U.S. equities traded lower on Thursday ahead of Friday’s all-important non-farm payroll data.
As of 3:50pm New York time, S&P500 was -0.87% lower with all sectors lower except energy which rose +1.85% with oil prices. The Dow Jones also declined -1.12%, along with the Nasdaq Composite -0.61% and Russell 2000 -0.47% with the VIX rising +6.20% to 30.32. In a potential sign of an easing in the labour market, initial jobless claims for the week ending October 1st rose by +219k compared with estimates of +203k, the largest increase in four months. The data comes ahead of tonight’s non-farm payroll data for September expected to show +250k jobs were added with the unemployment rate expected to remain stable at 3.7%.
President of Minneapolis Fed, Neel Kashkari commented the US central bank was “quite a ways away” from reducing interest rate hikes. Rich Steinberg, chief market strategist at The Colony Group weighed in on market sentiment, “I don’t think the Fed is going to be ready to pivot so quickly. We’re going to be in this kind of tug of war between good news, bad news.” The yield on the 2-year US treasury yield rose +8.9 basis points to 4.237%, while the yield on the 10-year and 30-year yields rose +6.3 and +3.2 basis points respectively.
The Euro Stoxx 600 fell -0.5%, weighed down by utilities, energy, and communications declining by -1.87%, -1.24%, and -1.05% respectively. Minutes from the ECB’s September meeting revealed officials proposed a raise in interest rates of 50 basis points, however, a consensus agreed to a 75-basis point hike. A similar hike is expected from the next meeting in November. The FTSE slipped -0.78%, the CAC fell -0.82% and the DAX fell by -0.37%. The FTSE was weighed down by energy company Shell, which saw a decline of -2.8% after announcing a drop in third-quarter earnings due to shrinking margins in oil refining, crumbling chemical margins and poor natural gas trading. head macroeconomist at Equiti Capital, Stuart Cole commented on the industry’s position, “The message from Shell is being seen as a proxy for the oil and gas industry in general, that is the excess profits that they were making previously are now coming to an end as the price of oil comes down.”
*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 this morning, with ASX futures down by -0.75 or -51 points to 6,769. The ASX finished little changed on Thursday, edging +0.03% higher with energy rising +2.21% due to higher oil prices, while utilities and materials were up by +1.08% and +0.49% respectively. The energy sector was the standout performer, rising +2.2% due to rising oil prices, with Woodside energy climbed +2.6% while Santos gained +1.8%. Rising lithium prices pushed lithium stocks higher, Pilbara Minerals soared +5.7%, Lake Resources was +2% higher, Allkem gained +1.8%. Whitehaven coal rose by +7.2%, New Hope climbed +2.3%. In financials, the four major banks fell, with Westpac declining -1%, National Australia Bank losing -0.8%, ANZ falling -0.5%, and Commonwealth Bank down -0.4%. Magellan plunged -8.4% after reporting assets under management fell -11.6%, Appen sunk -11.7% after announcing a forecast EBITDA of $13 million for calendar year 2022. Software firm Bridge (BGE) listed on the ASX and watched its share price fall +12.5%. The yield on the Australian 10-year yield rose +14 basis points on Thursday to 3.775%, while the local currency fell -1.20% to 0.6410.
In commodities, oil continued to rise after OPEC+ announced curtailing production on Wednesday to levels resembling COVID pandemic and Russia planning to cut supply. WTI and Brent Crude were up +1.34% and +1.59%$ to $88.95 and $94.84 a barrell respectively. In precious metals, gold fell by -0.17% to $1,713 while spot silver slipped -0.06% to $20.63. Industrial metals were mixed, with SGX Iron Ore rising +0.1% to $95.80, copper fell -1.71% to $344. The price of bitcoin remained below the $20k mark, declining -1.4% to $19,991
Economic Calendar:
- US Fed Waller Speech 08:00
- German Retail Sales (YoY AUG) 17:00
- US Non-Farm Payrolls (SEP) 23:30
- US Unemployment Rate (SEP) 23:30
- US Fed Williams Speech 01:00
- US Wholesale Inventories (MoM AUG) 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.
