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
About

News

Global Market Report - 29 November

Lewis Jackson  |  29 Nov 2021Text size  Decrease  Increase  |  
Email to Friend

Australia

The ASX is set to fall after the emergence of a new coronavirus strain triggered a global selloff.

The Australian SPI 200 futures contract closed down -1.73% to 7,279.30 at the close on 26 November, suggesting a negative start to trading. This comes after the S&P/ASX 200 shed 1.6% for the week.

Stocks, oil prices and government-bond yields slumped on Friday after South Africa raised the alarm over a fast-spreading strain of the coronavirus, triggering concern that travel restrictions and other curbs will spoil the global economy's recovery.

The Dow Jones Industrial Average fell 2.5%, the biggest one-day percentage drop since October 2020.

The S&P 500 lost 2.3% and the Nasdaq Composite dropped 2.2%. It was the worst Black Friday session on record for all three indexes. Markets closed early because of the holiday.

The Australian dollar was buying 71.21 US cents near 8.00am AEST, down from the previous close of 71.87. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, was down at 90.09.

Locally, the S&P/ASX 200 closed 1.7% lower at 7279.3, completing a third straight weekly loss amid fears of a new Covid-19 variant.

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

The benchmark opened lower and fell steadily through a session that included stronger-than-expected retail sales data for October. It was its worst loss since 20 Sept and lowest close since 13 Oct.

Every sector finished lower, with energy the biggest loser. Banks--ANZ, Commonwealth, NAB and Westpac--lost between 0.7% and 2.5%, while iron-ore heavyweights BHP, Rio Tinto and Fortescue gave up between 1.5% and 3.9%.

The tech sector dropped 2.3%, with Appen slumping 19% after Macquarie warned of a structural shift against the data annotation firm.

Gold futures was flat at $US1788.10 an ounce; Brent crude plummeted 12% to $US72.72 a barrel; Iron ore was down -5.5% to $US96.67 a tonne.

Bond yields moved lower as investors pivoted to the safety of long-dated government debt. The yield on the Australian 10-year bond moved down to 1.73%; The US 10-year Treasury yield fell to 1.47%.

Asia

Chinese stocks ended lower on Friday amid muted sentiment, Shanxi Securities says, pointing to low trading volumes in recent days. The benchmark Shanghai Composite Index lost 0.6%, the Shenzhen Composite Index declined 0.2% and the ChiNext Price Index fell 0.2%. Chip makers led losses, extending a recent downturn after the US put a dozen Chinese companies, including several semiconductor manufacturers, on a trade blacklist over national-security and foreign-policy concerns.

Hong Kong's Hang Seng Index fell 2.7%, a seven-week low, with all but one of the index's 60 constituents ending lower, as worries about a new Covid variant in Africa led to a broad selloff in Asia. Top laggards were casino stocks and airlines. Alibaba Group fell below HK$130 a share for the first time, finishing 4.7% lower. Tencent Holdings lost 3.0% and Meituan shed 3.9% ahead of its earnings. Sentiment for developers soured again, with China Evergrande diving 10% and Fantasia Holdings falling 5.9% lower after it said a winding-up petition was filed against one of its main subsidiaries.

The Nikkei Stock Average closed 2.5% lower, selling off alongside other Asian markets amid fears of a new Covid-19 variant in South Africa. Notable laggards included SoftBank Group, which fell 5.2%, as sentiment was weighed by media reports that China had asked Didi, a company in which SoftBank is the biggest minority shareholder, to come up with a plan to delist in the US

Europe

European stocks followed the lead from Asia and plunged as fears about a new coronavirus variant identified in southern Africa hit sentiment. The pan-European STOXX 600 index, which tracks the performance of companies across 17 European companies dropped 3.6%.

In London, the FTSE 100 index fell 3.6%, wiping out gains made in recent months. Airlines, banks, and restaurants are feeling the pinch especially, IG Group PLC senior market analyst Joshua Mahony says.

North America

Stocks, oil prices and government-bond yields slumped on Friday after South Africa raised the alarm over a fast-spreading strain of the coronavirus, triggering concern that travel restrictions and other curbs will spoil the global economy's recovery.

The Dow Jones Industrial Average fell 2.5%, the biggest one-day percentage drop since October 2020.

The S&P 500 lost 2.3% and the Nasdaq Composite dropped 2.2%. It was the worst Black Friday session on record for all three indexes. Markets closed early because of the holiday.

Bitcoin, following the path of other risk assets, skidded 8% to below $55,000.

"It's not a great day to wake up on Black Friday and see news about a concerning variant," said Jessica Bemer, a portfolio manager at Easterly Investment Partners.

Investors reached for safe havens. The yield on the 10-year Treasury note tumbled to 1.482% from 1.644% before the Thanksgiving break, on track for its biggest drop since March 2020. Gold, another perceived store of value when riskier assets retreat, rose 0.1% to $1,785.30 a troy ounce.

The pullback created whiplash for markets that had, to a great extent, parked worries about coronavirus.

Scientists say the new coronavirus variant, dubbed B.1.1.529, has a high number of mutations that may make it more transmissible and allow it to evade some of the immune responses triggered by previous infection or vaccination. Dozens of countries have already imposed travel restrictions to and from southern Africa.

Investors feared the strain could set back months of efforts to revive the world economy and save lives.

"For now, Covid is back on the table," said Takeo Kamai, head of execution services at CLSA in Tokyo.

Investors seemed to be following the playbook they pulled out early in the pandemic: sell travel stocks, buy work-from-home stocks. "This is a market that is well practiced in terms of reacting to Covid," Ms. Bemer said.

Delta Air Lines, United Airlines and American Airlines Group all dropped 8% or more, after the U.K., Israel and Singapore restricted travel from southern Africa. The European Union said it would propose stopping air travel from the region. Cruise stocks including Royal Caribbean Group were hammered, while Exxon Mobil fell 3.5%, or $2.23, to $61.25. Chevron fell 2.3%, or $2.68, to $114.51.

Moderna rose 21%, or $56.24, to $329.63. Pfizer gained 6.1%, or $3.11. to $54. Netflix and DoorDash, which previously benefited from stay-at-home orders, rose 1.1% and 1.6%, respectively.

The World Health Organization on Friday said the new strain was a "variant of concern." Rising caseloads of other variants have already led some European countries to tighten rules for transportation, shopping and workplaces.

Many US investors had taken the day off, extending their Thanksgiving holiday. Ms. Bemer said she'd planned on working Friday, though she was staying with relatives for the holiday. "It's a busier day than we expected," she said.

The combined trading volume on the New York Stock Exchange and Nasdaq was about 6.9 billion shares. The average Black Friday volume since 2007 has been 2.9 billion shares, according to FactSet.

Oil prices experienced some of the biggest declines. US crude oil tumbled 13% to $68.15. Traders said money managers were rushing to unwind wagers that a mismatch between tight supplies and rising demand would push crude prices toward $100 a barrel. The swoon might encourage the Organization of the Petroleum Exporting Countries and a group of Russia-led allies to pause steps to pump more oil when they meet next week.

"If the announcement is, the vaccine works on this, back up we go," said Adam Webb, chief investment officer of Blue Creek Capital Management. "If the vaccines don't work against it, then good night Vienna."

Money managers said that even if the variant proves more resistant to vaccines than earlier strains, there were reasons to think the economic damage could be contained. MRNA vaccines, such as those manufactured by Pfizer and Moderna, can be quickly updated, and businesses have adapted to containment measures, ensuring that the blow from each lockdown has lessened.

However, elevated inflation could prevent central banks and governments from spraying economies with stimulus in the event of renewed widespread lockdowns.

"That's the big cause for concern: Is policy able to respond and bail out markets and economies this time given inflation?" said Edward Smith, co-chief investment officer at the Rathbone Investment Management. Trouble in supply chains stemming from shutdowns could further boost inflation, he added.

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