Global Markets Report - 24 April

Australia

The Australian sharemarket is leaning lower this morning following a timid session in the US. A lack of signal changes left investors hesitant on Friday, but more economic data and corporate earnings will likely move markets this week. 

ASX futures were leaning 2 points lower, or less than 0.1%, as of 6:00am on Saturday, suggesting a slightly negative open.

US stocks wobbled Friday to close out the week with slight declines as investors weighed quarterly reports from banks and mixed economic data.

The S&P 500, Dow Jones Industrial Average and Nasdaq Composite each closed about 0.1% higher on Friday. The indices oscillated between small gains and losses throughout the session.

For the week, all three major indices edged lower. The S&P 500 dipped 0.1% this week. The Dow industrials shed about 78 points, or 0.2%. The Nasdaq Composite lost 0.4%.

Investors eyed quarterly results from big financial institutions and regional banks this week to assess how lenders are holding up after the March collapse of Silicon Valley Bank and Signature Bank. The earnings reports showed some stabilization in the financial system, but also indicated a tougher environment going forward for maintaining deposits.

In commodity markets, Brent crude oil added 0.5% to US$81.51 a barrel while gold lost 1.3% to US$1,979.19.

The yield on Australian 2 Year government bonds dipped to 3.14% while the 10 Year yield fell to 3.45%. Overseas, the yield on 2 Year US Treasury notes edged up to 4.19% and the yield on 10 Year US Treasury notes was lower at 3.57%.

The Australian dollar declined to 66.91 US cents after previously closing at 67.42. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 96.00.

Asia

Chinese shares ended the day and the week lower, as sentiment weakened after the latest economic data indicated an uneven recovery in the world's second largest economy. The declines were broad-based, but software and hardware makers led losses. Beijing Kingsoft Office Software dropped 6.7%, iFlytek Co. declined 9.2% and SMIC retreated 5.5%. The Shanghai Composite Index closed 1.95% lower at 3301.26 for the day and down 1.1% for the week. The Shenzhen Composite Index ended 2.45% lower and the ChiNext Price Index dropped 1.9%.

Hong Kong's benchmark Hang Seng Index ended 1.6% lower at 20075.73. Investor sentiment was weighed by reports of US President Biden's potential executive order to screen and possibly restrict US overseas investment in Chinese advanced technology. Tech stocks dragged the market lower, with the Hang Seng Tech Index retreating 3.1%. Alibaba Group lost 4.1% and Baidu dropped 2.7%. Chip maker Semiconductor Manufacturing International Corp. was the biggest loser among HSI constituents, slumping 9.2%. Among gainers, Li Ning added 2.9% and Hang Seng Bank rose 0.6%.

Japanese stocks ended lower, dragged by falls in bank and auto shares, amid continued caution over the economic and earnings outlook. Mizuho Financial Group fell 2.3% and Nissan Motor dropped 3.4%. The Nikkei Stock Average declined 0.3% to 28564.37.

Indian shares ended the session little moved, as gains by tech companies and financials were offset by auto stocks' losses. HCL Technologies added 1.1% after reporting earnings. Wipro was 1.4% higher and Bajaj Finance advanced 0.4%. Among losers, Tata Motors dropped 1.2% and Maruti Suzuki lost 1.9%. The Sensex ended flat at 59655.06.

Europe

European stocks ended Friday slightly higher, with the pan-European Stoxx Europe 600 up 0.3% at 469.00. Germany's DAX and France’s CAC 40 both climbed 0.5%.

"Overall stocks are still unable to establish a clear direction," IG analyst Chris Beauchamp wrote. "Despite better earnings from Procter & Gamble, the week has ended with US markets edging lower, though in Europe a more optimistic tone prevails," he said. Investors remained cautious, however, with tech stocks and defensives such as utilities and pharmaceuticals leading gains.

In the United Kingdom, the FTSE 100 closed up 0.1% as UK business confidence improved and consumers felt a little brighter about the future, AJ Bell analyst Danni Hewson said in a note. "Risk appetite was shaken by the prospect of a fresh standoff between the US and China, which hit Chinese tech stocks early on this morning, but the afternoon session has seen Europe stabilize," Chris Beauchamp said in a note. Dowlais, Smith & Nephew and Next were the day's top risers, up 4.3%, 2.5% and 2.3%, respectively. On the downside, miners Anglo American, Rio Tinto and Fresnillo were the session's biggest fallers, down 5.95%, 5.7% and 3.2%, respectively.

North America

US stocks wobbled Friday to close out the week with slight declines as investors weighed quarterly reports from banks and mixed economic data.

The S&P 500, Dow Jones Industrial Average and Nasdaq Composite each closed about 0.1% higher on Friday. The indices oscillated between small gains and losses throughout the session.

For the week, all three major indices edged lower. The S&P 500 dipped 0.1% this week. The Dow industrials shed about 78 points, or 0.2%. The Nasdaq Composite lost 0.4%.

Investors eyed quarterly results from big financial institutions and regional banks this week to assess how lenders are holding up after the March collapse of Silicon Valley Bank and Signature Bank. The earnings reports showed some stabilization in the financial system, but also indicated a tougher environment going forward for maintaining deposits.

"Given what's happened with financial sector stress, what we see is that there is greater lack of clarity now given the potential for tightening lending conditions, and that continues to raise some questions on the outlook going forward," said Lisa Erickson, head of the public markets group at US Bank Wealth Management.

Diverging price action in regional bank shares reflected the disparate results across the industry. Truist Financial on Friday fell 6% as the bank reported earnings that missed analyst expectations. Western Alliance gained 2.6% on Friday after the bank said this week that deposit outflows had stabilized.

Overall, market volatility has eased recently, with the S&P 500 on Friday continuing a string of small daily moves. Friday's muted market action is indicative of the "listless trading" in markets this week, said Scott Ladner, chief investment officer at Horizon Investments.

The earnings reporting season ramps up in the coming week with mega-cap companies like Microsoft, Alphabet and Amazon.com on the docket. Plus, investors will get a slew of economic data, including preliminary gross-domestic-product estimates for the first quarter and the Federal Reserve's preferred inflation gauge.

"It's really a waiting game this week," Mr. Ladner said. "We just haven't gotten important bellwether reports to either confirm or change a narrative."

Economic data released this week painted a mixed picture on the health of the US economy and its implications for the Fed's interest rate increases.

S&P Global data released Friday showed business activity jumped to an 11-month high at manufacturing firms based in the US, and a 12-month high for companies in the service industry. Prices also rose, sparking worries that the Fed still has work to do in taming inflation.

"That leads to concern that the interest rate environment may stay tougher," said Ms. Erickson, referring to the manufacturing and services data.