Global Market Report - 19 August

Australia

Australian shares are set to edge higher following a rise on Wall Street as investors digest earnings, economic data, and US Fed minutes.

ASX futures were up 21 points or 0.3% at 7041 as of 7:00am on Friday, pointing to a gain at the open.

US stocks rose Thursday as investors parsed earnings reports, economic data and minutes from the Federal Reserve's latest policy meeting for clues about the trajectory of the economy and interest rates.

The S&P 500 rose about 0.2% in 4 p.m. trading, after closing lower Wednesday. The Dow Jones Industrial Average ticked up about 18 points, or around 0.1%. The technology-heavy Nasdaq Composite added about 0.2%.

Stock indexes have climbed in recent weeks on signs that inflation was moderating and hopes that the Fed would ease off from its aggressive campaign of rate rises.
The rally -- which had pushed the S&P 500 to its highest level since April -- has been tempered after minutes from the Fed's July meeting, released Wednesday, indicated that policy makers could keep raising rates to curb inflation. Still, officials said they would be cautious, acknowledging the risk that too much tightening could cause economic pain.

"The rather vanilla nature of yesterday's Fed minutes directly plays into the directionlessness of today's markets," said Eric Leve, chief investment officer at investment-management firm Bailard.

In commodity markets, international oil benchmark Brent crude rose 3.1% to $96.59 a barrel. The prospect of weakening demand and additional supplies have dragged on crude prices in recent weeks.

In commodity markets, Brent crude oil rose 2.93% to $US96.58 a barrel, gold edged down 0.15% to US$1,759.19.

In local bond markets, the yield on Australian 2 Year government bonds rose to 2.79% while the 10 Year was at 3.33%. Overseas, the yield on 2 Year US Treasury notes was at 3.2% and the yield on the 10 Year US Treasury notes was down at 2.87%.

The Australian dollar hit 69.20 US cents down from the previous close of 69.35. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged up to 98.96.

Asia

Chinese shares ended lower amid worries over the country's sporadic Covid-19 outbreaks. The benchmark Shanghai Composite Index fell 0.5% to 3277.54, the Shenzhen Composite slipped 0.3% to 2236.53 and the ChiNext Price Index closed 0.1% lower at 2775.82. Auto stocks lead the declines, with BYD Co. shedding 0.6% and SAIC Motor falling 1.2%.

Geopolitical tensions may remain in focus with the U.S. saying it will start talks with Taiwan for a trade and investment pact. "Such a move will likely further heighten the tensions between the U.S. and China," said CBA strategist Carol Kong in a note. "In our view, a major escalation in geopolitical tensions will dampen risk sentiment," she added.

Hong Kong's Hang Seng Index fell 0.8% to 19763.91, weighed by property, tech and auto shares. Regional markets tracked U.S. stock futures lower as investor focus returned to the Fed's potential interest-rate increases. Country Garden Holdings topped losers with a 5.2% decline, after it said 1H net profit is expected to slump. Alibaba Group lost 2.3% and JD.com slid 2.5%, but Tencent Holdings gained 3.1% after its 2Q results. Among other stock moves after earnings, Galaxy Entertainment dropped 2.1% after swinging to 1H loss, while Geely Automobile was down 3.1% following a 35% decline in 1H profit.

Japanese stocks ended lower, dragged by falls in electronics stocks as caution persists over further tightening from the Fed and borrowing costs. Hoya dropped 3.0% and Sysmex lost 2.3%. The Nikkei Stock Average fell 1.0% to 28942.14. Macroeconomic data are in focus, including eurozone inflation and U.S. weekly jobless data due later in the day. USD/JPY is at 135.31, compared with 135.06 as of Wednesday 5 p.m. Eastern Time. The 10-year Japanese government bond yield rises 1.5 basis points at 0.195%.

Europe

The pan-European Stoxx 600 index is up 1.73 points or 0.39% today to 440.76, the German DAX is up 70.70 points or 0.52% today to 13697.41, and the French CAC 40 Index is up 29.08 points or 0.45% today to 6557.40.

London’s FTSE 100 closed up 0.35% on Thursday, as European markets saw a modest drift higher largely due to the recovery of U.S. markets off their intraday lows from yesterday.

The FTSE 100 was also helped along by a resilient oil and gas sector, with a rebound in oil prices helping to underpin the broader index and led by BP PLC and Shell PLC, CMC Markets UK chief market analyst Michael Hewson said in a research note. On the other hand, the market also saw a drag from a whole host of companies going ex-dividend, including Abrdn PLC, M&G PLC, Aviva PLC and HSBC Holdings PLC, Mr. Hewson says

North America

Home sales data showed a further cooling of the U.S. housing market. Sales of existing homes fell for a sixth consecutive month in July, the National Association of Realtors reported Thursday. Higher mortgage rates have weighed on sales, another example of how the Fed's rate hikes are affecting all corners of the economy.

Meanwhile, new applications for unemployment benefits inched down last week, according to the Labor Department, suggesting the jobs market is holding up despite signs of weakness in the broader economy.

"There is still a narrow pathway toward a 'soft landing,' but it is getting harder and harder to achieve," said Joe Little, global chief strategist at HSBC Asset Management.
On the earnings front, shares of Kohl's Corp. retreated 6.9% after the retailer's earnings shrank by nearly two-thirds in its second quarter.

Cisco Systems Inc. shares jumped 6.3% after the maker of networking and security equipment posted flat quarterly revenue, avoiding a decline it previously forecast.
With roughly 95% of companies in the S&P 500 having reported second-quarter results, about three-quarters have beat Wall Street earnings expectations, according to FactSet. Index constituents are on pace to post about 6% earnings growth for the second quarter.

"Going forward, the outlook looks a lot more cloudy. We are going to have an earnings picture that, in my mind, is going to continue to deteriorate. That's the reason why we should enter this period with maybe a little bit more prudence," said Marco Pirondini, U.S. head of equities and portfolio manager at asset-management firm Amundi US.

Elsewhere, Bed Bath & Beyond sank 23% after investor Ryan Cohen filed to sell his stake in the company. The selloff comes after the stock's recent, frenzied gains driven by individual investors, who jolted the stock in ways reminiscent of last year's meme-stock craze.
Energy stocks outperformed Thursday as oil prices climbed, with the S&P 500 energy sector up 2.5%.