Global Markets Report - 20 October
ASX set to fall at the open, as Wall St responds to strong labor data and mixed Fed commentary.
Australia
Australian shares are set to fall at the open, as Wall St responds to strong labor data and mixed Fed commentary.
ASX futures were down 0.6% or 45 points as of 8:00am on Friday, suggesting a lower open.
US stocks ended broadly lower as investors digested strong labor data and mixed Fed commentary, while the 10-year Treasury yield approached 5%.
Stocks rallied midday after Fed Chair Powell suggested that the central bank is unlikely to raise interest rates again in November, but later said policy makers are proceeding carefully amid continued worries about inflation.
DJIA fell 250 points to 33414, the S&P 500 dropped 0.8% to 4278 and the Nasdaq slid 1% to 13186.
In commodity markets, Brent crude oil rose 1.9% to US$93.21 a barrel while gold was flat at US$1,974.46.
In local bond markets, the yield on Australian 2 Year government bonds was higher at 4.30% while the 10 Year yield was also up at 4.78%. US Treasury notes were higher, with the 2 Year yield at 5.16% and the 10 Year yield at 4.99%.
The Australian dollar hit 63.28 US cents down from the previous close of 63.36. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, was flat at 100.48.
Asia
Chinese shares declined, with Shanghai Composite Index falling 1.7% to 3005.39, the lowest level reached this year, as investor sentiment remained depressed. The struggling property sector continues to be the key drag on China's economic recovery, said Ken Cheung, chief Asian forex strategist at Mizuho Bank, in an email, noting today's home-price data. Almost all sectors declined, with consumer and auto stocks leading losses. Kweichow Moutai dropped 5.7% and Wuliangye Yibin shed 3.3%. BYD declined 3.4% and Great Wall Motor was 4.2% lower. Semiconductors were the only bright spot, with SMIC up 2.7%. The Shenzhen Composite Index ended 1.5% lower and the tech-heavy ChiNext Price Index was off 1.3%.
Hong Kong shares closed lower as sentiment was weighed by China's latest data showing a decline in September home prices and Country Garden's recent debt crisis. Risk sentiment continues to reel from higher US Treasury yields, said IG market strategist Yeap Jun Rong in a report. The benchmark Hang Seng Index dropped 2.5% to 17295.89 and the Hang Seng Tech Index lost 1.9%. Almost all sectors declined, led by consumer and tech stocks. China Life Insurance fell 6.7%. Baidu and JD.com dropped 5.3% and 5.45%, respectively. Li Ning declined 5.1%. Among the few gainers, Sunny Optical Technology added 8.7% and Lenovo rose 6.3%.
Japanese stocks ended lower, dragged by falls in electronics and pharmaceutical stocks, as the Middle East conflict stoked concerns about higher costs of energy and borrowing. Tokyo Electron Ltd. lost 4.7% and Daiichi Sankyo dropped 7.0%. The Nikkei Stock Average fell 1.9% to 31430.62. The 10-year Japanese government bond yield rose 3.5 basis points to 0.840%, the highest level since July 2013. Investors are focusing on the latest developments in the war between Hamas and Israel and the impact on crude-oil prices and global bond yields.
Indian shares closed lower, following most of its regional peers as steel and tech stocks weighed. Markets are focused on geopolitical tensions in Middle East, as Biden's visit to Israel has not put an end to the risk that the Gaza conflict will spread, Saxo's APAC strategy team writes in a research note. The benchmark Sensex dropped 0.4% at 65629.24. Steel and tech stocks led the losses as Wipro shed 3.0% in the wake of 2Q results, and Tech Mahindra dropped 1.3%. JSW Steel lost 1.05% and Tata Steel was down 0.9%. The consumer sector lifted the market. Nestle India gained 3.7% after it 3Q earnings beat estimates on higher demand for its chocolate and instant-noodle products.
Europe
European markets fell as losses for property and packaging stocks eclipsed gains for drinks, luxury-goods and financial shares. The Stoxx Europe 600 dropped more than 1%, the DAX retreated 0.3% and the CAC 40 backtracked 0.6%. In London, the biggest faller is Rentokil Initial, down 19% after a downbeat update on its North American business. Property website Rightmove also fell 14% and packaging company Mondi loses 6%. "Rightmove is amongst the worst performers on news that CoStar is buying one of its rivals OnTheMarket," CMC Markets analyst Michael Hewson writes. "Mondi is also getting hit after warning that soft demand had meant lower selling prices had affected its 3Q performance."
The FTSE 100 index closed Thursday down 1.2% to 7499 points, the worst performer among European peers on the back of disappointing trading updates as sentiment remained fragile due to the mounting tensions on the Middle East, CMC Markets' U.K. chief market analyst Michael Hewson says in a note. Pest control company Rentokil dragged the index into negative territory, with shares plunging 19% after its quarterly update spooked investors—particularly over concern in its US operations—Hewson adds. Rightmove shares closed down 14% over fears that it will lose market share after news that CoStar is taking over one of its rivals OnTheMarket, he adds. Packaging company Mondi was the third-worst performer and closed down 6.1% after warning that soft demand had meant lower 3Q selling prices.
North America
US stocks ended broadly lower as investors digested strong labor data and mixed Fed commentary, while the 10-year Treasury yield approached 5%.
Stocks rallied midday after Fed Chair Powell suggested that the central bank is unlikely to raise interest rates again in November, but later said policy makers are proceeding carefully amid continued worries about inflation.
Netflix shares climbed 16% after posting a big subscriber gain with higher prices, while AT&T rose 6.6% after beating forecasts and raising its outlook.
Tesla shares fell 9.3% after saying it is struggling to scale production of the Cybertruck.
DJIA fell 250 points to 33414, the S&P 500 dropped 0.8% to 4278 and the Nasdaq slid 1% to 13186.