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Global Market Report - 26 May

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

Australian shares are set to open lower after Wall Street dipped slightly overnight. US bond yields continued to slide, as did the price of iron ore.

The Australian SPI 200 futures contract was down 35 points or 0.49 per cent to $7,081 near 7.35 am Sydney time on Wednesday, suggesting a negative start to trading.

US stocks have closed slightly lower and each of Wall Street's main indexes failed to stray far from the unchanged mark following a rally in the prior session as investors continue to try and assess the route of inflation.

The Dow Jones Industrial Average fell 81.52 points, or 0.24 per cent, to 34,312.46, the S&P 500 lost 8.92 points, or 0.21 per cent, to 4,188.13 and the Nasdaq Composite dropped 4.00 points, or 0.03 per cent, to 13,657.17.

The Australian dollar was buying 77.55 US cents at 7.36 AEST, down from 77.71 at Tuesday’s close.

Locally, mining giants thrived Tuesday despite continued falling iron ore prices, and Commonwealth Bank shares set a record price, in a wide-ranging rally on the ASX.

BHP, Fortescue and Rio Tinto rose by more than one per cent and materials shares climbed almost one per cent after the category had four consecutive sessions of losses.

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The gains came despite the price of iron ore, used to make steel, slipping to about $US187 per tonne.

Chinese government officials last week declared a crackdown on rising commodity prices. Iron ore has traded as high as $US240 per tonne.

Commonwealth Bank shares set a record price of $99.65.

Shares closed up by 0.88 per cent to $99.63.

Financial shares closed more than one per cent higher.

There were also gains of more than one per cent for shares in health, consumer discretionaries, telecommunications and property.

The benchmark S&P/ASX200 index closed up by 69.3 points, or 0.98 per cent, to 7115.2.

The All Ordinaries closed up by 73.1 points, or one per cent, to 7349.1.

The rally followed stocks on Wall Street closing higher.

GSFM investment strategy consultant Stephen Miller said shares had stabilised recently after a scare from higher than expected US inflation data earlier this month.

He said investors' concerns that central banks might ease or withdraw financial stimulus had subsided.

A US Federal Reserve official helped allay fears when he said the central bank should not look at changing policy in the midst of the coronavirus pandemic.

While the ASX has had four consecutive sessions of gains, CommSec market analyst Steven Daghlian was not so upbeat.

He noted the market had done little more than recoup its losses from Wednesday's 1.9 per cent loss.

"The market has not found a fresh sense of optimism," he said.

US consumer spending data for April, due later this week, could be the next test for inflation concerns.

Central banks have said inflation will be temporary as economies recover from the pandemic, but Mr Miller was unsure.

"I actually think inflation may be a little more persistent," he said.

Meanwhile, a COVID-19 cluster in Melbourne's north rose to nine infections.

The latest four people infected are all family members of the fifth person in the cluster.

Shops, cafes, restaurants and pubs continue trading with limits on the number of customers on-site.

New Zealand suspended quarantine-free travel from Victoria.

There was no obvious effect on travel stocks. Qantas was lower by 0.21 per cent to $4.71.

Investors in Pepper Money may be worried after the company joined the ASX and closed lower by 9.69 per cent to $2.61.

Shares opened at $2.61 and fluctuated between a low of $2.41 and a high of $2.73.

Brisbane-based software provider TechnologyOne warned full-year earnings may not be as pleasing as its 48 per cent rise in first-half earnings.

The vendor is still encouraging customers to move from on-site installations to online delivery of its products, which will help long-term growth.

Boss Ed Chung said sales under the old model would drop by about $7 million this financial year and have an impact on full-year earnings.

Shares rose 2.11 per cent to $9.18.

Cancer treatment provider Imugene shot up 12.35 per cent to 45 cents after its chairman and chief executive bought more shares.

Executive chairman Paul Hopper bought 25 million shares for $1.07 million.

Chief executive Leslie Chong bought 36.2 million shares for $1.51 million.

Spot Gold was up 1.08 per cent at $US1897.53 an ounce; Brent crude was up 0.3 per cent to $US68.66 a barrel. Iron ore was almost flat at $US192.87 a tonne.

The yield on the Australian 10-year bond closed down at 1.68 per cent.

Asia

At the close, China's Shanghai Composite index was up 2.4 per cent at 3,581.34.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, was up 1.75 per cent, to 28,910.86.

Japan's Nikkei 225 Index closed up 0.67 per cent at 28,553.98.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, rose 0.13 per cent to 445.20.

The German DAX rose 0.18 per cent to 15,465.09.

North America

US stocks have closed slightly lower and each of Wall Street's main indexes failed to stray far from the unchanged mark following a rally in the prior session as investors continue to try and assess the route of inflation.

The Dow Jones Industrial Average fell 81.52 points, or 0.24 per cent, to 34,312.46, the S&P 500 lost 8.92 points, or 0.21 per cent, to 4,188.13 and the Nasdaq Composite dropped 4.00 points, or 0.03 per cent, to 13,657.17.

Yields on longer-dated US Treasuries fell for a fourth straight day, with the benchmark 10-year yield hitting a fresh two-week low of 1.557 per cent and helping to dampen inflation worries.

The yield had climbed to as much as 1.776 per cent at the end of March.

Federal Reserve officials continue to downplay rising price pressures and Fed Vice Chair Richard Clarida said the central bank can take steps to cool a jump in inflation, if it occurs, without derailing the economic rebound coming out of the coronavirus pandemic.

While most market participants expect prices to increase as the economy recovers, concerns about the speed and trajectory of the rise persist.

"Maybe the bond market is not all that far out of balance," said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis, who says the bond market doesn't seem that concerned about inflation at the moment.

"It's a combination that maybe the Fed is correct but also that the Fed for the first time showed they are beginning to talk about tapering (of bond purchases), which is also a comforting sign that there is still a heartbeat of inflation fighting in the Federal Reserve."

Energy, down 2.04 per cent, was the weakest sector on the day with Exxon Mobil Corp off 2.26 per cent as the biggest weight on the S&P 500 after sources said BlackRock Inc has backed several candidates of hedge fund Engine No 1 to join the energy giant's board.

Real estate, up 0.31 per cent, was a bright spot, benefiting from the pause in yields.

Data on Tuesday showed sales of new US single-family homes dropped in April as prices surged amid a tight supply of houses while a separate report showed US consumer confidence was little changed and near last month's number that was the highest reading since February 2020.

The S&P 500 sits about 1.0 per cent from its May 7 all-time high as the focus turns to the US Personal Consumption Expenditures report, the Fed's preferred measure of inflation, to be released on Thursday.

A much stronger than expected reading on consumer prices two weeks ago re-ignited inflation fears and stoked market volatility.

Airline stocks, part of the "reopening" trade, rose after United Airlines and Hawaiian Holdings issued upbeat air traffic and ticket sale estimates that sent their shares up 1.50 per cent and 3.59 per cent respectively.

Boeing gained 1.39 per cent after aircraft leasing business SMBC Aviation Capital agreed to buy 14 more 737 MAX jets.

Lordstown Motors Corp slumped 7.45 per cent after the electric vehicle start-up said that 2021 production of its Endurance truck would be half of prior expectations and it needs additional capital to execute its plans.

is a reporter/data journalist for Morningstar. You can follow Lewis on Twitter @lewjackk

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