Global Markets Report - 30 January

Australia

Australian shares are set to rise today following a positive end to the week on Wall Street. US stocks climbed Friday on hopes that the economy will remain strong while inflation cools.

ASX futures were 12 points or 0.16% higher as of 9:00am on Monday, pointing to a gain at the open.

US stocks rose Friday, with major indices notching strong weekly gains, boosted by hopes that inflation is moderating.

The S&P 500 closed 0.25% higher while the tech-heavy Nasdaq Composite rose 0.95% and the Dow Jones Industrial Average edged up about 0.1%.

All three major US indices posted strong gains for the week. The S&P 500 added around 2.5%, while the Nasdaq Composite jumped about 4.3%. The Dow gained roughly 1.8%.

The rally builds on a winning streak for stocks that has lasted for much of January, pulling major indices higher from where they ended 2022 and bringing calm to a market that swung wildly for much of the past year.

The result has been a giant U-turn in assets from stocks to bonds to cryptocurrencies, with investors again rushing into the most speculative corners of the market. Parts of the market that Wall Street had bet heavily against have soared to start the year. Tesla, which just had its worst year on record, has jumped about 40% in January.

The mood among many investors appears to have shifted, boosted in part by signs that inflation is turning the corner and the economy isn't deteriorating as fast as many had feared.

In commodity markets, Brent crude oil lost 1.22% to $US86.40 a barrel while gold was relatively unchanged at US$1,928.81.

Yields on Australian government bonds edged higher, with the 2 Year increasing to 3.14% and the 10 Year rising to 3.55%. Overseas, yields on US Treasury notes declined, with the 2 Year dipping to 4.21% and the 10 Year sliding to 3.51%.

The Australian dollar edged lower to 71.08 US cents from its previous close of 71.12. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, rose to 94.94.

Asia

The Shanghai Stock Exchange was closed on Friday to celebrate the Lunar New Year.

Hong Kong's Hang Seng Index ended 0.5% higher at 22688.90, tracking broad gains among other regional markets as investors continued to digest US economic data. Property stocks ended higher, with Country Garden advancing 6.2%, Hang Lung Properties adding 1.4% and China Overseas Land & Investment rising 2.0%. Among tech stocks, JD.com gained 2.4%, Baidu rose 1.8% and Tencent was 2.0% higher. SenseTime surged 20% after index provider FTSE Russell confirmed that US investors can hold shares of the AI company despite its inclusion on a US Treasury blacklist.

Japan's Nikkei Stock Average edged 0.1% higher to close at 27382.56 as gains in financial, electronics and chemicals stocks outweighed losses in shipping, precision instrument and pharmaceutical names. Yaskawa Electric climbed 3.7%, Nidec added 3.05% while Mizuho Financial Group and Mitsubishi UFJ Financial Group each rose 2.7%. Shin-Etsu Chemical closed 4.1% higher after raising its fiscal-year revenue and net profit views.

Indian shares slid, led by losses among Adani Group's companies following allegations of fraud outlined in a report by short seller Hindenburg Research. There was a fresh bout of selling in the wake of market participants assessing the impact of the report, Nishit Master, portfolio manager at Axis Securities, said in an email. Adani Total Gas, Adani Green Energy and Adani Transmission each fell 20%, while Adani Ports & Special Economic Zone slipped 16% and Adani Enterprises was 18.5% lower. The benchmark Sensex index fell 1.45% to 59330.90, its lowest closing level since late October.

Europe

European stocks closed higher, with the pan-European Stoxx Europe 600 index ending up 0.2%. Gains for the energy sector, auto makers, and construction offset losses for miners, food stocks, and utilities. Swedish steelmaker SSAB was among the biggest risers, up 9.1% after fourth-quarter earnings showed a bigger-than-expected rise in revenue and a dividend increase.

UK grocer Sainsbury's gained 5.5% after Bestway Group said it had bought a 3.45% stake. Swedish clothing retailer H&M dropped 4.1%, however, after it said it swung to a net loss in the fourth quarter.

Germany's DAX index ended up 0.1% while both the British FTSE 100 and the French CAC 40 managed a gain of less than 0.1%.

North America

US stocks rose Friday, with major indices notching strong weekly gains, boosted by hopes that inflation is moderating.

The S&P 500 closed 0.25% higher while the tech-heavy Nasdaq Composite rose 0.95% and the Dow Jones Industrial Average edged up about 0.1%.

All three major US indices posted strong gains for the week. The S&P 500 added around 2.5%, while the Nasdaq Composite jumped about 4.3%. The Dow gained roughly 1.8%.

The rally builds on a winning streak for stocks that has lasted for much of January, pulling major indices higher from where they ended 2022 and bringing calm to a market that swung wildly for much of the past year.

The result has been a giant U-turn in assets from stocks to bonds to cryptocurrencies, with investors again rushing into the most speculative corners of the market. Parts of the market that Wall Street had bet heavily against have soared to start the year. Tesla, which just had its worst year on record, has jumped about 40% in January.

The mood among many investors appears to have shifted, boosted in part by signs that inflation is turning the corner and the economy isn't deteriorating as fast as many had feared.

"I'm actually quite optimistic about where things stand," said Dev Kantesaria, founder of Valley Forge Capital. "Inflation is improving across the board."

Mr. Kantesaria said he considers the path of interest rates to be paramount in terms of stock returns, despite the bevy of earnings results that have trickled out in recent weeks. He expects that the Federal Reserve will eventually need to cut interest rates, which he thinks will help the stock market.

The Fed is expected to raise interest rates at a milder pace when its policy makers meet next week. Expectations for less aggressive rate rises have helped push stocks higher, with the S&P 500 up more than 5% this year through Thursday's close.

Data released Thursday showed that US economic growth slowed less than expected in the fourth quarter of 2022 and that the US labor market remains strong.

Still, hopes that inflation has peaked, alongside some momentum in the stock market, have drawn many investors in to bet on some of the riskiest corners of the market.

Shares of Carvana, for example, jumped around 10% in trading on Friday. Carvana is among the most-shorted stocks on Wall Street, according to S3 Partners. Shares of Coinbase added 13% on Friday, bringing gains for the year to almost 70%.

Corporate earnings also continued to drive outsize moves. Intel stock sank 7.9% after the chipmaker reported a larger-than-expected quarterly loss late Thursday. Hasbro, the toy and games company, also declined after it reported lower revenue and became the latest corporation to outline large-scale layoffs.

Among companies issuing results early Friday, American Express reported that profit fell for the fourth quarter. Nonetheless, its shares rose about 12% after the credit card company said it plans to boost its quarterly dividend. Chevron shares edged down 5%, despite the oil company reporting record annual profit for last year.