Global equities closed higher on Wednesday after the Bank of England’s decision to stage a market intervention boosted UK Bonds sending yields lower globally.
The S&P 500 jumped +1.97% with all sectors closing higher. The largest gains were from the energy, communication, and consumer discretionary sectors, which rose by +4.4%, +3.17% and +2.81% respectively. The Dow rose +1.88%, the Nasdaq climbed +2.05%, the Russell 2000 was up +3.17%, while the VIX fell -7.7% to 30.09. Wilshire’s CIO, Josh Emanuel, commented on the market’s performance stating, “From this point forward, equities are really going to take their cues from bond market. So if you see bond yields move lower, that is a good sign for equities.” Treasury yields tumbled with the 2-year rate down -15.4 basis points to 4.129%, as were both the 10 and 30-year yields down by -21.2 and -13.4 basis points respectively. Elsewhere, the share price of Apple fell -1.3% after announcing it would not boost the production of “basic” iPhone 14 models, due to an expected decline in demand.
The EURO Stoxx 600 edged +0.30% higher, boosted by the real estate sector which jumped +3.71%, with healthcare and consumer discretionary up +1.74% and +0.86% respectively. Financials were the biggest laggard declining by -1.54%. The FTSE rose by +0.3%, CAC +0.2% and the DAX +0.4%. The Bank of England announced plans to buy long-dated bonds to offset the recent chaos in the market caused the government’s plans to slash taxes with many pension funds facing increased margin calls due to the heightened volatility. The UK pound was 1.4% higher to $1.0879 while the 10-year yield on government bonds dropped -49.8 basis points with yields sharply lower across the rest of the curve. Geo-political tensions continue to grip the region, as Europe announced a new round of sanctions following Russia’s announcement of deploying more troops. Meanwhile, investigations continue into the potential ‘sabotage’ of the Nord Stream pipeline earlier this week.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX is set to open higher this morning, with ASX futures up 103 points or 1.59% to 6,563. The ASX 200 was down -0.53% or 34.2 points to close at 6462 on Wednesday. The index’s biggest laggards were information technology, consumer discretionary, and financials which were down by -1.61%, -1.04%, -0.83% respectively. Utilities rose by +1.91%, communications was up +1.4%, and energy edged +0.07% higher. Telix Pharmaceuticals’ stock price sank by -15.4% after it announced plans to withdraw its application in Europe for its product, Illuccix. In the technology sector, Brainchip Holdings plummeted by -5.1%, Novonix fell -4.3%, Xero declined -3.2% and Megaport lost -2.8%. In financials, Commonwealth Bank fell -1%, NAB tumbled -0.9%, Westpac was down -0.6% and ANZ slipped -0.4%. Coronado Global Resources jumped +5.9%, Whitehaven Coal gained +3.9% and New Hope climbed +3% higher. Economic data showed that retail sales were 0.6% higher in August compared to September, above forecasts of 0.4% and the data will support the RBAs expected decision to raise interest rates by 0.5% when it meets next week and keep monetary policy on a tightening path. The yield on the Australian 10-year bond yield rose 7.1 basis points to 4.095% on Wednesday, while the local currency was up +1.3% to 0.6522.
Oil prices rocketed upwards on speculation that OPEC+ may cut output as well as an unexpected drop in U.S. crude stockpiles by -215k barrels compared to estimates of a +443k barrel increase with gasoline stockpiles down -2.422m barrels compared to expectations of a +709k increase. WTI Crude and Brent Crude climbed +4.64% and +3.63% respectively to US$82.14 and US$89.40 a barrel. In precious metals, spot gold rose +1.96% to $1,600.83, spot silver gained +2.87% to $18.96 and Bitcoin climbed +2.61% to US$19,569. Elsewhere, iron ore futures in Singapore declined -2.41% on Wednesday although are +1.23% higher this morning at US$96.05 with copper prices also +1.78% higher.
Economic Calendar:
- ANZ Business Confidence (MoM Sep) 10:00
- Eurozone Consumer Confidence and Economic Sentiment (MoM Sep) 19:00
- German Inflation Rate YoY (MoM Sep) 22:00
- US GDP Growth Rate Final (QoQ Q2) 22:30
- US Initial Jobless Claims (Sep 24th) 22:30
- Fed Bullard Speech 23:30
- Fed Mester Speech 03:00
- Fed Daly Speech 06:45
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.
