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Global Market Report - 7 February

Lewis Jackson  |  07 Feb 2022Text size  Decrease  Increase  |  
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Australia

Australian shares are set to slip after Wall Street finished mostly higher amid blockbuster earnings from Amazon.com and strong employment figures.

The S&P 500 and Nasdaq Composite rose Friday, pushing major stock indexes to weekly gains, after a better-than-expected January jobs report showed the economy is still growing solidly.

The technology-focused Nasdaq Composite jumped by 1.6%, a day after the index posted its largest loss since September 2020. The S&P 500 climbed 0.5%. Both were bolstered by a 14% jump in shares of Amazon.com, which surged after the e-commerce giant said profit nearly doubled in the holiday period. The Dow Jones Industrial Average slipped by 21.42 points, or 0.1%.

Even with the Dow's small loss, all three indexes finished higher for the week, extending their weekly winning streak to two. The Nasdaq notched a weekly gain of 2.4%, its largest weekly gain since late December. The S&P 500 rose 1.5% during the period, while the Dow gained 1%.

Locally, the S&P/ASX 200 closed another volatile session 0.6% higher at 7120.1, snapping a run of three weeks of losses. The benchmark shrugged off a weak lead from US stocks to move higher in early trade, fell back into negative territory and bounced around below the gain-line before closing at its weekly high on a late surge.

The heavyweight financial sector had been flat with about an hour remaining but closed 0.8% higher. Banks Commonwealth, Macquarie and Westpac put on between 0.7% and 2.1%.

The tech sector added 1.1%, rebounding from the prior day's heavy losses amid gains by WiseTech, Xero and Appen.

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The ASX 200 gained 1.9% for the week.

Overseas, the pan-continental Stoxx Europe 600 fell 1.4%. It lost 0.7% for the week. Markets have been rattled by the increasingly hawkish tone from global central banks. On Thursday, the Bank of England raised borrowing costs again, while the European Central Bank kept its key interest rates unchanged, but signaled concern about inflation and opened the door to a possible rate rise this year.

In Asia, stocks in Hong Kong resumed trading Friday following a three-day holiday closure. The Hang Seng Index added 3.2% and Japan's Nikkei 225 index rose 0.7% for the day.

Turning to commodities, gold futures gained 0.2% to $US1807.80 an ounce; Brent crude added 2.4% to $US93.27 a barrel; Iron ore was not available due to the Lunar New Year holidays.

In bond markets the yield on the Australian 10-year bond rose to 1.96%, while the benchmark US 10-year Treasury yield advanced to 1.91%. Yields fall when prices rise.

The Australian dollar was buying 70.76 US cents near 8.00am AEST, down from the previous close of 71.36. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, edged up to 89.67.

Asia

Chinese share markets were shut for the Lunar New Year holidays.

Hong Kong stocks ended the session sharply higher, as the market resumed trading after a three-day Lunar New Year holiday. The benchmark Hang Seng index jumped 3.2%, its largest one-day percentage gain in two weeks. A wide range of sectors delivered strong gains to support the market. Among consumer stocks, restaurant operator Haidilao and sportswear maker Li Ning rose 8.2% and 7.6%, respectively. Electric car makers also tracked up substantially, as BYD added 7.0% and Xpeng rose 11%. Tech giants lent further support, with Alibaba by 5.6% and Tencent adding 1.5%.

Japan's Nikkei Stock Average rose 0.7% amid gains in US stock futures and mild weakness of the yen. Among the best performers was video game-related companies such as Konami Holdings, which jumped 12%, Koei Tecmo Holdings with a 5.0% rise and Nintendo, up 3.6%. Transport companies were also higher, with Kawasaki Kisen Kaisha climbing 9.6%, Nippon Yusen K.K. gaining 6.2% and Japan Airport Terminal up 7.4%.

Europe

European stocks dropped as the euro built on gains against the dollar and sterling after the European Central Bank's more hawkish comments on interest-rate rises last Thursday. The pan-European Stoxx 600 fell 1.4%.

Banks remained amongst the biggest pan-European risers, having already advanced Thursday after investors took ECB President Christine Lagarde's comments to mean that a eurozone rate hike later this year was more likely.

In London, the FTSE 100 dropped 0.2%, but performed better when compared to its European peers due to the outperformance of the energy sector, says Michael Hewson, chief market analyst at CMC Markets UK.

The energy sector is being backed by crude oil prices, pushing up to another seven-year high above US$93 a barrel, Hewson adds, noting BP's share price above 300 points for the first time since March 2020 and Shell's similar performance in terms of moving higher and above 2,000 points.

North America

The S&P 500 and Nasdaq Composite rose Friday, pushing major stock indexes to weekly gains, after a better-than-expected January jobs report showed the economy is still growing solidly.

The technology-focused Nasdaq Composite jumped by 1.6%, a day after the index posted its largest loss since September 2020. The S&P 500 climbed 0.5%. Both were bolstered by a 14% jump in shares of Amazon.com, which surged after the e-commerce giant said profit nearly doubled in the holiday period.

The Dow Jones Industrial Average slipped by 21.42 points, or 0.1%. The index of blue-chip stocks was down more than 300 points earlier in the day.

Even with the Dow's small loss, all three indexes finished higher for the week, extending their weekly winning streak to two. The Nasdaq notched a weekly gain of 2.4%, its largest weekly gain since late December. The S&P 500 rose 1.5% during the period, while the Dow gained 1%.

Last month, major indexes tumbled for a stretch of weeks as concerns flared about the path of monetary tightening by the Federal Reserve. The central bank last week signalled that it would begin raising rates in mid-March.

This week's gains, though, were hard-won. On Thursday, major indexes sank, dragged down by technology companies after Meta Platforms posted disappointing earnings results. The tumble by major indexes seemed to threaten to kick-start a selloff in the US stock market again.

By Friday afternoon, however, sentiment had largely turned positive, shaking off concerns earlier in the day that the latest jobs report could support more hawkish Fed action. The Labor Department said Friday that the US economy added 467,000 jobs in January. Economists surveyed by The Wall Street Journal had expected a gain of 150,000.

Central bank officials have in recent days played down speculation that they might raise interest rates by a half percentage point in March instead of a quarter point. But they have also said that their rate increases will be guided by data.

"Markets were afraid the Fed would raise rates at a time when the economy was rolling over and there were worries about policy errors," said Jamie Cox, managing partner for Harris Financial Group. "What data like [Friday's jobs report] suggests is that the Fed is adjusting monetary policy to adapt to the economy. Hyper-accomodative monetary policy is no longer needed."

Major indexes enjoyed support Friday from a rise in the shares of big technology stocks including Microsoft and Tesla. With its 14% jump, Amazon broke the record for the largest-ever one-day gain in market value for a US company. The stock ultimately added $375.88 to close at $3,152.79.

Meta, however, fell by 67 cents, or 0.3%, to close at $237.09, a day after it tumbled 26% following a disappointing earnings report.

Sharp moves in the share prices of large technology and social-media companies have an outsize impact on broader indexes. Amazon had a 3.3% weighting on the S&P 500 as of Wednesday, according to data from S&P Dow Jones Indices. Meta had a 2% weighting.

Financials and energy stocks also finished solidly higher. Oil prices climbed, with global benchmark Brent crude rising 2.4% Friday to $93.27 a barrel, due to supply tightness and a winter storm in the US that may disrupt production.

Snap shares surged 59%, adding $14.41, to end at $38.91 after the social-media company posted its first quarterly profit. Pinterest rose by $2.74, or 11%, to close at $27.25 after it reported its first full-year profit and more than $2 billion in annual revenue.

Clorox shares lost $23.93, or 14%, to close at $141.41 after the maker of disinfectant wipes and other cleaning products reported earnings that missed analysts' expectations and said margins would take a steep hit from continued cost pressures. Ford Motor shares lost $1.93, or 9.7%, to finish at $17.96 after the auto maker posted earnings that fell short of Wall Street forecasts.

"Those companies which have continued to deliver strong results have held up relatively well," said Mike Bell, global market strategist at J.P. Morgan Asset Management. "Those companies which were priced as heavily valued growth stocks, but then under-delivered, are getting hit extraordinarily hard."

In the bond market, the benchmark 10-year US Treasury yield climbed to 1.930%, versus 1.825% Thursday, marking the highest yield since December 2019. Yields and prices move inversely.

Bitcoin also climbed, rising above US$40,000 for the first time since late January, according to 4 pm New York figures from CoinDesk.

Even with solid weekly gains for major indexes, many investors expect choppiness won't subside in the near future. The market volatility could continue until the Fed implements its first interest-rate increase and investors get used to the idea of rising rates, said Peter Andersen, founder of Massachusetts-based investment firm Andersen Capital Management.

"The fact that everything is sold off wholesale is really, in my opinion, a buying opportunity," Mr. Andersen said. "Every investor is so spooked now, and nobody really has a compass to figure out where exactly we are in this cycle."

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

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