Market Update - 17 November 2021

US stocks rallied with the Nasdaq outperforming the major indexes despite the rise in bond yields. The Dow was lifted by shopping giants as investors digested strong retail data. Americans started their holiday shopping early despite higher prices. Retail sales in October rose 1.7 per cent according to the Commerce Department, much stronger than economists expected. Online shopping and gas contributed to the rise, as well as electronic sales. Interesting is that the figures are seasonally adjusted, but not adjusted for inflation. Last week we saw pricing pressures hit 30 year highs with the price tag on items soaring, market participants are wondering how inflation is going to chip away at growth momentum and whether the Fed is going to change the pace of its taper timeline, and when interest rates will rise to curb these pricing pressures.

Playing into the retail space, Walmart closed 2.6 per cent lower despite reporting third quarter results exceeding expectations, raising its full-year guidance amid inflationary pressures. While Home Depot surged 5.7 per cent after consumers spent more per visit contributing to same store sales exceeding expectations for the quarter. Meanwhile, CEO Elon Musk is set to sell another US$931 million of stock bringing its total sale of shares to US$7.8 billion. Shares jumped 4.1 per cent today punching above the US$1,000 mark now to US$1,054.73.

At the closing bell, the Dow Jones added 0.2 per cent to 36,142, the S&P 500 gained 0.4 per cent to 4,701 while the Nasdaq closed 0.8 per cent higher at 15,974. Across the S&P 500 sectors, consumer discretionary, technology were the two winners from the four, while the rest closed lower, real estate was the biggest loser. The yield on the 10-year treasury note rose 2 basis points to 1.64 per cent, gold rose against a weaker greenback, supported by higher inflation indicators.

Across the Atlantic, European markets closed mixed. Paris was closed, Frankfurt gained 0.6 per cent and London's FTSE lost 0.3 per cent as the pound rose after comments from Bank of England governor Andrew Bailey showed that he was "very uneasy" about rising inflation. Miners fell while oil giants rose. BHP and Rio both lost 1.3 per cent while BP added 0.9 per cent, and Shell gained 1.4 per cent. Lifting the pound was also the latest jobs figures showing that the unemployment rate in the UK fell in the third quarter. The unemployment rate dipped 0.5 percentage points to 4.3 percent for the quarter versus an expectation of 4.4 per cent. Annual growth in average total pay including bonuses rose n to 5.8 per cent, coming in higher compared to expectations of 5.6 per cent.

Yesterday, the Australian sharemarket snapped its 2-day winning streak, its worst performance in over two weeks as investors digested the RBA's meeting minutes closing 0.7 per cent lower at 7,420. Rising bond yields on Wall St transcended in the same way in our bond market following news that broke last week that US inflation tipped its highest level in more than 30 years. This saw the greenback rise which put pressure on commodity prices. The local bourse closed at its lowest level of the session after the minutes from the Reserve Bank and a speech took a bit of attention.

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