U.S. equities traded mixed on Monday as investors await earnings from Apple and Alphabet later this week as well as a decision by the Federal Reserve.
The S&P500 edged +0.13% higher after swinging between gains and losses with energy outperforming +3.71% on higher oil prices while technology underperformed -0.61%. The Dow Jones also rose +0.28% along with the Russell 2000 +0.43% while the Nasdaq Composite was -0.43% weaker and the VIX traded +1.26% higher at 33.57. As earnings season continues, strategists remain mixed on their view for earnings with Goldman Sachs’ David Kostin seeing revenue under pressure from a stronger dollar, while Bank of America Corp. strategists note that corporate sentiment during earnings calls is deep in recession territory. Meantime, Citigroup and UBS Global Wealth Management strategists say the earnings season is turning out to be better than feared as consumer spending remains resilient.
Treasury yields rose ahead of the Federal Reserve’s rate decision overnight on Wednesday where it is widely expected to raise rates by +0.75%. The 2-year yield rose +4.6 basis points to 3.016% as did both the 10 and 30-year yields by +5.5 basis points respectively while the U.S. dollar index was -0.27% lower at 106.44.
European equities were also mixed following weakening German business confidence which deteriorated to the worst levels since the early months of the pandemic. The Ifo business climate survey for July declined to 88.6 from 92.2 previously, missing estimates of a more modest decline to 90.2. Also weighing on sentiment, Russia is once again sharply reducing the flow of natural gas through the Nord Stream pipeline to about 20% from 40% citing maintenance issues with a turbine that pumps gas at a time where Europe is trying to build stockpiles before winter. The Euro Stoxx 600 was -0.15% weaker along with the DAX -0.33% while the CAC rose +0.33% along with the FTSE100 +0.41%. Meanwhile, traders are now pricing in a further +0.5% increase by the ECB when the central bank meets in September.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set to open higher this morning with ASX200 futures +24 points or +0.36% higher at 6,709. The index finished little changed on Monday, down just -0.02% as a +1.09% gain in materials offset weakness in health care -1.02% and consumer discretionary -0.81% with only 38% of stocks finishing the session higher. EML Payments slumped -22% after noting a remediation strategy required by Irelands central bank to achieve regulatory compliance faced unplanned challenges. Flight Centre shares rose 3% after saying losses should be smaller than initially forecast, projecting an underlying full-year loss before interest, tax, depreciation and amortization between $180 million and $190 million. The Australian dollar is +0.40% higher overnight at 0.6957 while the 10-year yield was -8.6 basis points lower on Monday at 3.354%.
Oil prices rose on Monday as tight supplies offset concerns of an economic slowdown as well as news of slower gas supplies in Europe. Both WTI and Brent crude rose +1.87% and +1.58% respectively to US$96.46 and US$104.81 a barrel. Natural gas futures for delivery in the U.K. and Netherlands rose +2.66% and +10.48% respectively following the news of slowing gas supplies. Meanwhile, wheat prices climbed +3.1% after news Russia had attacked the Ukrainian seaport of Odessa with crude missiles just hour after signing a deal to unblock grain exports from Ukraine that had seen futures weaken as much as -6% on Friday following the deal. Iron ore futures in Singapore traded +2.24% higher on Monday and have extended gains a further +1.03% this morning to US$107.25. Gold was -0.45% lower overnight at US$1,719.78 an oz along with silver -0.87% and Bitcoin -2.43% to US$22,171.
Economic data:
- U.S. House Price Index (MoM May) 23:00
- U.S. Conference Board Consumer Confidence (MoM Jul) 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.
