Global Markets Report - 18 August
Australian shares are expected to decline this morning following a poor session across global markets.
Australia
Australian shares are expected to decline this morning following a poor session across global markets.
ASX futures were 16 points or 0.2% lower as of 6:00am on Friday, indicating a drop at the open.
US stocks closed lower Thursday, continuing their recent downward trend. The S&P 500 and the Dow Jones Industrial Average both backtracked 0.8%, while the Nasdaq Composite slumped 1.2%. Canadian stocks also fell, with the S&P/TSX Composite closing with a 0.5% loss.
The Labor Department reported even fewer jobless claims than expected last week, suggesting yet again that the US economy remains robust. While workers may interpret the data as good news, investors feared that an overly tight labor market may keep inflation from coming down to the Federal Reserve’s goal.
In commodity markets, Brent crude oil gained 0.6% to US$83.93 a barrel while gold closed 0.2% lower to US$1,888.55.
Australian government bonds were higher, with the 2 Year yield rising to 3.99% and the 10 Year yield climbing to 4.32%. US Treasury notes were also higher, with the 2 Year yield increasing to 4.94% and the 10 Year yield advancing to 4.29%.
The Australian dollar backtracked to 64.01 US cents. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged down to 98.23.
Asia
Chinese stocks ended higher on hopes for economic policy support. The benchmark Shanghai Composite index gained 0.4%.
Hong Kong stocks were unchanged, with the Hang Seng index remaining near its previous close.
Japan’s benchmark Nikkei Stock Average declined 0.4%, as concerns about China’s economy and the Federal Reserve’s next policy decision weighed on sentiment.
Indian shares fell as investors worried about China’s ability to bounce back economically from the pandemic. The benchmark Sensex index closed 0.6% lower. Meanwhile, India’s currency hit a record low on Thursday.
Europe
European markets closed lower Thursday as investors turned away from equities and toward higher yields on safer investments. The pan-European Stoxx Europe 600 and the French CAC 40 both lost 0.9%, while the German DAX backtracked 0.7%. London’s FTSE 100 dropped 0.6%.
As US Treasury notes continue to offer attractive long-term yields, investors re-evaluated their stock holdings. Worries about China’s sluggish economy and the Federal Reserve’s next policy decision also weighed on Europe’s mood.
North America
US stocks closed lower Thursday, continuing their recent downward trend. The S&P 500 and the Dow Jones Industrial Average both backtracked 0.8%, while the Nasdaq Composite slumped 1.2%. Canadian stocks also fell, with the S&P/TSX Composite closing with a 0.5% loss.
The Labor Department reported even fewer jobless claims than expected last week, suggesting yet again that the US economy remains robust. While workers may interpret the data as good news, investors feared that an overly tight labor market may keep inflation from coming down to the Federal Reserve’s goal.
Yields on US Treasury notes have reached unusually high levels this week, which also prompted investors to turn away from stocks. When safer assets like government bonds offer attractive long-term yields, shares of US companies often seem less valuable to investors.
Shares of CVS dropped 8.1% after a major insurer announced it would no longer use their pharmacy-benefit services. Moderna outperformed most of its peers on the S&P 500, closing the day with a 7.4% gain.