Global equities rose on Tuesday amid easing tensions over the Ukraine while Treasury yields rose after U.S. producer prices rose more than forecast for January.
Equities halted a three-day decline as Russian President Vladimir Putin said he hopes for a diplomatic solution to tensions while announcing a partial pullback of thousands of troops that had massed near the Ukrainian border. As of 07:15 am AEDT the S&P500 was +1.40% higher lifted by technology +2.54% and consumer discretionary +1.90% with 80% of stocks rising, while energy lagged -1.71% as oil declined over easing tensions. The Dow Jones also rose +1.12%, as did the Nasdaq Composite +2.33%, as did the Russell 2000 +2.62% with the VIX falling -9.25% to 25.68.
U.S. producer prices for January rose +1%, higher than the +0.5% expected while the December figure was revised slightly higher to +0.4% as companies continue to contend with supply chains and labour constraints. Longer-dated yields rose with both the 10 and 30-year rates +5.4 and +7.0 basis points higher at 2.042% and +2.356% respectively, while the 2-year declined -0.5 basis points on easing geopolitical tensions.
European equities also gained in easing tensions with the Euro Stoxx 600 rising +1.43% lifted by industrials +2.22% and health care +2.41% with 90% of stocks rising. The DAX rose +1.98%, as did the CAC +1.86% and FTSE100 +1.03% with major European benchmarks higher across the region. In economic data, the Eurozone expanded at +4.6% year-on-year as forecast from +3.9% previously, expanding +0.3% over the quarter as expected. Meanwhile, economic sentiment for February declined to 48.6 from 49.4 previously across the Eurozone, and in Germany the same measure rose to 54.3 from 51.7 previously, although below the 55 estimated by analysts.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set to follow global equities higher this morning with ASX200 futures up +64 points or +0.90% to 7,167. The index finished -0.51% weaker on Tuesday as declines in financials -0.89% and materials -1.03% weighed. Major miners were weighed by a drop in ore prices with BHP -0.3% lower, as was RIO -2.3% and FMG -5.1% with concerns over a China clampdown on the commodity warning it would act against the spread of misinformation on prices. Metal recycler Sims was the top performer, rising +13.7% after revenue and net profit rose and more than tripled its dividend payout to $0.41. The Australian dollar is +0.36% higher at 0.7153 and the yield on 10-year government bonds rose +5 basis points on Tuesday to 2.188%.
Oil prices weakened overnight on the easing of geopolitical tensions with both WTI and Brent crude -3.82% and -3.52% lower respectively at US$91.83 and US$93.12 a barrel. Natural gas prices for delivery in the U.K. and Netherlands also declined -11.47% and -12.20% respectively. Iron ore futures in Singapore slumped -8.42% on Tuesday on concerns of a crackdown in China and are trading +0.39% higher this morning at US$136.45. Gold declined -0.81% to US$1,855 with silver -1.79% lower at US$23.42 while Bitcoin rose +4.32% to US$44,072.
Economic data:
- Australian Westpac Leading Index (MoM Jan) 10:30
- Chinese Inflation (MoM Jan) 12:30
- U.K. Inflation (MoM Jan) 18:00
- Eurozone Industrial Production (YoY Dec) 21:00
- U.S. Retail Sales (MoM Jan) 00:30
- Fed Minutes 06:00
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.
