Global Market Report - 21 January
Australian shares are set to drop after a rally on Wall Street gave way to late-afternoon selling.
Australia
Australian shares are set to drop after a rally on Wall Street gave way to late-afternoon selling that left the major indices in the red for a third day.
ASX futures were down 62 points or 0.9% at 7183 near 8.00 am AEST, suggesting a negative start to trading.
US stocks weakened on Thursday afternoon, giving up the morning's gains and showing that investors are still concerned about the prospects of tightening monetary policy and slowing growth.
The Nasdaq Composite Index retreated 1.3%, a day after a late tech selloff dragged down indexes. The index had been up nearly 2% earlier in the day. The S&P 500 dropped 1.1%, and the blue-chip Dow Jones Industrial Average fell 0.9%.
The choppy trading shows investors are trying to gauge how far this selloff will go. On Wednesday, the ragged, weekslong selloff pushed the Nasdaq down more than 10% below its record close, putting it in correction territory. Those kinds of plateaus usually bring in bargain hunters, but on its own is no indication a selloff is over, observers say.
Locally, the S&P/ASX 200 closed 0.1% higher at 7342.4, driven by strong performance in the materials sector which finished up 3.0%.
Some blue-chip stocks in the heavyweight financial sector were a drag on the benchmark index. CBA fell 0.7%, NAB lost 1.3% and Macquarie gave up 0.6%.
The day's best performer, Northern Star Resources climbed 11.2% after telling investors that it was on track to meet FY 2022 output. Evolution Mining rose 8.9%, while Silver Lake Resources gained 7.0%.
Energy firms rose amid a slew of trading updates. Santos added 0.8% after reporting record production of oil and natural gas in 2021. Woodside closed 1.5% higher as it reported record Q4 revenue from higher oil and gas prices.
BHP shareholders in London and Sydney voted overwhelmingly for the unification of the miner’s dual listing. The results were announced overnight AEST. Shares closed 3.1% higher on Thursday.
Overseas, Hong Kong-listed Chinese stocks jumped after an interest-rate cut by China's central bank lifted shares of property developers and tech giants. The Hang Seng Index rose 3.4%, while mainland China's Shanghai Composite Index edged down 0.1%. Elsewhere in Asia, the Nikkei 225 rose 1.1%. The pan-continental Stoxx Europe 600 edged up 0.5%.
Turning to commodities, gold futures dipped 0.3% to $US1840.90 an ounce; Brent crude gave up 1.2% to $US87.39, hovering near a seven-year high; Iron ore continued to rally, advancing 2.6% to US$133.65 a tonne.
Bond markets steadied after days of selling, the yield on the Australian 10-year bond was flat at 1.99%, while the benchmark US 10-year Treasury yield edged lower to 1.81%.
The Australian dollar was buying 72.21 US cents near 8.00am AEST, up from the previous close of 72.08. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, rose to 89.52.
Asia
Chinese stocks closed lower, even as the country's central bank cut benchmark lending rates for a second straight month in a bid to support the economy amid a fresh wave of coronavirus cases. KGI Securities says Beijing's monetary support might have been offset by concerns over tightening US monetary policies. The benchmark Shanghai Composite Index fell 0.1%, while the Shenzhen Composite Index lost 0.9%. The ChiNext Price Index, a measure for emerging industries, slipped 0.3%. Solar companies were among the session's top losers amid expectations of below-target 4Q earnings due to high energy and raw-material costs.
Hong Kong technology stocks ended sharply higher Thursday, as Beijing's continued efforts to ease monetary policy boosted sentiment for growth sectors. The benchmark Hang Seng TECH Index rose 4.5%, its highest closing level in over a month. UOB Kay Hian internet analyst Chun Sung Oong said today's rally was most likely a result of China's move to cut its benchmark lending rate for a second consecutive month. He also pointed to relatively attractive valuations of the sector, after the Hang Seng TECH Index slid 12% in the past three months. Meituan soared 11%, Alibaba Health was up 7.6% and Tencent jumped 6.6%.
Japanese stocks closed higher, led by gains in electronics stocks, as selloffs on Wednesday triggered some bargain-hunting. Sony Group gained 5.8% following a 13% drop on Wednesday caused by concerns about new competition for its videogame business from the combination of Microsoft and Activision Blizzard. Olympus advanced 3.6% and NEC Corp. climbed 2.8%. The Nikkei Stock Average rose 1.1%. US economic data, including weekly jobless claims due later in the day, would be closely watched to assess the pace of the Fed's potential rate increases.
Europe
European stocks mostly rise after a positive start to trading on Wall Street.
"After a big sell-off in Asia markets, European markets initially started the day on the back foot," CMC Markets analyst Michael Hewson says. "However, as the day progressed, all the early losses have dissipated, helped by a slew of decent trading updates and a rebound in the basic-resources sector, lifted by rising metal prices."
In London, the FTSE 100 fell 0.06% and for a second consecutive day the legion of banks, miners and oil stocks that make up the index's heavyweights slipped. BHP shareholders in the UK and Australia voted overwhelmingly to unify the miner’s listings onto the Australian Stock Exchange.
"Investors are switching up their trades today, moving back into growth stocks after the recent selloff while trimming their profits in the FTSE 100 after a good run for that index," IG Group chief market analyst Chris Beauchamp says.
North America
US stocks weakened on Thursday afternoon, giving up the morning's gains and showing that investors are still concerned about the prospects of tightening monetary policy and slowing growth.
The Nasdaq Composite Index retreated 1.3%, a day after a late tech selloff dragged down indexes. The index had been up nearly 2% earlier in the day. The S&P 500 dropped 1.1%, and the blue-chip Dow Jones Industrial Average fell 0.9%.
The choppy trading shows investors are trying to gauge how far this selloff will go. On Wednesday, the ragged, weekslong selloff pushed the Nasdaq down more than 10% below its record close, putting it in correction territory. Those kinds of plateaus usually bring in bargain hunters, but on its own is no indication a selloff is over, observers say.
"Whenever we see equities churn lower, as they have this year, we are mindful that the risk of a meltdown grows rather than diminishes," said Nicholas Colas, the founder of analytics firm DataTrek Research.
Faced with the prospect of multiple interest-rate rises, cooling growth and inflation at multidecade highs, investors have been reassessing the pandemic-era playbook that focused on outsize gains for growth stocks, such as in tech. In recent sessions, investors have rotated into sectors expected to perform better in the coming year, such as financials and energy.
Investors are selling government bonds in anticipation of higher interest rates, pushing up yields, and in the process, pressuring tech companies, whose future earnings become less attractive when compared with bonds with rising yields.
"I don't see a whole lot in the market that is really alarming me. There is no one out there saying 'run for the hills,' but there are those saying they are going to take off risk and reposition to other areas of the market," said Kara Murphy, chief investment officer of Kestra Holdings.
The day brought a spate of economics reports. Weekly jobless claims jumped to 286,000 from 231,000 as businesses contend with Omicron-related disruptions. Existing-home sales in December fell 7.1% from a year ago, though home sales for 2021 were at a 15-year high.
The yield on the 10-year US Treasury note fell to 1.81%, reversing some gains from recent weeks. Benchmark German bund yields fell further into negative territory, a day after they briefly turned positive. The yield on the 10-year German government bond slipped to minus 0.015% Thursday from minus 0.014% Wednesday.
Among US equities, shares of Peloton Interactive fell 20% after CNBC reported the company is pausing production of its bikes and other connected-fitness products amid lower demand from consumers.
Dow component Travelers Cos. rose 4.8%, hitting an intraday record, after reporting record net income for the fourth quarter. American Airlines Group fell 1.2% even after the carrier said it had trimmed its losses.
Netflix will be one of the first tech giants to post its fourth-quarter results, after markets close, when PPG Industries also will report.