Global Markets Report - 11 September

Australia

The ASX is set to open higher this morning.

ASX futures were up 0.1% or 4 points as of 8:30am on Monday, suggesting a higher open.

The S&P 500 ticked lower for the week, weighed down by losses in tech heavyweights Apple and Nvidia.

Apple shares ended the week down 6% after China ordered central-government officials to stop using iPhones. Shares of Nvidia, the graphics-chip maker at the heart of the AI boom, dropped 6.1% for the week. Its stock remains up more than 200% this year.

Both tech stocks have a major influence on the broad U.S. stock index. At the end of August, Apple and Nvidia were responsible for almost 30% of the S&P 500's 2023 total return, including dividends, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

The S&P 500 fell 1.3% for the week while the tech-heavy Nasdaq Composite declined 1.9%. The Dow Jones Industrial Average, which includes Apple but not Nvidia, slipped 0.7%.

Investors said they were questioning the rally in tech shares that has lifted the market higher this year. The technology sector pulled back 2.3% for the week, trimming its year-to-date gains to 41%.

In commodity markets, Brent crude oil fell 0.3% to US$90.39 a barrel while gold was flat at US$1,919.12.

In local bond markets, the yield on Australian 2 Year government bonds were slightly down at 3.81% while the 10 Year yield was down at 4.08%. US Treasury notes were higher, with the 2 Year yield at 4.99% and the 10 Year yield at 4.26%.

The Australian dollar was higher at 63.90 US cents from its previous close of 63.81. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged down to 99.32.

Asia

Chinese shares retreated and finished the week lower as concerns over the country's growth linger. Investors are awaiting China's August inflation data due Saturday. Economists polled by The Wall Street Journal forecast CPI to rise 0.2%, reversing from July's 0.3% decline as deflationary pressures eased. Energy and developer stocks led losses. PetroChina declined 2.2% and Sinopec dropped 1.3%. China Vanke lost 0.6% and Seazen Holdings fell 3.0%. Among gainers, telcos China Mobile and China Unicom rose 1.4% and 1.0%, respectively. The benchmark Shanghai Composite Index was 0.2% lower at 3116.72 and finished the week 0.5% lower. The Shenzhen Composite Index was down 0.1% and the tech-heavy ChiNext Price Index dropped 0.35%.

Hong Kong markets were closed Friday, due to a Black Rainstorm Warning.

Japanese stocks ended lower, weighed down by electronics stocks as concerns about further tightening by the Federal Reserve persist. Tokyo Electron Ltd. dropped 3.8% and Olympus Corp. shed 3.9%. The Nikkei Stock Average fell 1.2% to 32606.84. Investors will be focusing on any policy-related developments from the G-20 summit this weekend. The 10-year Japanese government bond yield falls 1 bps to 0.645%. Eastern Time.

Indian shares closed higher, rallying for a sixth consecutive session and bucking the regional trend. India's equity market may remain in a bullish phase, with any consolidation likely to be shallow and short-lived, Amit Sachdeva, India equity strategist at HSBC, says in a research note. The G-20 summit hosted by India will be in focus this weekend. Energy stocks led gains. Coal India climbed 2.9% and Indian Oil advanced 2.5%. Among stocks on the benchmark index, NTPC rose 2.65% and Tata Motors added 2.0%. ITC shed 0.7% and UltraTech Cement lost 0.8%. The Sensex rose 0.5% to 66598.91.

Europe

European stocks rose as investors shrug off lingering jitters about inflation and interest rates. The Stoxx Europe 600 gained 0.2%, the CAC 40 rallied 0.6% and the DAX edged 0.1% higher, with luxury goods and retail stocks among the biggest risers. The Dow rose 0.3%. "Next week's US CPI and the European Central Bank's rate decision are likely to give investors further clues as to the future path of monetary policy," IG analyst Axel Rudolph writes.

The FTSE 100 index finished the week on a positive note, ending the trading day 0.49% higher on Friday at 7,478.19 points, alongside its European peers which closed up despite a challenging and predominantly negative week. "Investors are currently caught between two distinct pincers, concerns over slowing economic numbers, particularly in Europe and China, against a backdrop of much stickier inflation caused by rising energy prices," CMC Markets UK analyst Michael Hewson said in a market comment. In London, consumer stocks were among the index's top performers after a upbeat brokerage notes for Next and JD Sports. JD gained 2.6% to 138 pence after Berenberg raised its price target to 225p, saying it thought a 26% fall in the UK retailer's shares since February was harsh.

North America

The S&P 500 ticked lower for the week, weighed down by losses in tech heavyweights Apple and Nvidia.

Apple shares ended the week down 6% after China ordered central-government officials to stop using iPhones. Shares of Nvidia, the graphics-chip maker at the heart of the AI boom, dropped 6.1% for the week. Its stock remains up more than 200% this year.

Both tech stocks have a major influence on the broad U.S. stock index. At the end of August, Apple and Nvidia were responsible for almost 30% of the S&P 500's 2023 total return, including dividends, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

The S&P 500 fell 1.3% for the week while the tech-heavy Nasdaq Composite declined 1.9%. The Dow Jones Industrial Average, which includes Apple but not Nvidia, slipped 0.7%.

Investors said they were questioning the rally in tech shares that has lifted the market higher this year. The technology sector pulled back 2.3% for the week, trimming its year-to-date gains to 41%.

"You're finally starting to see a more intelligent look at artificial intelligence," said Dan Genter, chief executive and chief investment officer at Genter Capital Management.

While companies including Microsoft and Nvidia are likely to benefit in the near-term from advances in AI, he said, "there's a lot of other companies that the true benefit to earnings is very suspect."

The technology sector is trading at 25.6 times its projected earnings over the next 12 months, up from 20 at the start of the year and higher than a 10-year average of 18.5, according to FactSet. Many investors think that is looking expensive enough that it could limit future gains.

"Tech's coming under a lot of scrutiny given the valuations," said Stephanie Lang, chief investment officer at wealth-management firm Homrich Berg.

Shares of financial, healthcare and industrial companies also declined in weekly trading. Energy and utilities were the only two of the S&P 500's 11 sectors to rise for the week.

Major indexes rose Friday, snapping a three-day losing streak for the S&P 500 and a four-session streak for the Nasdaq Composite. The S&P 500 added 0.1%, and the Nasdaq rose 0.1%. The Dow Jones Industrial Average gained 0.2%, or about 76 points.

Among individual stocks, Kroger shares gained 3.1% Friday after a settlement to resolve opioid-related claims against the supermarket chain. The company's earnings beat forecasts while sales fell short of analysts' expectations.

Block shares fell 5.3%, bringing their losses for the week to 8.8%, after payments platform Square suffered outages Thursday and Friday.

Investors are looking ahead to the next release of the consumer-price index on Wednesday. The data could help them gauge the Federal Reserve's next steps in its campaign to tame inflation. The central bank's rate-setting committee is scheduled to meet the following week.

Data this week raised concerns that the economy may be running too hot for Fed officials to stop raising interest rates.

The services sector of the economy expanded for an eighth consecutive month in August, an index from the Institute for Supply Management showed Wednesday. Initial jobless claims, a proxy for layoffs, fell to the lowest level since early February, the Labor Department said Thursday.