Markets
Global Markets Report - 24 July
Australian shares are leaning higher this morning following timid gains in the US on Friday.
Australia
Australian shares are leaning higher this morning following timid gains in the US on Friday. Investors looked forward to this week’s key economic indicators, which include the Federal Reserve and European Central Bank’s policy decisions. Earnings season also ramps up this week, with market giants Alphabet, Microsoft and Intel all set to report.
ASX futures were up 29 points or 0.4% as of 1pm on Sunday, suggesting a positive open.
The Dow Jones Industrial Average eked out its tenth-straight daily gain Friday, overcoming an earnings-day selloff in American Express shares with gains from a range of blue-chips, including Intel, Procter & Gamble, Nike and Chevron.
Friday marked the Dow's longest winning streak in nearly six years and shows how the rally in stocks is spreading from a few chip makers and highflying tech firms into other corners of the economy, such as healthcare, airlines, energy and banking.
On Friday, the Dow added less than 0.1%, or about 3 points. The S&P 500 also climbed less than 0.1%, while the Nasdaq Composite, which is heavily weighted in technology stocks, declined 0.2%. The Dow gained 2.1% for the week. The Canadian market closed Friday with more substantial gains, as the S&P/TSX Composite advanced 0.5%.
In commodity markets, Brent crude oil gained 1.8% to US$81.07 a barrel while gold dipped 0.4% to US$1,961.94.
Australian government bonds were higher, with the 2 Year yield climbing to 4.00% and the 10 Year yield rising to 4.01%. US Treasury notes were also higher, with the 2 Year yield increasing to 4.84% and the 10 Year yield moving up to 3.83%.
The Australian dollar remained at its previous close of 67.32. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, increased to 95.96.
Asia
Chinese shares closed mixed Friday, finishing the week lower following soft data from the world's second-largest economy. Investors were focusing on possible policy easing from Beijing and the coming Politburo meeting, which will likely set the policy tone for 2H. The consumer and property sectors led gains. Kweichow Moutai increased 2.7% and China Vanke rose 0.7%. Companies in the chip and auto-related industries were among the losers. Semiconductor Manufacturing International Corp. dropped 0.6% and Huayu Automotive Systems declined 0.8%. The benchmark Shanghai Composite Index ended 0.1% lower at 3167.75 and fell 2.2% for the week. The Shenzhen Composite Index shed 0.2% and the tech-heavy ChiNext Price Index was 0.35% higher.
Hong Kong shares ended higher, with the mood lifted by hopes of policy easing from Beijing following weak economic data. The Hang Seng Index closed up 0.8% at 19075.26. Investors were focused on the coming Politburo meeting. Consumer brands and the tech sector gained. Anta Sports products rose 1.6%. The Hang Seng Tech Index advanced 1.0% with Alibaba increasing 2.0% and Lenovo rising 1.8%. The property sector declined. Country Garden dropped 5.5% and Longfor declined 1.1%. The Hang Seng Index finished the week 1.7% lower.
Japanese stocks ended lower, dragged by falls in chip and other electronics shares as caution continued over policy tightening by central banks. Advantest dropped 5.8% and Tokyo Electron lost 5.6%. The Nikkei Stock Average fell 0.6% to 32304.25. Japan’s consumer price index in June rose 3.3% on year compared with a 3.2% increase in May.
Indian stocks ended lower, with the benchmark Sensex index losing 1.3% to settle at 66684.26. The decline snapped six sessions of gains as investor sentiment soured after Infosys cut its full-year revenue guidance. The Indian IT company led losses on the index with an 8.2% slump. Other IT-services companies followed suit. HCL Technologies shed 3.3%, Wipro lost 3.1% and Tata Consultancy fell 2.7%.
Europe
European stocks ended Friday with mixed results ahead of next week's interest rate decisions by the US Federal Reserve and European Central Bank. The pan-European Stoxx Europe 600 closed 0.3% higher at 465.40.
"Investors seemed to put aside disappointing results by Netflix and Tesla, which provoked Thursday's rout, and instead focus on next week's Alphabet, Microsoft and Intel earnings among a plethora of others," IG analysts wrote.
Energy and utility companies were among Europe’s main risers as Brent crude oil prices rose 1.2% to $80.54. Germany's Dax underperformed, however, closing down 0.2% as business-software company SAP dropped 4.2% after disappointing 2Q cloud revenue growth. France's CAC 40 closed 0.7% higher.
The British FTSE 100 closed Friday up 0.2% to 7663 points, lifted by oil-exposed stocks and closing out a second consecutive week in positive territory. Slowing inflation and stronger-than-expected retail sales buoyed the market, while investors focused on next week’s news, IG senior market analyst Axel Rudolph said in a note. Rate decisions by the US Federal Reserve, European Central Bank and Bank of Japan, alongside flash Purchasing Managers Index (PMI), consumer sentiment, GDP and inflation data will likely add some volatility to next week’s trading, Rudolph noted.
Hargreaves Lansdown shares rose 1.9%, outperforming the UK’s blue-chip index, followed by Haleon and Ashtead Group, up 1.5% and 1.35%, respectively. Heavyweight Shell closed up 0.9% as Brent crude oil increased.
North America
The Dow Jones Industrial Average eked out its tenth-straight daily gain Friday, overcoming an earnings-day selloff in American Express shares with gains from a range of blue-chips, including Intel, Procter & Gamble, Nike and Chevron.
Friday marked the Dow's longest winning streak in nearly six years and shows how the rally in stocks is spreading from a few chip makers and highflying tech firms into other corners of the economy, such as healthcare, airlines, energy and banking.
On Friday, the Dow added less than 0.1%, or about 3 points. The S&P 500 also climbed less than 0.1%, while the Nasdaq Composite, which is heavily weighted in technology stocks, declined 0.2%. The Dow gained 2.1% for the week. The Canadian market closed Friday with more substantial gains, as the S&P/TSX Composite advanced 0.5%.
Utility, healthcare, finance and energy stocks have been the worst-performing sectors in the S&P 500 in 2023, but so far this month they have led the rally. Healthcare and financial stocks last week pushed into positive territory for the year. Energy and utility shares inched closer to break-even performance.
Advances beyond technology giants suggest that investors have warmed to the idea that central bankers will be able to tame inflation without tanking the US economy. The housing market, one of the sectors most sensitive to higher rates, has heated up this summer after slumping in autumn and propelled big gains in shares of builders and their suppliers, such as sawmills. Regional banks that tumbled amid the string of bank failures earlier this year have come roaring back, taming fears of a credit crunch.
"The fog in the US has lightened up. The probability of recession is lower," said Sharmin Mossavar-Rahmani, head of Goldman Sachs's investment strategy group and chief investment officer for wealth management.
Though some investors have worried over how much higher big tech stocks such as Nvidia and Apple could carry the market, Mossavar-Rahmani said similarly top-heavy rallies have historically been long-lasting.
"In the three instances in the last 20, 30 years, the market continued to have double-digit returns after that," she said. "The fact that there's narrow breadth does not change our recommendation to clients to stay invested, with the overweight to US equities."
Drugmaker Zoetis, equipment designer Danaher and online bazaar Etsy were among the S&P 500's top gainers, rising 6.9%, 4.7% and 3.9%, respectively.
Advertising company Interpublic Group was the S&P 500's worst performer, dropping 13% after falling short of quarterly revenue expectations and slashing its growth forecast because of reduced spending among its tech clients. Investors also found reasons to sell in the quarterly earnings of American Express, down 3.9%, and oil-field-services giant Schlumberger, which shed 2.2%.
Banking stocks also took a hit Friday, when several lenders, including Regions Financial and Comerica, reported earnings. Despite Friday share-price declines -- Regions fell 3.1%, Comerica lost 4.1% -- the KBW Nasdaq Bank Index gained 6.6% during the week, its best in more than a year.
Earnings season picks up steam next week with companies including Microsoft and Facebook-owner Meta due to report. Investors will also be on the lookout for clues as to the Federal Reserve's plans for interest rates later this year. The central bank is expected to raise interest rates by a quarter percentage point to a 22-year high when it meets next week.
