U.S. equities rose on Monday as investors await a busy week of economic data, while shorter-dated Treasury yields rose flattening the curve.
The S&P500 rose +0.71% on Monday lifted by a +1.23% gain in technology and +2.67% gain for consumer discretionary with 61% of stocks higher strengthening into the close. Technology shares were lifted by a +8.35% jump in Tesla Inc shares after the company tweeted it would ask shareholders to vote on another stock split. The Nasdaq Composite rose +1.31%, as did the Dow Jones +0.27% while the Russell 2000 was unchanged and the VIX retreated a further -5.67% to 19.63.
The 2-year Treasury yield rose +6 basis points to 2.332% while the 10 and 30-year rates declined -2 and -3.5 basis points respectively, flattening the spread between the 2 and 10-year rates to just 0.123%. Meanwhile the spread between the 5 and 30-year rates briefly inverted before edging back into positive territory trading at 0.0014%. The flattening of the curve between short and longer-dated yields signals the market is concerned about the economic outlook, suggesting rates will need to be lowered in the future to offset a weakening economy that has typically proceeded recessions although the timing of a recession occurring following an inverted yield curve has been lengthy. In economic data, U.S. retail sales excluding autos for February rose +1.2% over the month from +1.7% in January ahead of consumer confidence for March on Tuesday night.
European equities edged higher with the Euro Stoxx 600 up +0.14% as did the DAX +0.78% and CAC +0.54% with all other major indices higher other than the FTSE100 which weakened -0.14%. Benchmarks trimmed earlier gains after a report of several peace negotiators suffered symptoms of suspected poisoning following a meeting in Kyiv earlier this month, offsetting earlier hopes of progress on peace talks. 10-year government bond yields traded mixed across Europe ranging from –7.9 basis points in the U.K. to +3.5 basis points in Switzerland with the Euro little changed at 1.0986 and the Pound weakening -0.69% to 1.3091.
*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 Wall Street higher with ASX200 futures up +38 points or +0.52% to 7,415 as investors await the release of the Federal Budget on Tuesday. The index edged +0.08% higher on Monday with materials +1.29% and financials +0.58% offsetting weakness in other sectors with only 38% of stocks finishing higher for the session. A stronger iron ore price lifted major miners with BHP rising +2.3%, as did RIO +1.4% and FMG +0.78%. Weighing on earlier gains for the index was concerns over the Chinese economy after Shanghai is being partially lockdown until April 5th for widespread COVID-19 testing, which could add to supply chain issues and inflation concerns. In addition to the Federal Budget tonight, investors will also focus on the preliminary retail sales for February at 11:30 AEDT expected to show an increase of +1%, down from +1.8% previously.
Oil prices slumped following news of the partial lockdown in Shanghai as well as expectations for OPEC+ to further gradually increase supply when it meets this Thursday. WTI and Brent crude both declined -9.16% and -9.09% respectively to US$103.49 and US$109.68 a barrel. Iron ore futures in Singapore rose +0.33% on Monday and are a further +0.41% higher this morning at US$154.30. Gold weakened -1.89% to US$1,921 weighed by an increase in real yields, silver retreated -2.59% to US$24.87 while Bitcoin climbed +3.83% to US$47,876.
Economic data:
- Australian Retail Sales (MoM Feb) 11:30
- German GfK Consumer Confidence (MoM Apr) 17:00
- Fed William Speech 00:00
- U.S. Consumer Confidence (MoM Mar) 01:00
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.
