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Global Market Report - 26 July

Lewis Jackson  |  26 Jul 2021Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise as Wall Street shrugged off last Monday’s dip to end at record highs. This week, miners report earnings and a Federal Reserve monetary policy meeting.

The Australian SPI 200 futures contract was up 22 points or 0.30 per cent at 7,335 near 7.30 am Sydney time on Monday, suggesting a positive start to trading.

Wall Street has gained ground for the fourth straight session, extending a rally that pushed all three major US stock indexes to record closing highs as upbeat earnings and signs of economic revival fuelled investor risk appetite.

The Dow Jones Industrial Average rose 238.34 points, or 0.68 per cent, to 35,061.69, the S&P 500 gained 44.33 points, or 1.02 per cent, to 4,411.81 and the Nasdaq Composite added 152.39 points, or 1.04 per cent, to 14,836.99.

The Australian dollar was buying 73.66 US cents near 7.50am AEST, up from 73.65 at Friday’s close.

Locally, investors have extended an ASX record last Friday as they looked beyond the coronavirus lockdowns plaguing about half of Australia's population.

Shares set a closing record for the second consecutive day after ticking higher than Thursday's level.

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ThinkMarkets analyst Carl Capolingua was impressed.

"When you think about what's going on around the country, it's a very commendable performance," he said.

"You also might say it's completely at odds with what's going on."

NSW officials say it is unlikely their lockdown will end on July 30. Victorians and South Australians have a little more hope of their lockdowns ending sooner.

Mr Capolingua said the ASX"s lofty heights showed how far investors look ahead.
"Investors are looking past lockdowns," he said.

"The coronavirus situation is so severe that there is a silver lining in speeding vaccinations."
Low interest rates and supportive policy from central banks are also playing major roles.

For the week, the ASX added a modest 0.63 per cent.

Next week, US tech giants will have some influence over markets when they report quarterly earnings.

The US economy has roared back from the pandemic but some investors are wondering how much growth remains.

The US Federal Reserve has a monetary policy decision due.

AMP head of investment strategy Shane Oliver said he expected policy settings would remain as is.

Nor did he expect the US central bank to start winding back its bond buying, although the topic will be a point of interest.

US markets provided a modest lead overnight and the benchmark S&P/ASX200 index closed higher by eight points, or 0.11 per cent, to 7394.4.

The All Ordinaries closed up 12 points, or 0.16 per cent, to 7670.9.

Healthcare shares were best and gained 1.29 per cent.

Market giant CSL added 1.47 per cent to $293.48.

Technology shares were the next top performer and rose 0.97 per cent.

Energy shares fared worst and were the only ones to lose more than one per cent (1.06 per cent).

In corporate news, Star Entertainment withdrew its merger proposal for Crown Resorts.

A royal commission has raised the prospect Crown could lose the licence for its Melbourne casino.

Star, which operates The Star casino in Sydney, said there was too much uncertainty to continue.

Star shares closed lower by 0.56 per cent to $3.53. Crown shares dropped 2.24 per cent to $10.02.

Insurer IAG is headed for a full-year loss from COVID-19 but company leaders say there is more certainty in the economic outlook.

Preliminary earnings issued on Friday showed a full-year net loss of $427 million, largely due to the impact of the virus.

Despite the current lockdowns, IAG has forecast its premiums business to improve by a low, single-digit percentage this financial year.

Shares were better by 1.03 per cent to $4.91.

Gold miner Evolution raised $400 million from institutional investors and shares resumed trading.

The share sale will help fund the $400 million purchase of gold mines in Western Australia from Northern Star.

Evolution will raise a further $50 million from retail shareholders.

Shares were up 4.42 per cent to $4.25.

The major miners were affected by the iron ore price moving lower earlier.

Fortescue fared best and gained 0.24 per cent to $25.25.

The big banks had a forgettable day.

ANZ had the poorest showing of the big four and dropped 1.11 per cent to $27.69.

NAB was best of the group and steady at $26.04.

Spot Gold was down 0.3 per cent at $US1802.15 an ounce; Brent crude was up 0.5 per cent at $US74.12 a barrel; Iron ore was down 0.6 per cent to $US201.33

The yield on the Australian 10-year bond closed at 1.20 per cent.

Asia

At the close, China's Shanghai Composite index was down 0.68 per cent at 3,550.40.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 1.45 per cent at 27,321.98.

Japan's Nikkei 225 was up 0.58 per cent at 27,548.00

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up 1.09 per cent at 461.51.

The German DAX was up at 15,669.29.

North America

Wall Street has gained ground for the fourth straight session, extending a rally that pushed all three major US stock indexes to record closing highs as upbeat earnings and signs of economic revival fuelled investor risk appetite.

The Dow Jones Industrial Average rose 238.34 points, or 0.68 per cent, to 35,061.69, the S&P 500 gained 44.33 points, or 1.02 per cent, to 4,411.81 and the Nasdaq Composite added 152.39 points, or 1.04 per cent, to 14,836.99.

The S&P 500, the Nasdaq and the Dow all notched weekly gains.

"We see a continuation of the last couple days. It's roller coaster in reverse. We did the drop first and we've been climbing back to the top ever since," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

Growth and value stocks seesawed for much of the week as market participants weighed spiking infections of the COVID-19 Delta variant against strong corporate results and signs of economic revival.

"There's push and pull, there's clearly conflict in the market," Zaccarelli added.

"There's a strong difference of opinion as to whether the future's bright or whether there are clouds on the horizon."

Market participants now look toward next week with the Federal Reserve's two-day monetary policy meeting and a series of high-profile earnings.

The Fed's statement will be parsed for clues regarding the timeframe for tightening its accommodative policies although Chairman Jerome Powell has repeatedly said the economy still needs the central bank's full support.

Second-quarter reporting season is firing all pistons, with 120 of the companies in the S&P 500 having reported.

Of those, 88 per cent have beaten consensus, according to Refinitiv.

"We're seeing companies, on average, beat on the top and on the bottom line," Zaccarelli said.

"We're seeing the resilience of the consumer and that's been the story of the earnings season so far."

Analysts now expect aggregate year-on-year S&P 500 earnings growth of 78.1 per cent for the April to June period, a sizeable increase from the 54 per cent annual growth seen at the beginning of the quarter.

Shares of chipmaker Intel Corp fell after it said late on Thursday that it still faces supply constraints and provided disappointing guidance.

American Express Co gained following the release of its second-quarter results, which handily beat expectations on the strength of a global recovery in consumer spending.

Social media firms Twitter Inc and Snap Inc advanced on the back of their upbeat results.

Those reports gave a boost to shares of Facebook Inc, which is due to post second-quarter results next week.

Other high-profile earnings expected next week include Tesla Inc, Apple Inc, Alphabet Inc, Microsoft Corp and Amazon.com.

Industrials Lockheed Martin Corp, Boeing Co, Ford Motor Co, General Dynamics Corp, 3M Co Caterpillar Inc, Chevron Corp and Exxon Mobil Corp, along with a host of healthcare, consumer goods and others, are also on deck.

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

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