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Global Market Report - 28 September

Lewis Jackson  |  28 Sep 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to fall. US indexes closed mixed as supply issues kept oil and natural gas prices rising. Brent crude hit its highest level since 2018.

The Australian SPI 200 futures contract was down 42 points or 0.6 per cent at 7,311 near 7.15 am AEST on Tuesday, suggesting a negative start to trading.

US stocks wobbled, bond yields rose and oil hit its highest level in nearly three years as investors bet on further economic reopening but remained concerned about supply-chain disruptions.

The S&P 500 lost 0.3%. The Dow Jones Industrial Average ticked up 0.2% while the tech-heavy Nasdaq Composite Index fell 0.5%.

"We're easing off that extremely accommodative monetary policy stance as growth improves and we see higher inflation," said Amy Magnotta, co-head of discretionary portfolios at Brinker Capital Investments. "Then when the economy should meet the Fed's target of growth and employment perspective, we could see further tightening in rising interest rates."

The Australian dollar was buying 72.86 US cents near 7.15am AEST, up from the previous close of 72.56. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, rose to 87.95.

Locally, the S&P/ASX 200 closed 0.6% higher at 7384.2, led by travel and large-cap stocks. Shares in 13 of the 17 largest companies by market capitalization rose.

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Westpac, NAB, ANZ and Commonwealth banks put on between 0.8% and 2.8% as the heavyweight financial sector rose 1.5%.

Fortescue Metals gained 2.7%, helping the materials sector rise 0.15%.

Travel stocks Qantas, Corporate Travel, Webjet and Flight Centre were all among the ASX 200's 15 strongest performers, rising by between 2.8% and 7.5% after New South Wales, mapped out plans for easing Covid-related restrictions over coming months.

Gold futures fell 30 cents to $US1752.52 an ounce; Brent crude was up 1.8% at $US79.53 a barrel; Iron ore was up 7.2% $US119.31.

The yield on the Australian 10-year bond rose to 1.41%; The yield on the US 10-year note rose to 1.49%.

Asia

Chinese stocks finished mixed Monday, hurt by losses among miners and steelmakers, even as major liquor makers enjoyed their best day in years. A few cyclical stocks weakened further from an earlier rally. The Shanghai Composite Index dropped 0.8%, the Shenzhen Composite Index declined 1.1% and the ChiNext Price Index gained 0.7%.

Hong Kong's benchmark Hang Seng Index edged 0.1% higher, as energy majors gained amid rising oil prices. Property developers were broadly lower as Evergrande-related fears continued to weigh. Longfor Group declined 3.2%, Country Garden fell 2.5% and China Overseas Land & Investment dropped 2.8%.

The Nikkei Stock Average settled largely unchanged as gains in airline, railway and bank stocks helped offset losses in tech and shipping shares. Reports of the potential lifting of the Covid-19 state of emergency by the government boosted travel-related sectors, while triggering profit-taking in stocks related to chips and e-commerce.

Europe

European markets mostly gained Monday as oil stocks rally on the back of rising crude prices. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies, fell 0.2%.

"Energy prices are on the rise once again today, with Brent crude hitting the highest level in almost three years," IG analyst Josh Mahony says. "Supply constraints appear to be coming at the wrong time, with demand gradually picking up steam."

London’s FTSE 100 closed 0.17% higher.

North America

US stocks wobbled Monday, bond yields rose and oil hit its highest level in nearly three years as investors bet on further economic reopening but remained concerned about supply-chain disruptions.

Oil prices rose as supply constraints continued to draw on inventories around the world and the rally in natural gas prices also pushed up crude, according to ANZ Research analysts. Global benchmark Brent crude gained 2.1% to $78.81 a barrel in midday trading, hitting the highest level since October 2018.

The S&P 500 lost 0.3%. The Dow Jones Industrial Average ticked up 0.2% while the tech-heavy Nasdaq Composite Index fell 0.5%.

Stocks swung last week as fears about Evergrande's debt problems weighed on markets. Despite the Chinese property developer missing a bond coupon payment, the S&P 500 still finished the week up 0.5%. Federal Reserve Chairman Jerome Powell helped boost confidence when he said the US economy has recovered sufficiently for the central bank to potentially announce the start of bond-purchase tapering at its next meeting.

"We're easing off that extremely accommodative monetary policy stance as growth improves and we see higher inflation," said Amy Magnotta, co-head of discretionary portfolios at Brinker Capital Investments. "Then when the economy should meet the Fed's target of growth and employment perspective, we could see further tightening in rising interest rates."

Technology stocks are particularly sensitive to rising interest rates. Facebook Inc. shares recovered after being dragged down in early trading by the California-based social media giant announcing Monday it will pause the development of its Instagram for kids project.

Meanwhile, Alphabet Inc.'s Google started its appeal Monday to overturn a $5 billion antitrust fine imposed by the European Union, contending that its Android operating system for mobile devices has boosted competition rather than foreclosing it. Shares declined 0.8%.

Shares of energy stocks gained. Occidental Petroleum Corp. jumped 7.4%, Marathon Oil Corp. rose 6.2% and Valero Energy Corp. climbed 4.6%. Travel stocks also rallied with shares of Carnival Corp., Royal Caribbean Group and Norwegian Cruise Holdings Ltd. all gaining.

Special-purpose acquisition company Gores Guggenheim rose 5.3% after it agreed to merge with Swedish electric-vehicle maker Polestar in a $21 billion deal.

Fresh data showed a 1.8% rise in new US orders for durable goods in August, stronger than economists expected, as business investment and consumer spending picked up.

Bitcoin climbed 1% compared with its level at 5 p.m. Friday, recovering some ground after a steep decline prompted by the Chinese government outlawing cryptocurrency transactions. The digital currency traded around $43,500.

The yield on the 10-year benchmark US Treasury note ticked up to 1.482% Monday from 1.459% Friday, reaching the highest intraday level since June. This extended into a fifth day a rise that drove the biggest weekly increase since March.

Some investors say that cyclical stocks rallying in the face of rising interest rates shows that the economy is on a path to sustainable growth. "That's really the next leg, can more cyclical oriented companies continue to grow earnings at the same pace coming out of the cyclical trough post-Covid?" said Tom Graff, head of fixed income and portfolio manager at Brown Advisory.

Pullbacks also can make overvalued stocks more affordable, some market participants said. "If you see these attractive names pull back, you are definitely going to use that as an opportunity to buy in," said Sara Rajo-Miller, financial adviser and director at Miracle Mile Advisors. "They are still good names that people want to own."

Investors also are closely monitoring the outcomes of many high-stakes deadlines on Capitol Hill this week, setting up potentially chaotic negotiations against the backdrop of expiring government funding and the threat of a possible US default.

"The sooner something there [Capitol Hill] happens, the happier the market will be," said JJ Kinahan TD Ameritrade's chief market strategist. "Watching the sausage being made is always a really ugly process."

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

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