U.S. equities fell after a session of wild swings as Jerome Powell continued to push a hawkish message.
The S&P500 declined -2.10% on Wednesday with all sectors negative with consumer discretionary and technology leading declines down -3.49% and -3.17% respectively with 91.5% of stocks lower. The Dow also declined by -1.29%, as did the Nasdaq Composite -3.06%and Russell 2000 -3.08% with the VIX little changed at 25.69. The Federal Reserve announced a rise in the interest rate by 75 percent points as forecast to 4% while comments from Jerome Powell that the central bank has “some way to go” in its policy cycle and that it was “very premature” to consider pausing rate increases weighed on hopes of a pivot.
Ahead of Friday’s non-farm payroll data, private employment figures showed 239k jobs were added in October, beating forecasts of 195k. Elsewhere the ISM purchasing manager index for October was 50.2, compared to 50.9 in September, indicating that interest rate hikes were making an impact on the economy. Jeffrey Roach at LPL Financial commented on the impact of economic data and the fed rate, “a tight labor market and rising wages will complicate things for the Fed, and the risk is the labor market could remain tight for quite some time.” Invesco’s chief global market strategist Kristina Hooper wrote, “The most important thing to watch, in my view, is the press conference following the announcement”. The yield on the 10-year US treasury note fell by 1 basis point to 4.03% while the VIX index receded to 25.76. Meanwhile, in corporate news, Elon Mush announced Twitter would begin charging a fee of $8/month to verify accounts via a tweet by the billionaire, “Power to the people! Blue for $8/month”, as Chief Consumer Officer Sarah Personette and other key management personnel leave the company.
European markets closed lower on Thursday. The Euro STOXX 600 was down 0.3% when 9 out of the 12 sectors closed in the red. Real estate lost 1.26%, consumer discretionary shed 1.11% and information technology dropped 1.08%. The DAX fell by 0.61%, the CAC receded 0.81% while the FTSE rose 0.03%. Investor focus will now shift to ECB President Christine Lagarde’s speech and the S&P Global Services PMI report tomorrow.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX is expected to open lower today, with ASX futures down 95 points or -1.37% to 6,889. The ASX closed 0.14% higher, with materials, energy, and utility sectors boosting the index up by rising 1.13%, 1.12% and 0.34% respectively. Real estate was down by 1.64%, information technology 1.34%, and consumer staples & communications both fell by 0.68%. Coronado Global Resources was the outperformer, up 8.81% while Domino’s pizza was the biggest laggard declining 5.33%. Energy stocks benefited from rising oil prices, Whitehaven jumped 4.2%, Woodside Energy was up by 1.2%, and Santos 0.8%. Vulcan Energy lost 1.9%, despite announcing an expansion of its lithium operation in France. Miners Rio Tinto and BHP both rose more than 2%. Amcor’s share price fell by 4.3%, despite a rise in sales revenue in September by 9%.
In commodities, oil prices jumped with WTI and Brent crude rising 2.09% and 1.85% to $90.18 and $96.36. Precious metals gained momentum with spot gold up by 0.53% to $1,656, spot silver up +0.85% to $19.79. Industrial metals also rallied, with the price of copper rising 0.94% to $351, nickel up 8.31% to $23,522 and SGX iron ore rose by 1.21% to $78.1. Meanwhile, the price of Bitcoin rose 0.3% to $20,493.
Economic Calendar:
- Australian S&P Global Services PMI Final (Oct) 09:00
- Chinese Caixin Composite PMI (Oct) 12:45
- RBA Kearns Speech 16:00
- UK S&P Global/CIPS Services PMI Final (Oct) 20:30
- Eurozone Unemployment Rate (Sep) 21:00
- BoE Interest Rate Decision 23:00
- US Continuing & Initial Jobless Claims (Oct 22nd & 29th) 23:30
- US ISM Non-Manufacturing PMI (Oct) 01:00
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.
