Global Market Report - 09 August
Australian shares are set to edge lower after the US markets finished Friday flat.
Australian shares are set to edge lower following a 0.1% decline across major US indices.
ASX futures were down 14 points or 0.2% at 6909 as of 7:00am on Monday, pointing to a slip at the open.
US stocks wavered Monday as investors reviewed a series of earnings reports for insight into the impact of higher inflation on companies and consumers.
The S&P 500 fell 5.13 points, or 0.1%, to 4140.06. The Nasdaq Composite retreated 13.10 points, or 0.1%, to 12644.46 after spending much of the afternoon hovering between gains and losses. The technology-heavy index earlier flirted with a potential exit of its bear market. The Dow Jones Industrial Average added 29.07 points, or 0.1%, to 32832.54 points.
Shares of tech giant Nvidia fell $11.96, or 6.3%, to $177.93 after reporting preliminary quarterly revenue below analysts' forecasts. The company said it expects challenging market conditions to persist in the third quarter. Shares of Palantir Technologies lost $1.63, or 14%, to $9.82 after it issued guidance that missed Wall Street's estimates.
In commodity markets, Brent crude oil rose by 1.41% to $US96.26 a barrel, gold edged rose 0.75% to US$1,788.86.
In local bond markets, the yield on Australian 2 Year government bonds rose to 2.65% while the 10 Year rose to 3.2%. Overseas, the yield on 2 Year US Treasury notes declined to 3.21% and the yield on the 10 Year US Treasury notes edged down to 2.76%.
The Australian dollar hit 69.80 US cents from the previous close of 69.12. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged down to 98.14.
Chinese shares ended mixed, as gains by coal miners and aerospace stocks offset losses by tourism-related sectors. Coal miners rebounded from recent weakness, with Yankuang Energy and Shaanxi Coal Industry each jumping more than 7%. AECC Aviation Power added 3.3% and AVIC Xi'an Aircraft Industry gained 3.8% as China announced fresh military drills around Taiwan. China Tourism Group slid 4.7% after duty-free malls in resort city Sanya were asked to shut amid a fresh Covid-19 lockdown. The Shanghai Composite Index added 0.3% to 3236.93, the Shenzhen Composite Index climbed 0.8% but the ChiNext Price Index closed 0.3% lower.
Hong Kong's Hang Seng Index fell 0.7% to 20065.35 as news of fresh Covid-19 outbreaks in areas such as Hainan continued to weigh, writes KGI Securities analysts in a note. Rising geopolitical headwinds between the U.S. and China are also likely to pressure stocks, they add. The Hang Seng Tech Index fell 1.4% to 4354.26 as technology stocks make up the major decliners in Hong Kong. Alibaba Group fell 3.1% while Xiaomi Corp fell 2.3%. Other decliners include Sino Biopharmaceutical, off 2.2%. Gainers include China Overseas Land & Investment, which rose 1.0%.
The Nikkei Stock Average was flat at 28166.36 as gains in auto and bank stocks offset losses in electronics and insurance shares. Suzuki Motor added 7.2% after first-quarter net profit beat the analysts' consensus estimate. Meanwhile, Shimadzu declined 10% after first-quarter net profit fell 0.5% on year. MS&AD Insurance Group Holdings fell 6.1% after first-quarter net profit fell 49% on year. Broader market index Topix is 0.1% lower at 1945.18.
European markets rose after upbeat Asia trading and ahead of an expected higher US open following last week's better-than-expected July non-farm payrolls. The pan-European Stoxx Europe 600 and German DAX gained 0.8%, while the French CAC 100 climbed 1%
"While the Hang Seng fell overnight, other markets in Asia made some modest gains as investors continued to digest the impact of Friday's U.S. job report," IG analysts say in a note. "Monday sees little in the way of big data."
The FTSE 100 closed up 0.6% on Monday with gains across the index after trade data out of China showed exports rose 18% in July.
"Everyone continues to look for the beginning of the next leg lower, but it stubbornly refuses to begin. Friday's jobs report seemed to provide the spark, but the new week has begun with gains as investors continue to take the positive view," says Chris Beauchamp, chief market analyst at online trading platform IG.
Investment platform Hargreaves Lansdown ended the day as the biggest riser, up 7.2% after Deutsche Bank raised its price target for the stock, followed by Rolls-Royce, which ended up 4.5%.
Stocks have swayed in recent days, buffeted by shifting views on central bank policy. Friday's better-than-expected jobs report divided investors and analysts. Some raised concerns that the Federal Reserve could continue raising interest rates aggressively, while others questioned whether the U.S. economy could really be in recession.
"If we do technically get into recession, I think it's more likely to be shorter-lived and less severe because both the consumer and corporations are well suited going into this recession," said Wiley Angell, chief investment officer at Ziegler Capital Management.
Kiran Ganesh, a multiasset strategist at UBS, said the labor market "doesn't look like a recession in the sort of broad sense."
"Investors seem to be in the mood to listen to the good news," he added.
Trading volumes also tend to be lower in August while many traders take summer vacations, which can drive outsize moves, analysts said. For those still in the office, investors are awaiting U.S. inflation data for July out on Wednesday, a key release that is expected to provide more direction for markets. Still, a surprise there could send markets quickly back down again.
Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said his firm recently added more healthcare and small and mid-sized technology companies to its portfolios, and has maintained exposure to defensive sectors like consumer staples and utilities. "We were taking less risk early on, now we're back to probably a neutral position," he said.
Sandi Bragar, chief client officer at Aspiriant, said she doesn't believe companies will be able to pass along soaring input costs to consumers in the coming quarters.
"This market wants to go up. It seems really focused on inflation and feeling like the Fed is going to do a fine job continuing to fight inflation and not expecting any major surprises there," Ms. Bragar said. "Our concern is that the market is looking past profit margins."
Tesla's stock added $6.76, or 0.8%, to $871.27. The U.S. Senate passed a bill on Sunday to spend billions of dollars on climate, including the extension of a tax incentive for electric vehicles.
Shares of Signify Health jumped $2.18, or 11%, to $22.05 after The Wall Street Journal reported that drugstore chain CVS Health is planning to bid for the company. Shares of Global Blood Therapeutics rose $2.76, or 4.3%, to $66.60 after Pfizer agreed to buy the company for $5.4 billion.