U.S. equities finished little changed on Friday as they weigh the more dovish Fed policy minutes from earlier in the week as well as China’s latest stimulus amid surging COVID cases.
United States
The S&P 500 edged -0.03% lower on Friday, with declines in communication, information technology and energy which fell by -0.70%, information technology -0.67% and 0.30% respectively offset by strength in health care 0.62% and financials 0.41%. The Dow gained +0.45% the Nasdaq declined -0.52% and the Russell 2000 slipped -0.03% with the VIX rising 0.39% to 20.50. China’s central bank moved to boost growth with a second cut this year to the amount of cash lenders must hold in reserve, expected to inject $100 billion into the economy to help offset the impact from rising COVID cases.
On the latest Fed policy minutes, head of private capital advisory at Raymond James Sunaina Sinha Haldea noted, “Is it a pivot? No, but are we seeing a slowdown in rate hikes and that path downwards towards rate cuts coming through? Yes. I think we will look back and say this was the peak of it.” TD Securities stated in a note, “As markets welcome the prospect of smaller hikes, we expect them to counter that by emphasizing the need to reach an appropriately higher terminal rate.” Ahead in a busy week for economic data, investors’ focus will turn to the results from the Black Friday sales, speeches from Fed Chair Jerome Powell and Governor Lisa Cook for hints on the upcoming central bank’s monetary policy, and the upcoming non-farm payroll report for November. Additionally, the Conference Board’s measure of consumer confidence for November will be released on Wednesday and Thursday will bring the 2nd estimate of Q3 GDP expected to show the economy expanded at a 2.7% annualized rate. Thursday will also bring PCE inflation data for October, expected to show headline prices decreased modestly to 6.0% from 6.2% over the twelve months with core prices also expected to ease modestly.
Europe
European markets closed higher on Friday. The STOXX 600 index climbed +0.10%, with the energy sector closing +0.94% higher, followed by healthcare up +0.45% and industrials rising 0.32%. The CAC closed slightly higher by +0.08%, the DAX edged up +0.01% on the back of a stronger German economy due to higher consumer spending, while the FTSE slid -0.05%. Notes from the ECB’s latest meeting showed ‘a few’ ECB officials backed a smaller increase in interest rates in October to tame inflation and rising energy concerns in the region. In company new, shares in Credit Suisse Group fell by 5% after the bank reported massive outflows and competitors in Asia gaining from the Swiss firm’s troubles. In economic data, the final reading of German GDP for Q3 was slightly ahead of forecasts rising 1.3% over the year compared to estimates of 1.2% while the GfK consumer confidence survey was weaker than expected at -40.2 compared to -39.6 forecast.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX is expected to open slightly lower on Monday, with futures down 9 points or 0.12% to 7263. The ASX 200 closed +0.28% higher at 7259.5 on Friday, with materials and energy the only underperformers falling by -1.06% and -0.29% respectively. Utilities made the biggest gains, rising by +1.40%, followed by consumer discretionary and real estate both up +1.15%. In terms of share prices, the biggest winner was Nansonics jumping 11.06% while the biggest laggard was Alkeme, dropping -8.61%. Investors sought refuge in blue chips while the banking sector benefited from rising interest rates. Commonwealth jumped +1.1%, while NAB, Westpac and ANZ all rose above 0.5%. Virgin Money UK soared +20%. The yield on the 10-year Australian bond was 3.57% and the local currency weakened slightly to the greenback by -0.2% to 0.6751. Ahead for the week, the focus will be on the ANZ business confidence survey for November on Wednesday along with building permits for October. Additionally, Friday will bring the final reading of retail sales for October along with a speech by RBA Governor Philip Lowe.
Commodities
Oil prices dropped in the wake of an expected higher cap on Russian oil by the European Union, and rising concerns of a decline in global demand with news of rising COVID-19 related cases in China. WTI and Brent Crude dropped by -2.13% and -2.0% to $76.28 and $83.63 respectively. In precious metals, spot gold slid -0.02% to $1,754.93 while spot silver rose +1.01% $21.75. Industrial metals were mixed with copper rising by +0.26% to $363, nickel dropped -2.61% to $25,299, SGX Iron Ore jumped +3.59% to $99.15.
Economic data:
- RBA Gov Lowe Speech 10:00
- AUS Retail Sales (MoM Oct) 11:30
- ECB President Lagarde Speech 01:00
- US Fed Williams Speech 04:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
