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15 October 2021
Morning News Summary
Financials Lift Hopes for Earnings Season

Falling US bond yields and jobless claims and strong results from several banking heavyweights helped pushed US and European equities higher, while Asian markets were mixed following further signs of stress in China’s property sector. ​​​​​​​

US investors were in a great mood on Thursday. Bond yields retreated further as investors chose to focus on a data point showing producer prices, excluding energy and food, grew at a more moderate than expected pace of +0.2% month-on-month in September (but overall producer prices were still up +8.6% year-on-year). The 10-year Treasury bond yield gave back another 3bp to 1.52%, despite weekly initial jobless claims of 293,000 being the lowest since the pandemic started. All equity sectors and indices were well in the green, with the FAANGs and other technology stocks pushing the Nasdaq up +1.7%, while the S&P 500 (+1.6%), Dow Jones (+1.5%) and Russell 2000 (+1.4%) were not far behind. Bank of America jumped +3.3% after beating profit estimates, and Morgan Stanley (+1.8%) also provided a strong earnings update. Peers US Bancorp (-3.1%), Wells Fargo (-2.2%) and Citi (+0.1%) didn't get rewarded for their results. Walgreens Boots Alliance bounced +6.7% after reporting better-than-expected revenue and adjusted profit and raising long-term growth forecasts. Health insurer UnitedHealth (+4.2%) also delivered strong earnings. Domino's Pizza rose +1.9% as it beat earnings expectations despite reporting a fall in third-quarter same store sales amid staff shortages. 

European equites gain ahead of earnings season

The STOXX 600 advanced +1.2%. Chipmakers ASML (+4.2%) and Infineon Technologies (+2.7%) bounced after peer Taiwan Semiconductor Manufacturing (+2.1% in the US) posted a strong result and delivered better than expected Q4 guidance. SAP (+2.9%) continued to gain following its positive result on Wednesday, while French advertising group Publicis rose +2.7% after lifting its FY21 guidance. The UK’s FTSE 100 added +0.9% as heavyweight miners and oil companies rose. Rio Tinto (+3.7%) and BHP (+3.7%) gained as sentiment around the broader economic outlook lifted​​​​​​​, while Royal Dutch Shell (+1.4%) and BP (+0.8%) tracked oil prices higher. Europe’s drug regulator has started a review of AstraZeneca’s (-0.5%) antibody-based COVID-19 therapy. ​​​​​​​

Further stress evident at China property developers

Asian equities ended mixed, with China’s CSI 300 down -0.5% and the Shanghai Composite (-0.1%) little changed as another property company, Modern Land, sought extensions to a bond payment deadline and was subsequently downgraded by a credit rating agency. Hong Kong markets were closed for the Chung Yeung Festival. Japan’s Nikkei 225 advanced +1.5% as technology stocks bounced, while Seoul’s Kospi also gained +1.5%. Australia's ASX 200 added +0.5%. The unemployment rate rose to 4.6% from 4.5% m/m in September, as lockdowns and supply-chain disruptions forced some businesses to furlough staff or shut down. South32 jumped +4.9% after announcing it purchased a 45% stake of the Sierra Gordo copper mine in Chile. Investment management platforms Netwealth (+15.6%) and HUB24 (+8.7%) soared after strong earnings results. The NZX 50 edged +0.2% higher, with a2 Milk bouncing +4.6%.

WTI crude and gold rose, iron ore drops

WTI crude added +0.5% to US$80.83/bbl and gold edged +0.2% higher to US$1,798.30/oz. Iron ore fell -3.3% to US$122.29/MT.

NZ Headlines

Kmart has excluded unvaccinated shoppers from New South Wales stores, and will look to do so in New Zealand if the government requires it.

The government will pay three companies $11.5 million to conduct the first part of its feasibility study into a pumped hydro storage scheme at Lake Onslow in Central Otago.

House sales nationwide dropped by -37.9% in September from the same time last year, according to the Real Estate Institute, and while the nationwide median house price fell -6.5% from August, it was still up +15.4% compared to a year ago.​​​​​​​

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