Global equities were lower on Thursday as investors weighed the prospects for growth following disappointing earnings in the U.S. and weaker than forecast initial jobless claims against the backdrop of persistently rising prices and tightening monetary policy.
While the S&P500 pared initial declines to edge up, the final hour of trading pushed stocks lower into the close. The S&P500 finished -0.58% lower in mixed breadth with only 56% of stocks trading lower, weighed by technology -1.07% and consumer staples -1.98% while materials outperformed +0.68. The Dow Jones retreated -0.75%, the Nasdaq Composite was -0.26% lower while the Russell 2000 edged +0.08% higher and the VIX retreated -5.2% to 29.35. Shares in Cisco Systems dropped -14.44% after warning that Chinese lockdowns and other supply disruptions would wipe out sales growth in the current quarter.
While the Federal Reserve is expected to push ahead with tightening policy by raising rates by +0.5% at the next two meetings, Treasury yields were lower as investors bought haven assets amid concerns for the growth outlook. The 2-year yield was -6.2 basis points lower at 2.607%, as were both the 10 and 30-year yields down -4.3 and -1.3 basis points respectively while the U.S. dollar index retreated -0.89% to 102.89. Helping to push yields lower was weaker than expected economic data, with initial jobless claims for the week ending May 14th rising to +218k from +197k previously, missing estimates of +200k. The Conference Board’s leading index for April declined -0.3% over the month following a +0.3% gain in March, while the average analyst had forecast no change.
European equities were lower following heavy selling on Wall Street on Wednesday. The Euro Stoxx 600 declined -1.37% with all sectors negative, weighed the most by consumer staples -3.70%, financials -1.68% and industrials -1.34% which underperformed as the Pound rose +1.05% given the exposure to overseas earnings of companies in the index. The DAX also declined -0.90%, as did the CAC -1.26% and FTSE100 -1.82% with indices across the region broadly lower. On Friday, investors will focus on U.K. retail sales for April expected to decline -7.2 year-on-year from +0.9% previously, as well as Eurozone consumer confidence for May forecast to modestly improve to -21.5 from -22 in April.
*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 down just -7 points or -0.10% to 7,050. The index took a negative lead from Wall Street on Thursday, declining -1.65% in broad-based selling with 83% of stocks lower, weighed by financials -1.81% and materials -1.68% while health care +0.13% was the only positive sector, after private equity firm KKR & Co confirmed its $88 per share offer for Ramsay Health Care was on track. In economic data, the unemployment rate declined to a 48 year lower of 3.9% in April from 4.0% previously although fewer jobs were added than expected, increasing by +4k compared to estimates of +30k. The number of unemployed is now at 537,000, down from 700,000 before the COVID-19 crisis, and job ads data suggests businesses are trying to fill more than 400,000 positions. That leaves the RBA on track to continue to raise rates this year with futures pricing in a further 7 to 8 hikes by the end of the year, implying a cash rate of +2.77%.
Oil prices rose overnight with both WTI and Brent crude up +1.88% and +2.25% respectively to US$111.65 and US$111.56 a barrel. Iron ore futures in Singapore gained +1.04% on Thursday and are a further +0.47% higher this morning at US$127.10. Gold rose +1.39% on Thursday to US$1,841.85 with silver also +2.35% higher at US$21.92, as was Bitcoin +3.51% to US$30,231.
Economic data:
- K. Retail Sales (YoY Apr) 16:00
- Eurozone Consumer Confidence (MoM May) 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.
