U.S. equities rose on Friday, shrugging off hawkish comments by members of the Federal Reserve earlier in the week.
United States
The S&P 500 closed +0.48% higher on Friday, with utilities, real estate and healthcare rising by +2.0%, +1.29% and +1.2% respectively. Energy and communications were the only underperforming sectors, with the former sliding -0.90% while the latter slid -0.35%. The Dow rose +0.59%, the Nasdaq crawled up +0.01%, while the Russell 2000 was up by +0.58%. Looking ahead to the coming year 2023, analysts at Goldman stated, “Our central case is one in which the US economy sees a slow but gradual cooling in inflation through 2023, while avoiding a recession.” In economic data, the Conference Board’s leading index declined more than expected in October, falling -0.8% compared to estimates of -0.4%. The weaker reading adds weight to other forward-looking indicators that suggest economic growth is deteriorating, and while this is likely to help cool inflation, it raises the risk that continued hawkish policy from the Federal Reserve will cause a deeper recession rather than a “soft landing”. Ahead for the week, several policymakers are due to speak throughout the week as well as durable goods orders for October on Wednesday and the latest policy minutes from the Federal Reserve on Thursday.
Analysts at Goldman Sachs commented on the performance of the US Markets on the last day of trading, “Friday gave a glimpse of what could be an ongoing problem for markets over the final six weeks of the year. Namely, that technology has hit meaningful upside resistance, and this might not break out anytime soon if Treasury yields start to turn higher in more aggressive fashion into December.”
Europe
The European markets closed slightly, rising 0.92%, Energy was the only underperformer sliding -0.25%. Utilities, industrials and real estate showed the largest gains, rising +1.58%, +1.33% and +1.2% respectively. The CAC was up +1.04%, the DAC jumped +1.16% while the FTSE rose +1.38%. Ahead for the week, Eurozone consumer confidence for November will be in focus on overnight on Tuesday as well as PMI data for November on Wednesday expected to show the region is in contractionary territory. Thursday will bring Germany’s Ifo business climate survey, followed by the final reading of German GDP on Friday for Q3.
*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 higher today, with ASX futures up 24 points or 0.33% to 7192. The ASX 200 rose by 0.25% to close at 7151.8. Industrials made the largest gains rising +0.88%, while communications rose by +0.81% and utilities gained +0.66%. The biggest laggards were energy and real estate, falling by -0.42% and -0.18% respectively. Copper miner OZ mineral’s share price soared 4% after the BHP Group announced a takeover bid, increasing its exposure in copper. Positive earnings growth boosted the stock price of Nanosonics by +1.3% and Health Insurer NIB by 3.2%. Cettiere dropped -12.2% after selling off another division of the company for “greater diversification”, while Lovisa fell by -7.1% after disappointing results which missed analyst expectations. Software group Nuix rocketed +21.09 after posting contract value gains rising by +4.6%, while construction giant Lendlease share price declined by -1.6% after announcing a deteriorating environment and poor economic conditions. Investors’ focus will shift on RBA governor Philip Lowe’s speech on Tuesday at the 2022 Annual CEDA dinner in Melbourne on Tuesday. PMI data is due to be released on Wednesday morning, followed by a RBNZ rate decision where the central bank is widely expected to hike another 0.75% to 4.25%.
Commodities
Oil prices dropped on continued uncertainty of demand out of China. WTI and Brent crude dropped by -1.91% and -2.41% to $80.08 and 87.62% respectively with swelling COVID cases in China and aggressive monetary tightening weighing on sentiment. Additionally, the spread between the two closest futures contracts moved in contango on Friday, signalling early signs of the market moving into oversupply, although further out the curve remains in speed backwardation, signalling future demand is expected to be weaker versus current demand. In precious metals, spot gold lost -0.55% to $1.750.68 while spot silver slid -0.07% to $20.94. In industrial metals, copper sunk by -1.52% to $363, nickel rose +1.3% to $25,257, while SGX Iron ore gained +1.7% to $98.60.
Economic Calendar:
- US Chicago Fed National Activity Index (Oct) 00:30
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.
