U.S. equities rose on Monday ahead of Wednesday's Federal Reserve meeting.
The S&P 500 closed +0.69% higher on Monday, with materials, industrials and consumer discretionary leading the gains by rising +1.63%, +1.34% and +1.33% respectively. The Dow edged +0.64% higher, while the Nasdaq was up by +0.76% along with the Russell 2000 +0.81% with the VIX retreating -2.05% to 25.76. Tech stocks rallied with Apple firming +2.1%, Tesla up by +1.8% and Amazon gaining +0.6%. Analysts at Morgan Stanley suggested a hawkish view by the Fed was the reason for equities trading lower stating, ”Since our earnings downgrade two weeks ago, stocks have traded poorly due to further evidence that inflation will keep the Fed and other central banks hawkish.” Investors are expecting another interest rate hike of 75 basis points by the Fed when it meets on Wednesday. CIO of Nationwide, Mark Hackett commented, “Due to current negative indicators including high inflation and the Fed’s upcoming rate announcement, global economic growth concerns and earnings expectations, we expect to see a continued negative pattern in the near-term”.
In Europe, markets were mixed, with the Euro SXXP 600 slipping -0.09%, as real estate, health care and energy dragged the index down by falling -1.34%, -0.69% and -0.27% respectively. The Dax closed +0.49% higher, the CAC fell -0.26% while the FTSE remained closed on account of the death of Queen Elizabeth II. The ECB’s Vice President Luis de Guidos in a statement on Monday emphasized the bank’s position on fighting inflation, stating the economic slowdown is not enough to reduce consumer prices. The European Union is also expected to raise targets to tackle global warming under the Paris agreement, by updating the “Nationally determined contribution” (NDC). In corporate news, Volkswagen’s shares rose +1.1% after the car manufacturer saw an increase in the valuation of the company’s luxury car brand Porsche by $75.2 billion. VW is expecting to raise nearly $9.4 billion from an IPO, which would be Europe’s largest-ever IPO.
*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 higher this morning, as ASX futures were up 55 points or 0.82% to 6,775. The ASX closed -0.28% lower on Monday, with utilities, information technology and healthcare dragging the index by closing -1.39%, -1.25% and -1.14% lower respectively. The real estate and minerals sectors were the only gainers, closing +0.84% and +0.02% higher. Lithium stocks were the best performers in the market. Lake Resources surged +12.3% after the company comforted investors that the Kachi project in Argentina with Lilac solutions was still on schedule despite disputes arising. Pilbara Minerals was up +3.5%, Mineral Resources rose +2.4% while Alkem gained +1.8%. In the energy sector, AGL Energy sunk +2% after announcing changes in the company’s board. Origin Energy lost -0.9% after announcing it was selling 80% of shareholding in the Betaloo Basin. National Australia Bank fell -0.9%, Commonwealth Bank rose +0.5% while Westpac firmed +0.1%. The yield on the 10-year Australian bond was -4.5 basis points lower at 3.67% on Monday while the local currency gained +0.15% to 0.6726 ahead of the latest policy minutes from the RBA due out at 11:30 AEDT.
In commodities, oil prices rose on Monday, with the WTI crude and Brent crude both rising by +0.49% and +0.45% to $85.53 and $91.76 respectively. In precious metals, spot gold fell -0.05% to $1,674.18 while spot silver declined -0.5% to $19.49. Copper weakened -0.34% while SGX Iron ore dropped -0.98% although is +2.01% higher this morning at US$99. Bitcoin’s price sunk below the $19k mark, declining -3.6% to $18,990.
Economic Calendar
- Japan Inflation Rate (YoY AUG) 09:30
- RBA Meeting Minutes 11:30
- Canada Inflation Rate (YoY Aug) 22:30
- ECB President Lagarde Speech 03:00
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.
