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Global Market Report - 4 August

Lewis Jackson  |  04 Aug 2021Text size  Decrease  Increase  |  
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Australia

The ASX is set to open higher after the S&P 500 notched another record close. The Reserve Bank vowed to continue with its plans to reduce bond buying after its Tuesday meeting.

The Australian SPI 200 futures contract was up 9 points or 0.12 per cent at 7,381 near 7.10 am Sydney time on Wednesday, suggesting a positive start to trading.

Wall Street's main indexes have closed higher on gains in Apple and healthcare stocks despite concerns over a surge in the Delta variant of the coronavirus taking some shine off an upbeat corporate earnings season.

The Dow Jones Industrial Average rose 279.16 points, or 0.8 per cent, to 35,117.32, the S&P 500 gained 36.14 points, or 0.82 per cent, to 4,423.3 and the Nasdaq Composite added 80.23 points, or 0.55 per cent, to 14,761.30.

The Australian dollar was buying 73.94 US cents near 7.30am AEST, down from 73.99 US cents at Tuesday’s close.

Locally, investors had a momentary spat about a Reserve Bank decision not to maintain the same support for a coronavirus-ravaged economy, and the ASX eased from record highs.

Many economists had tipped recent coronavirus lockdowns across the nation would prompt the RBA to defer easing its bond buying.

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The central bank in July vowed to reduce bond buying to $4 billion a week from early September, from $5 billion currently.

The RBA on Tuesday kept to its decision, and maintained the record low cash rate of 0.1 per cent.

While Governor Philip Lowe said a rise in unemployment was likely soon due to lockdowns, he said the economy had bounced back in the past.

Pepperstone chief market strategist Chris Weston said Mr Lowe was looking through the lockdown period and expecting economic recovery heading into 2022.

Mr Weston said investors had hoped for more support from the RBA.

Bond buying took bonds out of the market, he said, and encouraged investors to take risk in places like the share market.

Bond buying also kept yields low, and the currency value low, he said.

The ASX was trading lower prior to the RBA's monthly statement, and slipped to its lowest level of the day soon after.

Currency traders liked the optimistic outlook and the prospect for rate rises.

Nomura senior economist Andrew Ticehurst noted the bank's forecast for the economy to grow by a little more than four per cent during 2022.

The long-term forecasts were pretty upbeat, he said.

Investors pushed the Aussie dollar from about 73 US cents to its highest level of the day, 74.09 US cents.

The ASX late in trade recovered from its low level but still closed down.

The benchmark S&P/ASX200 index closed lower by 16.9 points, or 0.23 per cent, to 7474.5.
The fall follows a record high for the index on Monday.

The All Ordinaries on Tuesday closed down 10 points, or 0.13 per cent, to 7750.5.

The big banks and miners were all lower.

US markets closed mostly lower too after Federal Reserve Governor Christopher Waller said the central bank could start to reduce its support for the economy by October.

This would depend on whether the next two monthly jobs reports each show employment rising by 800,000 to 1 million, he said.

In ASX company moves, Afterpay gained 11.37 per cent to $127.85 after news the previous day of US payments provider Square's $39 billion takeover bid.

Investors also continued pursuing chief Afterpay rival Zip. Its shares rose 7.46 per cent to $7.78.

Crown Resorts said the boss of its Melbourne business Xavier Walsh would step down on August 20 and leave the company in December.

An inquiry heard Mr Walsh knew Crown Melbourne underpaid millions in Victorian gaming taxes for three years but did nothing about it until the day after a royal commission was declared.

Shares were up 1.68 per cent to $9.08.

About 2500 Qantas and Jetstar employees will be stood down for two months because of coronavirus border closures.

Domestic pilots, cabin crew and airport workers will be stood down, mostly in NSW, but won't lose their jobs.

Qantas boss Alan Joyce expects borders to remain closed for at least another two months due to Greater Sydney's COVID-19 lockdown.

Shares were lower by 0.88 per cent to $4.52.

Brickworks is buying the largest independently owned brick distributor in the US for $70 million.

Brickworks' purchase of The Illinois Brick Company will provide a direct distribution presence in the midwest region.

Shares were up 0.57 per cent to $24.55.

Spot Gold was down 0.2 per cent at $US1810.22 an ounce; Brent crude was down 0.7 per cent at $US72.35 a barrel; Iron ore was up 25 US cents at $US184.67

The yield on the Australian 10-year bond closed at 1.15 per cent.

Asia

At the close, China's Shanghai Composite index was down 0.47 per cent at 3,447.99.

The Hang Seng index, used to record and monitor daily changes of the largest companies of the Hong Kong stock market, closed down 0.16 per cent at 26,194.82.

Japan's Nikkei 225 was down 0.50 per cent at 27,641.83.

Europe

The pan-European STOXX 600 index, which tracks the return of the largest listed companies across 17 European countries, was up 0.20 per cent at 465.38.

The German DAX was down at 15,555.08.

North America

Wall Street's main indexes have closed higher on gains in Apple and healthcare stocks despite concerns over a surge in the Delta variant of the coronavirus taking some shine off an upbeat corporate earnings season.

The Dow Jones Industrial Average rose 279.16 points, or 0.8 per cent, to 35,117.32, the S&P 500 gained 36.14 points, or 0.82 per cent, to 4,423.3 and the Nasdaq Composite added 80.23 points, or 0.55 per cent, to 14,761.30.

Ten of the 11 S&P indexes traded higher, with the S&P 500 index setting a record closing high and energy stocks rebounding after getting hit by a dip in oil prices.

The S&P 500's previous record closing high was 4,422.30.

Apple Inc rose after sliding last week.

Other heavyweight technology stocks including Netflix Inc, Tesla Inc and Facebook Inc continued to edge lower, capping gains on the tech-heavy Nasdaq.

A clutch of US companies, including industrial materials maker Dupont and Discovery Inc, reported better than expected quarterly results but their shares fell as investors booked profits amid lofty stock valuations.

Rising cases of the Delta variant and signs that the domestic economic rebound has begun to slow have knocked the three main US stock indexes off record highs while a deepening regulatory scrutiny in China has sent jitters through the global technology sector.

Shares in US- and European-listed gaming companies fell after a steep sell-off in China's social media and video games group Tencent, driven by fears the sector could be next in regulators' crosshairs.

Data on Tuesday showed US factory orders rose 1.5 per cent in June after a 2.3 per cent increase in the previous month.

Economists polled by Reuters had expected a rise of 1.0 per cent in June.

Later in the week, focus will shift to data on the US services sector and the monthly jobs report for July.

In M&A-driven moves, Translate Bio surged after France's Sanofi agreed to buy the US biotech company in a $US3.2 billion ($A4.3 billion) deal.

Under Armour Inc and Ralph Lauren Corp both jumped after raising their annual revenue forecasts.

Overall, earnings at S&P 500 firms are estimated to have climbed about 90 per cent in the second quarter versus forecasts of 65.4 per cent at the start of July, according to IBES data from Refinitiv.

"The earnings reports continue to come in very strong or stronger than people expect, which leads me to believe that people are underestimating the strength of recovery", said Jamie Cox, Managing Partner at Harris Financial Group in Richmond, Virginia.

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

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