Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn


Global Market Report - 28 January

Lewis Jackson  |  28 Jan 2022Text size  Decrease  Increase  |  
Email to Friend


Australian shares are set to rise as a morning rally on Wall Street gave way to losses, continuing the rollercoaster-like sessions that have gripped markets this week.

ASX futures were up 101 points or 1.5% at 6810 near 8.00 am AEST, rebounding a day after the share market fell into a correction.

US stocks fell Thursday in another frenzied session as investors try to gauge how monetary policy and the prospects for the economy will affect corporate profits and stock valuations.

The Dow Jones Industrial Average rose as much as 600 points early in the session, but was off 7 points, or less than 0.1%. The S&P 500 fell 0.5%, while the Nasdaq Composite gave up all its morning gains, falling 1.4%.

Locally, the S&P/ASX 200 fell 1.8% to 6838.8, moving into correction territory with the market down over 10% from its highs in August. Almost all sectors ended the day in the red, with utilities and energy the only sectors to finish higher, up 1.2% and 2.1% respectively.

Beach Energy rose 8.8% and Santos was 3.6% higher, while Woodside Petroleum gained 2.5% after news that it would withdraw from Myanmar amid a deteriorating human-rights situation.

Technology stocks were the worst performers, closing 5.0% lower. WiseTech lost 10.0%, Codan fell 10.2% and Megaport finished 9.5% lower.

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

ANZ was the only major bank to finish in the green, gaining 1.1%.

Overseas, the Stoxx Europe 600 added 0.7%, reversing direction after declining moderately. Earlier, Asia-Pacific indexes fell sharply, with gauges in China, Japan and South Korea hitting their lowest closing levels in more than a year.

Turning to commodities, gold futures fell 2% to $US1795.70 an ounce; Brent crude fell 0.2% to $US89.76; Iron ore added 0.5% to US$138.75 a tonne.

Bond markets stabilised after a day of heavy selling, with the yield on the Australian 10-year bond edging down to 2.02%, while the benchmark US 10-year Treasury yield slipped to 1.80%. Yields fall when prices rise.

The Australian dollar was buying 70.30 US cents near 8.00am AEST, down from the previous close of 71.11. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 90.75, its highest level since July 2020.


Chinese stock indexes closed at multimonth lows amid a selloff across regional markets, with heavy losses among software, construction machinery and electronics companies. Investors may be cautious ahead of the upcoming Lunar New Year holiday and wish to mitigate risks from uncertainties in overseas markets, China Fortune Securities says. Will Semiconductor, Sany Heavy and Yonyou Network Technology each declined more than 5%. The Shanghai Composite Index fell 1.8%, its lowest closing since July. The Shenzhen Composite Index shed 2.9% and the ChiNext Price Index lost 3.3%, their lowest closing levels in more than eight months.

Hong Kong's Hang Seng Index closed 2.0% lower, weighed by broad declines across sectors, after Chinese stock indexes closed at multi-month lows. Chinese education-related stocks were among the worst performers amid concerns of possible tighter regulations. China Education Group declined 24% and Hope Education slid 13%. Tech stocks were also lower, tracking the weak performance of the US market overnight. Alibaba Group Holding fell 7.2% and Meituan dropped 6.9%. Other notable losers included China Aoyuan, which fell 5.0% after it said it will sell properties in Canada for C$215 million as part of efforts to address its liquidity issues.

The Nikkei index closed 3.1% lower Thursday at 26170.30, down from a recent high of 30670.10 last 14 Sept. Japanese stocks fell sharply because "the pace of the Fed's rate increases will likely be faster than expected," says Takahiro Sekido, chief Japan strategist at MUFG Bank. Although market participants had already expected rate increases later this year, many, including American investors, had thought the pace would be milder, he says.


European stocks rose in closing trade following early losses after the Federal Reserve signalled yesterday it would start raising interest rates in March. "While a more guardedly-positive tone prevails than was the case in the wake of the Fed, this market does not yet look like it wants to rebound," IG analyst Chris Beauchamp says. The pan-european Stoxx 600 rose 0.7%.

In London, the FTSE 100 ended Thursday up 1.13%, reversing the losses it incurred over the course of the week.

"The stock market rollercoaster has continued today—after opening sharply lower in the aftermath of last night's sharp post Fed sell off and the weakness in Asia markets, European markets have slowly peeled themselves off the canvas," CMC markets says.

The FTSE 100 managed to recover, climbing back into positive territory thanks to an outperformance across the board, with financials, energy and healthcare driving the gains, it says.

North America

US stocks fell Thursday in another frenzied session as investors try to gauge how monetary policy and the prospects for the economy will affect corporate profits and stock valuations.

The Dow Jones Industrial Average rose as much as 600 points early in the session, but was off 7 points, or less than 0.1%. The S&P 500 fell 0.5%, while the Nasdaq Composite gave up all its morning gains, falling 1.4%.

The range between Thursday's highs and lows isn't as wide as in other sessions this week, but it does continue the run of erratic trading. The VIX, a measure of expected volatility, hit its highest level in a year on Wednesday. Markets have been buffeted by concerns about central-bank policy around interest rates and inflation, and geopolitical tensions over Russia.

The volatility is a reflection of the difficulties investors are having in not only responding to the Federal Reserve's plans for monetary policy, but in preparing to live with what will be a long-term change in that policy, said Yung-Yu Ma, the chief investment strategist at BMO Wealth Management.

"What gets priced in and when is difficult at this point," he said. If inflation comes down quickly on its own, that will release some pressure. If it doesn't, and the Fed has to be aggressive in fighting it, "that's going to take its toll on the market."

For many traders, the question isn't what the Fed is going to do, said David Bahnsen, chief investment officer at Bahnsen Group, but what other traders think it will do and how to place bets that take advantage of that. The result, he said, is a market stuffed with leveraged trades that will need to be unwound quickly if they don't pay off.

"There's no lesson in any of it," he said. "It's all a game. But it does exacerbate volatility."

The Fed's statements on Wednesday added to that. The central bank signaled it would begin raising interest rates in mid-March as generally expected, but investors were struck by Chairman Jerome Powell's hawkish tone in his press conference, repeatedly emphasizing the bank's intention to fight inflation. That prompted a sharp market selloff.

The inflation question is important, said Mark Grant, a strategist at B. Riley Securities, but the Fed didn't provide enough guidance to the market on how exactly it plans to fight inflation.

"This continuing uncertainty with the Fed is overshadowing the economy," he said. "Everybody's sitting around trying to figure out what to do."

The latest economic reports provided some good news. The economy grew at an annualized rate of 6.9% last quarter, the biggest one-year jump since 1984. Economists had forecast 5.5% growth, propelled by consumer spending, business investment and efforts to rebuild inventories. Separately, weekly jobless claims fell by 30,000, the latest sign of a healthy job market.

While the economic questions are overshadowing it, earnings season is ongoing and is seen as the next big test of whether the stock market's sky-high valuations can be justified.

McDonald's was down 0.4% after the company missed analysts' profit estimates despite a sales boost. Blackstone rose 6.8% after it reported that net income nearly doubled. Mastercard rose 1.7% even after it said operating expenses had jumped.

"What I'm looking for this earnings season is inflationary pressures and margins—if companies are able to hold on to their profits," Fahad Kamal, chief investment officer at Kleinwort Hambros, said. "Are they able to pass along prices, are they able to maintain pricing power?" As central banks rein in liquidity, maintaining profit margins is particularly important, he added.

The yield on the benchmark 10-year Treasury note fell to 1.807% Thursday from 1.845%. Shorter-dated government bonds continued to sell off, with the two-year Treasury yield rising to 1.19%.

The greenback strengthened, with the WSJ Dollar Index rising to the highest level since July 2020. Precious metals fell, with gold down 2% to $1,793.30.

"The yields in the US have gone up as the path of rate hikes increases. There's a bit of a safe-haven play mixed in there as well, that will be a support environment for the dollar," said Mr. Kamal.

Apple, Visa and food and beverage giant Mondelez were due to report Thursday after markets close.

Netflix rose 7.5% after billionaire investor William Ackman said his hedge fund had bought 3.1 million shares. Moderna fell 4.1% after the company said it has started testing a version of its Covid-19 vaccine modified to target the Omicron variant.

Teradyne, an equipment manufacturer, tumbled 22% after its profit guidance missed analysts' expectations. Records showed that company insiders have sold thousands of shares in recent days. Software firm ServiceNow rose nearly 9.1% after beating Wall Street's estimates on revenue.

Oil prices slipped. US crude fell 0.85% to $86.61 after hitting a fresh seven-year high. Declining inventories have been pushing up prices, according to Nordic bank SEB.

Cryptocurrencies edged up, even as bitcoin extended its decline into a third day to trade around $35,960. Meta Platforms, formerly known as Facebook, is winding down its plans to build a cryptocurrency payments network and is selling its technology to a small bank, The Wall Street Journal reported.

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

AAP logo

© 2022 Australian Associated Press Pty Limited (AAP) or its Licensors. This is the Morningstar service with content provided by AAP where indicated. AAP reserves all rights, including copyright, in services provided by it. The information in the service is for personal use only, does not constitute financial product advice (whether general or personal) and may not be re-written, copied, re-sold or re-distributed, framed, linked or otherwise used whether for compensation of any kind or not, without the prior written permission of AAP. You should seek advice from a professional financial adviser before making decision to acquire or dispose of a financial product.

This service is published for general information purposes only without assuming a duty of care. AAP is not in the business of providing financial product advice (whether personal or general advice), and gives no warranty, guarantee or other representation about the accuracy of the information or images contained in this service. AAP is not liable for errors, omissions in, delays or interruptions to or cessation of the services through negligence or otherwise. The globe symbol and "AAP" are registered trademarks.

Email To Friend