Global Markets Report - 27 March
Australian shares are set to open flat today after gains in the US but losses in Europe.
Australia
Australian shares are set to open flat today. US indices managed to advance Friday, ending the week with gains despite concerns over the global banking sector, which sent financial stocks lower.
ASX futures were flat as of 7:00am Saturday, indicating an uncertain open.
The selloff in bank stocks continued Friday, weighing on global markets and suggesting that strains in the financial system have yet to be resolved.
Upheaval that began with the collapse of Silicon Valley Bank and two other US lenders earlier this month spread to Europe with Credit Suisse's forced sale to UBS last weekend. On Friday, Deutsche Bank's Frankfurt-listed shares tumbled 8.5% as investors looked for the next trouble spot.
The S&P 500 rose 0.6%, the Dow Jones Industrial Average added 0.4%, and the Nasdaq Composite gained 0.3%. All three major US indices ended with weekly gains.
Traders moved money into safe havens, including utility stocks, which were the top performing sector of the S&P 500, up 3.1%, and gold futures, which rose above $2,000 per troy ounce this week for the first time since March 2022, when the Federal Reserve began raising interest rates to fight inflation.
In commodity markets, Brent crude oil lost 1.1% to $US75.07 a barrel while gold shed 0.8% to US$1,978.55.
Australian government bonds dipped lower, with the 2 Year yield falling to 2.86% and the 10 Year yield declining to 3.21%. US Treasury notes also fell, with the 2 Year yield dipping to 3.77% and the 10 Year falling to 3.37%.
The Australian dollar declined to 66.49 US cents from its previous close of 66.85. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 96.49.
Asia
Chinese stocks ended mixed with investors in a wait-and-see mode amid the recent banking crisis, the Fed rate hike and China's economic recovery. Telecommunication stocks dragged in today's session with China Mobile falling 2.4% after its lower-than-expected 2022 net profit. Software companies gained with Beijing Kingsoft up 8.6% and iFlytek adding 5.8%. Property stocks were boosted by China Evergrande's deal with a group of bondholders, bringing its prolonged debt negotiations close to the finish line. Greenland Holdings climbed 1.7% and Seazen Holdings rose 2.0%. The benchmark Shanghai Composite Index shed 0.6% to close at 3265.65, up 0.5% for the week. The Shenzhen Composite Index gained 0.3% and the ChiNext Price Index closed 0.4% higher.
Hong Kong shares ended 0.7% lower at 19915.68 as the global banking crisis and the Fed interest rate hike weighed on market sentiment. Shares of banking and financial companies were lower. HSBC Holding dropped 2.9% and Ping An Insurance was 1.1% lower. Telecommunication stocks fell too, with China Mobile dipping 1.7% after its 2022 net profit was short of market expectations. Tech companies were higher, with the Hang Seng Tech Index rising 0.6% to 4224.85. Baidu was up 2.3% and Netease rose 1.2%. The Hang Seng index finished the week 2.0% higher.
Japanese stocks ended lower, dragged by financial shares, as concerns regarding the turmoil in the global banking sector continued. Resona Holdings Inc. dropped 2.6% and Orix Corp. declined 1.8%. Meanwhile, some utility and chemical stocks advanced as recent falls in crude oil prices eased concerns about the costs of energy and raw materials. The Nikkei Stock Average fell 0.1% to 27385.25.
India's Sensex index ended 0.7% lower at 57527.10. Bajaj Finance slipped 3.2% and Axis Bank was down 1.0% as the turmoil surrounding Credit Suisse dragged the banking sector lower. Among the gainers were Infosys, which rose 0.4% and Power Grid Corp., whose shares climbed 0.2%.
Europe
European stocks declined on renewed concerns over the global financial sector. Bank stocks led Friday’s losses as investors feared the crisis will spread. The pan-European Stoxx Europe 600 lost 1.4% while the German DAX and the French CAC 40 dropped 1.7%.
The UK’s FTSE 100 index closed Friday down 1.3%, as fresh bank-crisis fears prompted losses in stocks around the world. The British index slipped alongside a host of other European markets as a renewed bout of selling of Deutsche Bank AG shares showed the takeover of Credit Suisse has not put a lid on the crisis, IG Group analyst Chris Beauchamp said. Equally, a widening gulf between the expectations of the Federal Reserve and those of the market has prompted further losses, Beauchamp explained. "It's not usually a sign of calm when the Fed and markets are singing from different hymn sheets, so investors should buckle up and prepare for more volatility ahead," he said.
The performance of European stocks remains key for the euro's direction, UniCredit Research said, noting a positive correlation between EUR/USD and the Euro Stoxx 50 index. "A rebound in stocks is needed for EUR/USD to climb back above 1.09 and towards the year-to-date peak of 1.1033," UniCredit forex strategist Roberto Mialich said in a note. The road to any gains, however, might prove bumpy as financial markets remain volatile amid concerns over the health of the global banking system, he said.
North America
The selloff in bank stocks continued Friday, weighing on global markets and suggesting that strains in the financial system have yet to be resolved.
Upheaval that began with the collapse of Silicon Valley Bank and two other US lenders earlier this month spread to Europe with Credit Suisse's forced sale to UBS last weekend. On Friday, Deutsche Bank's Frankfurt-listed shares tumbled 8.5% as investors looked for the next trouble spot.
The S&P 500 rose 0.6%, the Dow Jones Industrial Average added 0.4%, and the Nasdaq Composite gained 0.3%. All three major US indices ended with weekly gains.
Traders moved money into safe havens, including utility stocks, which were the top performing sector of the S&P 500, up 3.1%, and gold futures, which rose above $2,000 per troy ounce this week for the first time since March 2022, when the Federal Reserve began raising interest rates to fight inflation.
The climb in gold prices suggests belief among traders that the Fed is finished raising interest rates, said Christopher Wood, global head of equity strategy at Jefferies.
"The reason for this conviction is the assumption that credit conditions will tighten in the context of recent banking-related stresses," he said.
Though major European banks lack some of the vulnerabilities of regional US lenders, investors are nervous about issues such as funding costs, following the unexpected wipeout of riskier Credit Suisse bonds.
Financial stocks in the S&P 500 slipped 0.1%. JPMorgan declined 1.5%, Citigroup lost 0.8%, and Morgan Stanley dropped 2.2%. Some regional banks continued to recover from the recent selloff, including KeyCorp and Citizens Financial, up 5.4% and 4.1% respectively.
They were outpaced in the S&P 500 only by Activision Blizzard, which gained 5.9% after the UK's antitrust regulators said it has narrowed its probe of Microsoft's planned $75 billion takeover of the video-game maker, bringing the deal closer to approval. Microsoft shares traded 1.1% higher.
Michael Bell, global market strategist at J.P. Morgan Asset Management, said investors were trying to determine to "what extent do concerns around the banking system bleed to even further credit-condition tightening."
That would determine the outlook for stock markets, Mr. Bell said. He said the risk of a recession had risen in both Europe and the US, and that a downturn has historically weighed on stocks. Still, he added that central banks and other authorities are likely to respond forcefully to any further stress in the banking industry.