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Markets

Global Market Report - 23 August

The Australian market is set to open lower after Wall Street dips. 


Australia

Australian shares are set to edge lower following a dip on Wall Street. Investors are focussed on the US Federal Reserve comments expected later this week.

ASX futures were down 44 points or 0.6% at 6909 as of 7:00am on Tuesday, pointing to a slip at the open.

US stocks fell as traders worried about further interest-rate increases and the backdrop of a slowing economy.

The Dow Jones Industrial Average slid 1.9%, or more than 640 points, in Monday's trading. The S&P 500 dropped 2.1%, while the technology-focused Nasdaq Composite tumbled more than 2.5%.

The declines came after U.S. stocks ended last week lower, snapping a four-week stretch of gains for the S&P 500. Stocks rose from July to mid-August on hopes that inflation has started to peak, which would allow the Federal Reserve to ease up on lifting rates, as well as on generally strong corporate earnings. But Fed officials remained publicly hawkish, casting doubt on the strength of the midsummer rally.

"The market got a little ahead of itself," said Philip Blancato, chief executive of Ladenburg Thalmann Asset Management. "The market wants the Fed to sound off on the dovish standpoint, but the Fed's not there yet."

In commodity markets, Brent crude oil slipped 0.06% to $US96.66 a barrel, gold edged down 0.7% to US$1,735.16.

In local bond markets, the yield on Australian 2 Year government bonds rose to 2.94% while the 10 Year rose to 3.51%. Overseas, the yield on 2 Year US Treasury notes rose to 3.32% and the yield on the 10 Year US Treasury notes was at 3.02%.

The Australian dollar hit 68.72 US cents down from the previous close of 68.76. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged up to 100.06.

Asia

Chinese shares ended higher as sentiment was boosted by banks' lowering of loan prime rates to support economic growth. Recent supportive comments from Beijing are a positive signal and stimulus measures are starting to work through the system in 2H, Nicholas Yeo, abrdn's head of China equities, says in a note. Electric-car suppliers strengthened, with Tianqi Lithium jumping 10% and Ganfeng Lithium up 5.3%. Coal miners also advanced amid a heatwave that has driven up power demand. Shaanxi Coal added 2.6% and China Shenhua climbed 1.5%. Among the laggards, Jiangsu Hengrui Medicine fell 2.4% after reporting a 21% drop in 1H profit. The Shanghai Composite Index added 0.6% to 3277.79, the Shenzhen Composite Index increased 0.9% and the ChiNext Price Index gained 1.6%.

Hong Kong's Hang Seng Index fell 0.6% to 19656.98, as weakness in electronics stocks offset gains by sportswear makers and property developers. Investors are cautious ahead of a closely watched speech by Fed chair Jerome Powell later this week. ENN Energy was the top laggard with a 14% slide after 1H profit weakened 18%. Xiaomi lost 3.3% after 2Q profit slumped 83%. The property sector strengthened after supportive policy measures, including a lowering of the five-year loan prime rate. Country Garden Holdings rose 3.2% and Country Garden Services added 3.9%, while China Resources Land was up 1.8%

Japanese stocks end lower, dragged by falls in electronics stocks, as caution persists over further tightening by the Fed and higher costs of borrowing. Omron drops 2.5% and Rohm loses 2.5%. Meanwhile, Hino Motors sheds 3.5% after it admitted additional wrongdoings related to applications of engine emissions certification. The Nikkei Stock Average falls 0.5% at 28794.50. The 10-year Japanese government bond yield rises 2 bps to 0.215%. Econ data will be closely watched ahead of Fed's Jackson Hole symposium later this week. USD/JPY is at 137.08, compared with 136.92 late Friday in New York.

Europe

The pan-European Stoxx Europe 600 Europe 600 Index is down 4.19 points or 0.96% today to 433.17, the German DAX is down 313.95 points or 2.32% today to 13230.57, while the French CAC 40 Index is down 117.09 points or 1.80% today to 6378.74.

In London, the FTSE 100 index fell 0.6% to 7504.74 in early trade on caution ahead of a speech by US Federal Reserve Chairman Jerome Powell later this week, when he is likely to hint at further interest-rate rises.

"The general summer lethargy also weighed on sentiment in U.K. markets, where further monetary tightening is also likely to continue," wrote Richard Hunter, head of markets at Interactive Investor. "A further leg down in the oil price on demand concerns weighed on BP and Shell, with some weakness in recovery stocks such as International Consolidated Airlines offset slightly by some tentative buying within defensives," he said.

International Consolidated Airlines dropped 2.9%; Shell fell 1.2% and BP by 0.8%; while pharma giant AstraZeneca gained 0.9%

North America

Investors are awaiting comments Friday from Fed Chairman Jerome Powell, in Jackson Hole, Wyo., on the central bank's economic outlook. Futures markets show traders are split as to whether the central bank will raise interest rates by half a percentage point or three-quarters of a point at its September meeting. Aggressive increases could cause businesses and consumers to cut back on spending, potentially hurting corporate earnings and economic growth.

"Jackson Hole is something the market is starting to get nervous about," said Hani Redha, a portfolio manager at PineBridge Investments. After the last central-bank meeting, some investors expected that the Fed would be less aggressive on interest-rate increases as economic data worsened, he said, adding that "there is chatter that perhaps Powell will try to reverse that perception."

The yield on the benchmark 10-year Treasury note rose to 3.035%, from 2.987% Friday. Yields and prices move inversely.

Netflix, a big beneficiary of the market's midsummer rally, slid 6% after analysts at CFRA Research recommended that investors sell the stock.

Shares of Ford Motor fell 5% after a $1.7 billion jury verdict from Friday that calls into question the roof strength of some trucks. The automaker has said it plans to appeal.
Bed Bath & Beyond, an individual-investor favorite whose shares have been on a wild ride in recent days, tumbled nearly 16% after S&P downgraded the retailer's credit rating.
Palo Alto Networks and Zoom Video Communications were slated to post quarterly results after markets close.

In currencies, the WSJ Dollar Index, which measures the greenback against a basket of 16 currencies, edged higher. The euro weakened, again touching parity with the dollar.
Bitcoin, the world's largest cryptocurrency by market value, slipped 1.1% from its 5 p.m. ET level Sunday to trade at about $21,277. The digital currency briefly broke below $21,000 earlier Monday. Crypto prices are heavily influenced by sentiment, causing selling in times of broad market selloffs.



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