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Global Market Report - 27 October

Lewis Jackson  |  27 Oct 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to edge up after Wall Street inched higher amid a Q3 miss at Facebook.

The Australian SPI 200 futures contract was 4 points or 0.18 per cent higher at 7,422 near 8.00 am AEST on Wednesday, suggesting a positive start to trading.

The S&P 500 and Dow Jones Industrial Average cruised to another pair of closing records after solid earnings and upbeat consumer data gave investors a fresh dose of economic optimism.

Both benchmarks advanced from Monday's record closes. The Dow Jones Industrial Average added less than 0.1%, while the S&P 500 gained 0.2%. The Nasdaq Composite finished less than 0.1% higher.

Earnings season so far has beaten investors' expectations and helped lift stocks out of a September slump. Jitters about the labour market and inflation have somewhat given way to optimism about a recovering economy.

The Australian dollar was buying 75.02 US cents near 8.00am AEST, up from the previous close of 74.91. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 88.20.

Locally, the S&P/ASX 200 closed flat at 7443.4 after giving back its early gains. The benchmark had been up as much as 0.4%, following fresh records in US shares, but eased into the close amid profit-taking in stocks including Crown Resorts.

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The casino operator closed 8.7% higher, although it had been up 13% after regulators said it could keep its flagship Melbourne license despite illegal behaviour.

The heavyweight financial and materials sectors both closed flat, leaving tech as the best performer in percentage terms. Afterpay rose 3.3%, following a similar overnight rise for future owner Square.

Coal-rich Australia will need to retool its commodity-export industry to align with the Paris climate targets, energy consultancy Wood Mackenzie says, after Prime Minister Scott Morrison announced a net-zero emissions by 2050 target. It sees future opportunities in low-carbon hydrogen and carbon storage services.

Gold futures fell 0.7% to $US1793.40 an ounce; Brent crude rose 0.5% to $US86.40 a barrel; Iron ore was 2.7% lower at US$122.30.

The yield on the Australian 10-year bond was up at 1.80%; The US 10-year Treasury note fell to 1.61.

Asia

Chinese stocks were dragged lower Tuesday by property developers and home-appliance makers. The property sector fell for a second day after Beijing said over the weekend that it would conduct property-tax trials in parts of the country. The Shanghai Composite Index fell 0.3%.

Hong Kong's Hang Seng Index lost 0.4%, weighed by tech and property stocks. The Hang Seng TECH Index ended down 1.3%. Alibaba Health Information Technology led the declines after indicating that it expects to record a first-half loss this year. Hong Kong developers were also sent lower by the news of a property-tax trial on the mainland.

The Nikkei Stock Average advanced 1.8%, thanks to gains by shipping and steel-related stocks. Bio-venture company PeptiDream surged following news it plans to buy Fujifilm Toyama Chemical's radiopharmaceutical business.

Europe

European stocks were higher on Tuesday following Wall Street’s advance. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, was up 0.75%.

In London, the FTSE 100 was 0.76% higher.

North America

The S&P 500 and Dow Jones Industrial Average cruised to another pair of closing records Tuesday after solid earnings and upbeat consumer data gave investors a fresh dose of economic optimism.

Both benchmarks slipped from their session highs but still eked out gains, beating records they set Monday. The Dow added 15.73 points, or less than 0.1%, to 35756.88, hitting its 38th record close of the year. The S&P 500 gained 8.31 points, or 0.2%, to 4574.79, its 57th closing high of 2021.

The Nasdaq Composite finished up 9.01 points, or less than 0.1%, to 15235.71. That put the tech-heavy benchmark within a percentage point of the record close it notched in September.

Earnings season so far has beaten investors' expectations and helped lift stocks out of a September slump. UPS powered both the Dow and the S&P 500 after the delivery company topped analysts' estimates.

Investors have been buoyed by strong earnings from major banks, consumer companies and manufacturers. Jitters about the labour market and inflation have somewhat given way to optimism about a recovering economy.

Consumer confidence also rose last month, halting a three-month decline, according to the Conference Board. The latest home-sales figures from the Commerce Department highlighted an increase in purchases across the country, topping analysts' projections.

"Covid numbers have crested, the economic data has been pretty good, and the early read on third-quarter earnings is positive," said David Donabedian, chief investment officer at CIBC Private Wealth. "The bottom line is this is still a buy-the-dips market."

Now investors are turning their attention to the tech industry. Microsoft, Twitter, Google parent Alphabet and Robinhood Markets all reported after markets closed. Microsoft and Twitter shares edged higher in after-hours trading, while Alphabet and Robinhood slipped.

Of the 144 companies in the S&P 500 to report quarterly earnings through Tuesday morning, 81% have beaten analyst forecasts, according to FactSet. Companies across the index are currently estimated to grow third-quarter earnings by 33% from a year earlier.

UPS gained $14.17, or 6.9%, to $218.07 after the delivery company reported that it continued to make money despite shipping fewer packages. General Electric rose $2.14, or 2%, to $107.44 after it said cost-cutting efforts had offset lower-than-expected sales.

Some reports disappointed investors. Facebook, which was among the first of the major tech firms to report third-quarter earnings, said late Monday that changes to Apple's privacy rules had hit sales growth. Shares slid $12.88, or 3.9%, to $315.81, putting some pressure on the S&P 500 and Nasdaq.

Shares of Lockheed Martin fell $44.42, or 12%, to $331.91 after the aerospace company posted a drop in profit early Tuesday.

In other corporate news, DraftKings rose $1.93, or 4.1%, to $48.75 after the betting company said it was withdrawing its takeover plan for London-listed Entain.

Tech firms are likely to remain attractive to investors despite the trend of fewer people working from home and the risk of increasing regulation, Mr. Donabedian said.

"They are battleships -- they just continue to post very strong revenue and earnings growth," he said.

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

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