US markets were mixed on Wednesday after minutes of the Fed’s latest policy meeting revealed the committee intends to continue raising interest rates and investors await inflation data for September released tonight.
As at 3:47, the S&P 500 was -0.04% lower, the Dow climbed +0.24%, the Nasdaq rose +0.21%, the Russell 2000 was little changed -0.02% with the VIX index edging -0.51% lower to 33.46. Minutes from the Fed’s last meeting stated, “Several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.” US Treasury Secretary Janet Yellen aimed to project confidence in the markets, stating, “Our economy remains resilient in the face of global economic headwinds.” US economic data will give traders additional insight on the Fed’s direction. The inflation rate is forecast to drop to 8.1% in September, compared to 8.3% in August, while core inflation is forecast at 6.5% slightly higher than 6.3% from the previous month. Elsewhere, producer price inflation for September overnight showed headline prices rose +8.5% over the 12 months, modestly ahead of expectations while core prices which exclude energy and food rose +7.2% modestly below forecasts. This week also marks the beginning of corporate earnings reports, starting with the banking sector on Friday.
European markets closed lower on Wednesday on the back of heightened fears of policy rate hikes by the Fed. The Euro STOXX 600 slipped -0.53%, with the largest declines experienced by the real estate, utilities and financials which were down by -2.32%, -1.62% and -1.2% respectively. The FTSE dropped -1.27%, the CAC slid -0.25% while the DAX edged -0.39% lower. Traders experienced high volatility in the UK Bond markets on Wednesday, as the 30-year bond soared above 5% during the day to finally close at 4.8%. Traders sold off holdings after the Bank of England confirmed extending its deadline for bond-buying, and then followed by making the largest round of emergency purchases since the intervention began last month. Kristina Hooper, the chief global market strategist at Invesco stated, “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” further commenting, “The UK has come close.”
*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 9 points, or -0.12% to 6,638. The ASX 200 finished flat on Wednesday, edging +0.04% higher. The Bank of Queensland stock price rose +11.1% after reporting margins which were above expectations. Commonwealth Bank climbed +2.4% after the company’s CEO Matt Comyn said the bank would help customers navigate rising interest rates. Meanwhile the National Australia Bank, Australia & New Zealand Bank, and Westpac all rose between 1.3-3.8%. Coronado Global Resources stock price rose by +8% after confirming takeover talks with NYSE based Peabody Energy. The yield on the Australian 10-year bond was -9 basis points lower at 3.94%, while the local currency strengthened against the dollar pared initial gains to finish little changed at 0.6274.
In commodities, oil prices dropped with the price of WTI and Brent Crude falling by -2.44% and -2% to $87.17 and $92.39 respectively. OPEC trimmed productivity projections and Russia’s President Vladimir Putin stated the energy infrastructure in the world was at risk after the explosions on the Nord Stream pipeline. Meanwhile, the US deliberated over further sanctions against Russia after its bombing on Ukraine this past week. In precious metals, the price of spot gold rose up by +0.49% to $7,596, while the price of silver fell by -0.44% to $19.06 and the price of bitcoin rose +0.4% to 19,136. Industrials metals declined, with copper sliding -0.85% to $343, nickel dropped -1.65% to $21,915, SGX Iron ore receded -0.81% on Wednesday and is a further -0.21% lower this morning at US$93.60.
Economic Calendar:
- Fed Bowman Speech 09:30
- Japan PPI (MoM Sep) 10:50
- AUS Consumer Inflation Expectations (MoM Oct) 11:00
- Ger Inflation (YoY Sep) 17:00
- BoE Credit Conditions Survey 19:30
- US Inflation (YoY Sep) 23:30
- US Jobless Claims (Oct 8th) 23:30
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.
