U.S. equities extended a recent bounce on Thursday while Treasury yields rose following hawkish comments from Fed policymakers.
Speaking overnight, Fed Chair Jerome Powell said the central bank won’t flinch in its efforts to curb inflation “until the job is done” warning against prematurely easing policy noting “history cautions strongly against prematurely loosening policy”. Elsewhere, Charles Evans of the Chicago Federal Reserve echoed Powell’s comments noting “I think that we’ve got a good plan in place. We could very well do 75 in September” although noted his mind is not made up but views the need to increase interest rates up substantially from where they are now. Elsewhere, U.S. initial jobless claims for the week ending September 3rd was lower than expected at 222k vs 240k forecast suggesting demand in the labour market remains robust.
The S&P500 rose +0.66% lifted by gains in health care +1.77% and financials +1.74% while communications lagged -0.44% with 75% of stocks trading higher. The Dow Jones also rose +0.61% along with the Nasdaq Composite +0.60% and Russell 2000 +0.81% with the VIX -4.158% lower to 23.61. Treasury yields rose following comments from Jerome Powell with the 2-year rate up +7.9 basis points to 3.510% with both the 10 and 30-year rates up +5.9 and +6.5 basis points respectively.
European equities were higher along with government bond yields after the ECB raised interest rates by +0.75% and signaled further hikes at the next several meetings. Yields climbed after the central bank announced it would temporarily remove a 0% cap for remunerating government deposits which is seen as reducing the incentive to shift billions of public money from cash into short-term debt. The Euro Stoxx 600 gained +0.50% along with the CAC +0.33% and FTSE100 +0.33% while the DAX edged -0.09% lower.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set for a flat open this morning with ASX200 futures up just +2 points or +0.03% to 6,847. The index climbed +1.77% on Thursday as comments by RBA Governor Philip Lowe hinted the central bank may reduce the pace of rate increases and has no plans to actively sell bonds known and quantitative tightening. Technology shares paced gains on Thursday, rising +3.19% while materials +2.68% and financials +1.63% were the biggest contributors to the index’s gains with energy -2.76% the only negative sector following a drop in oil prices. The Australian dollar os -0.27% lower overnight at 0.6751 while the 10-year government bond yield slumped -13.7 basis points on Thursday to 3.568%.
Oil prices rebounded on Thursday following heavy losses earlier in the week with both WTI and Brent crude +1.11% and +0.64% higher at US$82.84 and US$88.56 a barrel. Iron ore futures in Singapore rose +3.70% on Thursday and are +0.17% higher this morning at US$100.20 with copper prices also +3.48% higher following news the Chinese city of Zhegzhou had ordered work to restart on unfinished property projects fuelling hopes of a wider reboot of construction activity. Gold declined -0.56% to US$1,708.75 an oz overnight while silver rose +0.41% to US$18.54 and Bitcoin was little changed at US$19,367.
- Eurogroup Energy Meeting 10:00
- Chinese Inflation (YoY Aug) 11:30
- Canadian Employment (MoM Aug) 22:30
- Fed Evan Speech 00:00
- Fed George Speech 02:00
- Fed Waller Speech 00:00
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.
