U.S. equities bounced on Thursday while the yield curve steepened with traders weighing comments by Federal Reserve officials providing more clarity on the central bank's task of taming inflation.
Speaking on Thursday, St. Louis Fed President James Bullard said he prefers raising rates to 3% to 3.25% in the second half of the year, implying a half-percentage rate increase at each of the six remaining meetings this year. Elsewhere, Chicago Fed President Charles Evans and Atlanta President Raphael Bostic said they favour raising rates to neutral while monitoring how the economy performs.
The S&P500 rose +0.43% lifted by gains in health care +1.86% and consumer staples +1.18% in mixed breadth with 54% of stocks higher. The Dow Jones also rose +0.25% while the Nasdaq Composite edged +0.06% higher and the Russell 2000 slipped -0.35% along with the VIX -2.49% to 21.55. The yield curve steepened as the 2-year Treasury yield declined -1 basis point to 2.462% while the 10 and 30-year rates rose +5.8 and +5.1 basis points to 2.656% and 2.677% respectively. In economic news, there were fewer than expected initial jobless claims for the weekend ending 2nd of April at 166k versus 200k forecast and a revised lower 171k previously adding weight to the Fed’s view that the economy is resilient enough to withstand aggressively raising interest rates.
European equities were lower on Thursday with the minutes from the latest ECB meeting showing officials are keen to unwind stimulus and the European Union agreed to ban coal imports from Moscow. The Euro Stoxx 600 traded -0.21% lower weighed by consumer discretionary -1.07% and energy -1.64% while health care +1.44% and consumer staples +0.11% outperformed. The DAX weakened -0.52%, as did the CAC -0.57% and FTSE100 -0.47% with major European benchmarks all lower. In economic data, Eurozone retail sales for the year to March were higher than forecast at 5% versus 4.8% expected, although lower than the revised higher 8.4% in February. 10-year government bond yields rose across the region following the ECB minutes which leaned hawkish, ranging from +2.5 basis points in the U.K. to +7.5 basis points in Greece. The Euro weakened -0.15% to 1.0880 while the Pound edged +0.05% higher to 1.3076.
*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 +37 points or +0.50% higher at 7,456. The index declined -0.63% on Thursday weighed by a drop in materials -0.72% and financials -0.57% with 71% of stocks lower. Technology shares declined -3.4% following prior weakness on Wall Street after the more hawkish minutes from the Federal Reserve pushed longer-dated yields higher weighing on long-duration stocks which are seen as having a greater share of earnings in the future. Magellan Financial was the top performer rising +11.4% after announcing total funds under management at $70 billion as of March 31st versus $69.1 billion on March 11th, saying they experienced net outflows of $1.1 billion over the 20-day, suggesting the market was expecting much worse in terms of outflows. In economic data, services PMI for March weakened to 56.2 from 60 previously, although remained firmly in expansionary territory. The Australian dollar is trading -0.44% lower at 0.7479 this morning while the 10-year government bond yield eased -1.7 basis points in Thursday to 2.914%.
Oil prices edged higher despite the International Energy Agency announcing they would be adding 240 million barrels of oil to the global supply given Russia’s war in Ukraine. WTI and Brent crude traded +0.85% and +0.33% higher respectively at US$97.02 and US$101.40 a barrel. Iron ore futures in Singapore weakened -2.99% on Thursday although have pared those losses in early trade this morning, up +1.12% to US$158.30. Gold rose +0.33% to US$1,931.63 an oz, as did silver +0.56% to US$24.59 while Bitcoin weakened -0.70% to US$43,577.
Economic data:
- Canadian Unemployment (MoM Mar) 22:30
- U.S. Wholesale Inventories (MoM Feb) 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.
