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Morning report

Bond Yields Rise Across the Globe

10-year government bond yields rose across the globe as investors continued to anticipate rising consumer prices. Major US indices were down, Europe and the UK were mainly little changed, while Asia was mostly in the green.

Reassurance from the Fed doesn't quell inflation fears

US indices declined on Thursday as inflation worries continued to grip investors despite Federal Reserve Chair Jerome Powell downplaying the threat of increasing consumer prices earlier in the week, pointing to a slack in the US labour market. Bond yields were up across the board, with the 10-year touching 1.49% — close to the 1.5% dividend yield of the S&P 500. Jobless claims data improved more than expected compared to last week. The S&P 500 and the Dow Jones were both down -0.9% and the Nasdaq dropped -1.4%. Tech stocks fell as investors were cautious about heightened valuations, with Alphabet (-2.7%), Apple (-1.5%), Amazon (-1.0%), Microsoft (-1.2%), Facebook (-1.3%) and Netflix (-0.7%) all in the red. NVIDIA (-7.5%) and (-7.2%) both dropped despite beating top and bottom-line estimates and upbeat trading or outlook commentary. Tesla fell -7.0% after reports a media report said the company will temporarily halt some production at its car assembly plant in California due to supply chain delays.

Europe flat after early session gains

The Stoxx 600 ended unchanged after gaining earlier in the session. Weakness in Bayer (-6.4%) after its result helped pull Germany's DAX down by -0.3%, while the 10-year bond yield rose to -0.24%. European Central Bank policy maker Schnabel said that the pandemic continues to pose a risk to the short-term economic outlook and that monetary and fiscal support should not be withdrawn early. Brewer Anheuser-Busch InBev tumbled -5.7% despite reporting higher than expected core quarterly profit. The UK's FTSE 100 (+0.1%) remained little changed. Standard Chartered lost -5.6% despite restoring its dividends and reaffirming long term profit goals. Anglo American added +4.2% after raising dividends. Outsourcer Serco Group climbed +3.8% after reinstating dividends and increasing its 2021 forecasts on the back of a +20% jump in annual revenue.

Asian and Australia up, NZ down

Asian indices closed in the green, with Japan's Nikkei 225 gaining +1.7%, Hong Kong's Hang Seng up +1.2%, China's Shanghai Composite adding +0.6% and South Korea's Kospi increasing +3.5%. The ASX 200 progressed +0.8% with all sectors bar consumer staples and industrials ending higher. Woolworths climbed +1.5% after a broker said the retailer could carry out an A$1b buyback once it completes the separation of its Endeavour drinks and pubs business. Afterpay entered a trading halt after announcing a convertible note issue to raise as much as A$1.5b to fund an increased stake in its US operations. The 10-year bond yield rose to 1.86%.

A guidance cut from a2 Milk (-16.1%) helped drag the NZX 50 -1.2% lower. The benchmark bond yield rose to just over 1.85% after the government ordered the Reserve Bank to take house price stability into account when setting interest rates.

WTI crude and iron ore up, gold down

WTI Crude gained +0.7% to US$63.65/bbl, gold lost -1.5% to US%1,777.91/oz and iron ore inched forward +0.2% to US$164.53/MT.

NZ Headlines

A full-year profit downgrade from A2 Milk (ATM) triggered a share price plunge for the milk marketer on Thursday as investors digested its turnaround plans.

Air New Zealand (AIR) made a substantial loss as expected in the first half of its 2021 financial year, due to COVID-19 decimating the travel sector.

Listed powerco Genesis Energy (GNE) posted its strongest interim earnings since listing in 2014.

Meridian Energy (MEL) believes it is close to signing deals that will see it supply cheap electricity to commercial customers in the South Island to replace coal boilers.

The Warehouse Group (WHS) has its first-half profit expectation for the second time in as many months as trading improves and it manages costs, lifting margins.

Finance Minister Grant Robertson has instructed the Reserve Bank to now consider the impact on housing when it makes monetary and fiscal policy decisions, such as setting the official cash rate.

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