Global Markets Report - 29 June
Australian shares are slightly lower this morning following a broadly pessimistic session on Wall Street.
Australia
Australian shares are slightly lower this morning following a broadly pessimistic session on Wall Street. Although tech shares climbed, remarks from Federal Reserve Chair Jerome Powell on Wednesday suggested the possibility of further policy tightening.
ASX futures were hinting down Thursday morning, having lost 3 points or less than 0.1% as of 6:30am.
A jump in shares of Apple and Tesla pushed the Nasdaq Composite higher, helping it eke out a slim gain even as other major US indices slipped.
US stocks have been hovering near some of their highest levels of the past year, boosted by a stretch of strong economic data and optimism about artificial intelligence, which has driven tech shares higher.
The gains for the Nasdaq continue a recent stretch of outperformance for the tech-heavy gauge, which is on track for its best start to a year through June on record, according to Dow Jones Market Data.
On Wednesday, the Nasdaq added 0.3%, while the S&P 500 slid less than 0.1%. The Dow Jones Industrial Average lost 74 points, or 0.2%. They're all sitting around 1% off their 2023 highs, set earlier in June.
In commodity markets, Brent crude oil gained 1.9% to US$73.65 a barrel while gold gave up 0.2% to US$1,909.91.
Australian government bonds were lower, with the 2 Year yield declining to 4.03% and the 10 Year yield falling to 3.87%. US Treasury notes were mixed, with the 2 Year yield rising to 4.70% and the 10 Year yield decreasing to 3.71%.
The Australian dollar slipped to 65.99 US cents from its previous close of 66.82. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, inched higher to 97.58.
Asia
Chinese shares ended mixed, weighed by China's weak industrial profit data released Wednesday. Profits at China's industrial firms plunged 18.8% on year in the first five months of 2023. "The divergence in profits across various sectors and firms remained significant," wrote economists from Goldman Sachs in a note. Most sectors were lower with software makers and hardware companies leading the losers. Beijing Kingsoft Office Software dropped 4.3% and Hangzhou HIK Vision Digital Technology was 1.1% lower. Among the gainers was the energy sector as Sinopec Corp. gained 1.6% and China Shenhua Energy increased 1.3%. The Shanghai Composite Index ended flat at 3189.38. Both the Shenzhen Composite Index and ChiNext Price Index declined 0.4%.
Hong Kong shares ended higher, driven by tech and auto stocks, despite a weakening yuan and poor Chinese industrial profit data. Although profits at China's industrial firms plunged 18.8% on year in the first five months of 2023, profits for the auto industry bucked the trend with an 4.8% increase. The Hang Seng Index edged up 0.1% to end at 19172.05. Chinese electric vehicle maker Xpeng rose 11% with the company launching its G6 model, a rival to Tesla's Y3, on Thursday. Nio Inc. followed the trend and increased 7.2%. Tech stocks were also higher, with Hang Seng Tech Index rising 0.75%. Meituan rose 4.45% and Xiaomi gained 2.3%.
Japanese stocks ended higher, led by gains in tech, auto and brokerage shares as signs of US economic strength brightened the economic outlook. Nippon Telegraph & Telephone gained 5.2%, Toyota Motor added 2.8% and Nomura Holdings climbed 3.7%. The Nikkei Stock Average rose 2.0% to 33193.99.
Indian shares ended higher, briefly breaching the 64000 level for the first time, driven by auto and financial stocks, as signs of US economic strength buoyed Asian markets. HDFC Bank was 1.1% higher, Bajaj Finance was up 1.0%, and Tata Motors rose 2.4%. Aditya Birla Fashion & Retail gained 1.1% after the Competition Commission of India approved the company's acquisition of TCNS Clothing. Adani Enterprises rose 5.3% following reports that some investors bought shares worth about $1 billion in two Adani Group companies from the family trust. The benchmark Sensex rose 1.5% to close at 63915.42.
Europe
European stocks rose, but US blue-chip shares dropped after hawkish comments from US Federal Reserve Chair Jerome Powell. The pan-European Stoxx Europe 600 advanced 0.7%, the French CAC 40 gained 1.0% and the German DAX moved up 0.6%.
"US markets opened slightly lower after yesterday's advances gave way to some modest profit-taking," CMC Markets analyst Michael Hewson wrote. Powell's comments, made during a European Central Bank panel discussion in Portugal, that US interest rates could rise several more times in coming months prompted market caution, he added.
In London, the FTSE 100 index closed up 0.5% to 7500 points, amid a positive session for European markets despite a fall in mining and oil-exposed stocks, Michael Hewson explained in a note. Shares of the software company Sage Group outperformed the British index, closing up 5.1% after an upgrade by JPMorgan Cazenove. Scottish Mortgage Investment Trust and Pershing Square Holdings were up 3.9% and 2.9%, respectively. Retailer Ocado closed down 5%, the index’s worst performer, after reports that Amazon is not seeking to make a bid for the business.
North America
A jump in shares of Apple and Tesla pushed the Nasdaq Composite higher, helping it eke out a slim gain even as other major US indices slipped.
US stocks have been hovering near some of their highest levels of the past year, boosted by a stretch of strong economic data and optimism about artificial intelligence, which has driven tech shares higher.
The gains for the Nasdaq continue a recent stretch of outperformance for the tech-heavy gauge, which is on track for its best start to a year through June on record, according to Dow Jones Market Data.
On Wednesday, the Nasdaq added 0.3%, while the S&P 500 slid less than 0.1%. The Dow Jones Industrial Average lost 74 points, or 0.2%. They're all sitting around 1% off their 2023 highs, set earlier in June.
Apple shares added 0.6% to $189.25, a record. Tesla shares jumped 2.4%, ahead of the company's second-quarter deliveries numbers expected this weekend.
Federal Reserve Chair Jerome Powell, speaking Wednesday in Sintra, Portugal, said that monetary policy has not been restrictive for very long, and there is likely "more restriction coming."
Still, some investors have not been fazed by the central bank's recent messaging, instead saying they are more focused on the end of the central bank's rate-hiking campaign, which appears in sight. Meanwhile, the economy has been stronger than many investors anticipated at the start of the year.
The Nasdaq has soared almost 30% this year. The S&P 500 has added 14%, boosted by the tech and communication-services groups.
Data this week has shown that US consumers are feeling better about the economy despite rising interest rates, while orders for manufactured US goods rose last month. Many Americans appear to be spending on travel this summer, boosting stocks such as Carnival and Norwegian Cruise Line, two of the S&P 500's top performers on Wednesday. Shares of each added around 8%.
Lumber is also booming again. Shares of Weyerhaeuser, West Fraser Timber, Boise Cascade and others that own sawmills and make wood panels were big winners in trading Wednesday, continuing a hot streak this month thanks to the recovery in residential construction.
Wall Street's "fear gauge" ticked lower. The move in the Cboe Volatility Index, or VIX, was relatively small but continued a slide despite a slim loss for the S&P 500. The volatility indicator typically moves in the opposite direction of the stock market -- not in lockstep.
One of 2023's market stars took a U-turn on Wednesday. Shares of Nvidia fell, showing how one of the biggest AI winners this year might be susceptible to sharp shifts in sentiment. The declines came after The Wall Street Journal reported that the US was considering new restrictions on AI chip exports to China. Nvidia has been the most prominent beneficiary of the investor enthusiasm around artificial-intelligence-driven computing.