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Global Market Report - 30 August

Lewis Jackson  |  30 Aug 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to start the week higher after the S&P 500 notched its first close above 4,500 and the Federal Reserve reaffirmed it would begin reducing economic support later this year.

The Australian SPI 200 futures contract was up 13 points or 0.17 per cent at 7,441 near 7.30 am Sydney time on Monday, suggesting a positive start to trading.

The S&P 500 hit a fresh record after Federal Reserve Chairman Jerome Powell stressed that the central bank shouldn't overreact to a recent spike in inflation.

The S&P 500 advanced 0.9% after Mr. Powell's highly anticipated speech at the virtual Jackson Hole conference on Friday. The record close for the S&P was also its first above 4500.

The technology-heavy Nasdaq Composite climbed 1.2%, also putting it at a record. The Dow Jones Industrial Average rose 0.7%. All three indexes were up for the week.

Mr. Powell reaffirmed that the central bank would begin tapering bond purchases later this year. While he didn't say when exactly the process would begin, the Fed chair spent much of his speech explaining why he is still confident that the recent inflation surge would prove temporary and why the Fed shouldn't rush to tighten monetary policy.

The Australian dollar was buying 73.10 US cents near 7.30am AEST, up from the daily low of from 72.22 over the weekend. The WSJ Dollar Index, which measures the US dollar relative to 16 foreign currencies, was up at 87.38.

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Locally, the S&P/ASX 200 closed flat at 7488.3, as weakness in tech and consumer stocks offset gains elsewhere.

Retail and industrial conglomerate Wesfarmers' 2.8% fall after its FY results led the consumer discretionary sector to drop 1.6%. Appen again weighed on the tech sector, losing 6.1% to log a two-day loss of 26% after a disappointing 1H performance.

The sector fell 1.2% as data-center operator NEXTDC dropped 5.4% following softer-than-expected guidance.

The benchmark's largest sector, financials, added 0.2%, while Clinuvel's 18% jump helped the health sector add 0.6%. The ASX 200 gained 0.4% for the week.

One of the biggest movers Friday was Blackmores, which gained 6.42% to close at $98.

Australia is back in recession, according to the Commonwealth Bank of Australia, as it lowered its outlook for economic growth on Friday.

The big mortgage lender on Friday lowered its expectations for national output in the three months through September, forecasting gross domestic product to fall 4.5% from the previous quarter. A few weeks ago, CBA's forecast was for the economy to contract 2.75%.

Gold futures rose by 1.4% to $US1819.50 an ounce; Brent crude was up 2.3% at $US72.70 a barrel, up 11% for the week; Iron ore was up 3% at $US157.55.

The yield on the Australian 10-year bond was up at 1.18 per cent; The yield on the US 10-year note fell to 1.31 per cent.

Asia

Chinese stocks finished the session mixed on Friday as traders weighed reports of incoming People’s Bank of China policy support and corporate earnings results.

The benchmark Shanghai Composite Index rose 0.6% to 3522.16, while the Shenzhen Composite Index edged up 0.1%, both recovering from losses over the last session. Metal producers and mining companies led the gains, which were offset by lingering weakness in consumer firms such as tourism agencies and food-and-beverage retailers.

Hong Kong stocks ended the session flat, with the benchmark Hang Seng Index edging 0.03% lower to 25,407.89. Developers were the top winners, but drugmakers offset that upbeat momentum.

Japanese stocks fell, weighed down by weakness in electronics stocks amid caution over the US monetary policy outlook. The Nikkei Stock Average lost 0.4% to finish the week at 27,651.14.

Europe

The FTSE 100 closed up 0.3% to 7148.01, with Federal Reserve Chairman Jerome Powell's Jackson Hole speech helping to lift stocks in European markets.

Anglo American, BHP and BP were the leading gainers on the index, thanks to firmer commodity prices, Michael Hewson at CMC Markets said. Sainsbury shares suffered the second biggest decline after an apparent lack of interest in a takeover of the U.K. grocer overtook Monday's speculation that private equity group Apollo was interested in making a bid, Mr. Hewson said.

The pan-European STOXX 50 index, which tracks the return of the largest listed companies across 19 European countries, closed Friday up 0.51% to 4190.90, for a total gain of 1.05% this week.

North America

The S&P 500 and Nasdaq Composite climbed to fresh records Friday after Federal Reserve Chairman Jerome Powell stressed that the central bank shouldn't overreact to a recent spike in inflation.

The broad-based S&P 500 advanced 39.37 points, or 0.9%, to 4,509.37 after Mr. Powell's highly anticipated speech at the virtual Jackson Hole conference. It was the first time the index closed above 4,500.

The technology-heavy Nasdaq rose 183.69, or 1.2%, to a record 15,129.50. The Dow Jones Industrial Average rose 242.68, or 0.7%, to 35,455.80. All three indexes were up for the week.

Investors were monitoring Mr. Powell's speech for clues about when the Fed might start to scale back its easy-money policies. The central bank has been conducting $120 billion in monthly asset purchases to juice the economic recovery, while holding its benchmark short-term interest rate near zero. Such policies have helped propel stocks to all-time highs.

Minutes from the Fed's late July policy gathering showed that many of the officials thought asset buying could start to slow down by the end of this year. This week, more regional Fed leaders made the case that it was time to pare back the central bank's stimulus campaign.

Mr. Powell reaffirmed Friday that the central bank would begin tapering bond purchases later this year. While he didn't say when exactly the process would begin, the Fed chair spent much of his speech explaining why he is still confident that the recent inflation surge would prove temporary and why the Fed shouldn't rush to tighten monetary policy.

"The mood music going into Powell's speech was 'taper is coming, taper is coming,' which might have led people to think he was going to make an announcement," said Christopher Smart, chief global strategist at Barings.

Instead, Mr. Powell's measured remarks signaled the Fed wouldn't rush to begin tapering, prompting the market's positive reaction, Mr. Smart said. "He reset expectations slightly towards later," the strategist said.

In the bond market, the yield on 10-year Treasury notes fell to 1.311% from 1.342% Thursday. Yields move in the opposite direction of bond prices.

One of the biggest risks to stock prices is the rise of the Delta variant, which threatens to delay a rebound in travel and leisure spending.

New data released by the Commerce Department on Friday showed consumer spending grew 0.3% in July, suggesting the recovery has lost momentum amid uncertainty caused by the Delta variant.

Still, stocks have been buoyant on hopes that strong economic growth will extend a surge in corporate profits.

Nine of the S&P 500's 11 sectors ended Friday in positive territory. Energy stocks posted the strongest gains, while healthcare and utilities were the only two sector to sectors to decline.

Shares of Peloton Interactive slid $9.75, or 8.5%, to $104.34. The exercise-equipment maker said Friday that it had been subpoenaed by the federal government for information on its reporting of injuries related to its products. Peloton also said late Thursday that it expected its growth to slow.

Disney rose $3.58, or 2%, to $180.14 a share after The Wall Street Journal reported that the entertainment giant's ESPN unit is seeking to license its brand to major sports-betting operators for at least $3 billion over several years.

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

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