tech sector gave up its gains to close flat after the Reserve Bank said buy-now-pay-later (BNPL) providers should end so-called no-surcharge rules.

The rules prevent merchants from raising the cost of their goods or services to cover the slice of the transaction levied by providers.

Afterpay lost 0.3% having been as much as 2.2% higher.

The ASX 200 gained 0.7% for the week.

Gold futures rose 0.8% to $US1796.30 an ounce; Brent crude rose 1.1% to $US85.53 a barrel; Iron ore was 2.2% higher at US$119.52.

The yield on the Australian 10-year bond was flat at 1.79%; The US 10-year Treasury note fell to 1.64.

Asia

Chinese stocks ended Friday mixed, continuing a trend of muted trading so far this month. The benchmark Shanghai Composite Index shed 0.3%, while the Shenzhen Composite Index lost 0.1%. Coal miners led the losers as the sector retreated from the previous day's growth.

Hong Kong stocks recovered from the previous session's brief downturn to extend their recent rally. The benchmark Hang Seng Index edged up 0.4%. Chinese property developers led the rise, after China's top officials recently reiterated support for the sector and noted that the impact from China Evergrande's debt crisis looks manageable.

Japanese stocks also advanced, as hopes for an earnings recovery offset concerns about higher costs of borrowing and raw materials. The Nikkei Stock Average rose 0.3%. Investors are expected to focus on the earnings season set to start next week and any policy developments ahead of Japan's lower-house election on 31 Oct.

Europe

European stocks rose on Friday, with the pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, up 0.46%.

In London, the FTSE 100 was 0.2% higher.

"The FTSE 100 has shaken off much of the negativity of earlier in the week, and is putting its best foot forward in a bid to surpass recent highs. As with US indices, raw materials and banks are behind the strength in the index," Chris Beauchamp at IG says.

North America

US stocks wavered Friday but headed toward a third consecutive week of gains.

The S&P 500 index fell 0.1%. The technology-heavy Nasdaq Composite shed 0.7%, while the blue-chip Dow Jones Industrial Average rose 0.2%.

All three major indexes are on track for weekly gains. The S&P 500 is up 1.7% this week, while the Dow has added 1.1%. The Nasdaq is up around 1.4%.

Stocks have risen in recent days after strong earnings results from some of the biggest US corporations. Most S&P 500 companies that have reported earnings have beat analysts' expectations, and corporate profits are expected to jump around 35% in the latest quarter from the prior year, according to Refinitiv data.

The latest financial results from companies like Tesla and Procter & Gamble showed that companies have been able to insulate themselves from the global supply-chain crisis and deliver strong results. Some companies have been passing down higher prices to customers.

"It's still a solid backdrop for the stock market," said Gabriela Santos, global market strategist at JPMorgan Asset Management.

Market volatility has edged lower this week while investors have piled into the stock market. The Cboe Volatility Index closed at 15.01 Thursday, its lowest close since February 2020, while the S&P 500 clinched another record. Some investors have turned to the options markets in recent sessions to wager on a continued stock rally.

While the broader market has been calmer in recent sessions, there have been big moves in individual stocks and other assets.

Investors have also piled into Bitcoin, sending prices to a high this week after the first Bitcoin ETF started trading.

Digital World Acquisition, the blank-check company taking former President Donald Trump's new social network public, more than doubled in a frenetic trading session. The shares were halted at least six times in trading Friday and are now up more than 1,000% this week, a lurch higher that is unusual even for SPACs, which tend to be volatile.

The shares have far outperformed an ETF tracking SPACs, the Defiance Next Gen SPAC Derived ETF, which has gained around 0.2% this week. Chatter about the shares permeated Reddit and Twitter.

On Friday, American Express shares rose around 5% after the credit-card company posted a rise in earnings that beat analysts forecasts, in part helped by more consumers dining out.

Snap shares fell around 25%, on track for the largest one-day fall on record, after the social-media company said changes to Apple's privacy rules would hurt its ad business. Other technology shares also slipped, with Facebook falling more than 5% and Google parent company Alphabet down 3.3%.

And recent earnings showed that some companies are struggling with parts shortages. Intel shares fell more than 11% after the chip maker posted earnings late Thursday. Component shortages are weighing on Intel's computer shipments and China's gaming crackdown is hurting sales of chips used in servers.

China Evergrande Group, the heavily indebted property giant whose potential default had spooked markets, made an overdue interest payment to international bondholders, Chinese state-owned media reported Friday. The payment allowed the company to stave off default and helped ease investors' broader concerns about China's property sector.

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

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