US equities remain under pressure, with all three major indices closing lower on Tuesday.
Despite an encouraging turnaround during Monday’s trading session, prices resumed their current path lower, with the S&P500 closing -2.81% down at 4,175.20, while the Nasdaq100 fell close to -4%, closing at 12,490.74. From the S&P500, consumer discretionary stocks were hit the hardest, with the sector index down almost -5%, while energy stocks stabilized.
The major drivers at present are the looming prospects of lower global economic growth over the coming 12 months, combined with persistently high inflation. Added to this, we have clearly entered a structural shift in terms of interest rates, with bond yields surging over the past six months, even through Central Banks have been slow to lift official cash rates. Coronavirus lockdown measures in China remains a major concern for global economic growth, with Bloomberg reporting that Chinese port activity has recently fallen below levels seen during the first outbreak in 2020.
US equities remained under pressure in after market trading, following quarterly results from several of the larger technology companies, with Alphabet (GOOG) and Microsoft (MSFT) both disappointing. Alphabet, which is the parent company of Google posted the slowest quarterly revenue growth since 2020 and came in approximately $40 million below market expectations.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
To commodity markets, and the energy complex was higher on Tuesday, with Nymex WTI crude oil prices rallying 3.2% to close at US$101.70. From a technical perspective, the oil price has been in consolidation mode for the past 4-5 weeks following a strong run up between December 2021 and early March this year. Strong support has emerged in the US$100 to US$94 region, with a break above US$110 likely to signal a resumption of the broader uptrend. Gasoline prices rallied over 9%, while natural gas was 6.6% higher. Energy prices remain sensitive to the current Russian/Ukraine conflict, with reports from overnight that Russia plans to shut off natural gas supplies to Poland as early as this week, unless the country agrees to pay in Rubles. Base metal prices were noticeable weaker in overnight trading with aluminum and copper falling 4.8% and 3.4% respectively. Spot gold prices firmed slightly, closing at US$1,905.46 an oz.
To Australia, and the ASX SPI200 futures fell 107 points (-1.47%) overnight, suggesting a weaker start to trade today, while the Australian dollar closed at a 2-month low of 71.21 US cents.
As a reminder, on the economic front, CPI in Australia is due out today at 11.30am, with analyst’s currently forecasting the annualized trimmed mean to be 3.4% for the March quarter, well above the upper bound of the RBA’s 2% – 3% target range. The forecasted raw CPI figure is 4.6% annualized. While in the US, new home sales data is out tonight following by GDP and initial jobless claims on Thursday.
This article was written by Oliver Gordon, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
