U.S. equities rose on Tuesday, lifted by earnings and firm economic data with most Treasury yields ticking higher.
As of 07:37 am AEDT the S&P500 was 0.39% higher boosted by financials +1.50% and energy +3.52% with 68% of stocks trading higher. The Nasdaq Composite rose +0.48%, as did the Dow Jones +0.60% and Russell 2000 +0.68% with the VIX down -7.93% to 22.86. In earnings, Exxon Mobil gained +6.34% after posting the highest earnings in eight years following spending cuts and benefiting from higher oil prices. Alphabet Inc is due to report after the market close while United Parcel Service surged +13.55% after projecting revenue for 2022 above expectations and increased its dividend after posting record earnings following the increase in pandemic-driven online shopping.
In economic data, the jobs opening report or “JOLTS” for December showed the number of job openings to unemployed job-seeks rose to 1.73 pointing to further signs of a strong labour market. Elsewhere, the ISM Manufacturing PMI report for January was in line with forecasts of 57.5 with a reading of 57.6 from a revised higher 58.8 in December. The report showed a further easing of supply-chain stress, even throughout the spread of the Omicron variant in January with delivery delays reaching the lowest reading since November 2020. Labour shortages continue to remain a problem for manufacturers noting a “lack of skilled production personnel” to work absenteeism due to Covid as preventing higher production and more new orders. The yield on 2-year Treasuries edged -1 basis point lower to 1.169% while the 10 and 30-year rates rose +2.3 and +1.5 basis points respectively with the U.S. dollar index easing -0.16% to 96.38.
European equities were broadly higher with firm economic data in line with estimates as well as positive earnings from Swiss Bank UBS Group AG lifting sentiment. The Euro Stoxx 600 rose +1.28% lifted by financials +1.52% and industrials +1.27%, with the former boosted by an +8.98% gain for UBS after beating earnings estimates and pledging to buy back as much as $5 billion of shares. The DAX also gained +0.96%, as did the CAC +1.43% and FTSE100 +0.96%. German unemployment was better than forecast, declining -48k in January versus -6k expected, with the unemployment rate edging lower to 5.1% from 5.2%. Meanwhile, Eurozone unemployment for December declined to 7% from 7.1% and the Markit Manufacturing PMI for January rose to 58.7 from 58 previously, slightly below estimates of 59. The Euro rose +0.27% to 1.1265 with the Pound also +0.59% higher at 1.3526.
*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 up +44 points or +0.64% to 6,952. The index gained +0.49% on Tuesday lifted by a more dovish than expected statement from the Reserve Bank of Australia. The central bank kept its benchmark rate unchanged at 0.10% as expected while announcing it ended the $4 billion per week bond-buying program as widely expected. The statement noted the bank will be patient on rate hikes and will consider how it reinvests bond proceeds at the May meeting and is committed to maintaining highly supportive monetary conditions. Pushing back against market pricing, the bank continues to expect a strong pickup in inflation will prove temporary while upgrading its near-term inflation forecast to +3.25% over the coming quarters before declining to +2.75% in 2023. The Australian dollar initial declined after the meeting before finishing +0.79% higher overnight at 0.7123 and the 10-year government bond yield edged +1 basis point higher to 1.903%.
Oil prices are little changed overnight ahead of Wednesday’s OPEC+ meeting with WTI unchanged at US$88.17 and Brent -0.11% lower at US89.16 a barrel. Iron ore futures in Singapore rose +0.69% on Tuesday and are +1.34% higher this morning at US$138.90. Gold rose +0.15% to US$1,799 as did silver +0.62% to US$22.61 and Bitcoin +0.32% to US$38,561.
Economic data:
- NZ Employment (QoQ Q4) 08:45
- RBA Chart pack 11:30
- Eurozone Inflation (MoM Jan) 21:00
- U.S. ADP Employment (MoM Jan) 00:15
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.
