U.S. equities finished higher on Friday, with sentiment supported by expectations of easing inflationary pressures, with China also moving to begin easing some COVID restrictions.
United States
The S&P 500 closed +0.92% higher on Friday, led by energy jumping +3.06%, communication services up by +2.46% and consumer discretionary gaining +2.46%. The Dow edged up 0.1%, the Nasdaq jumped 1.88% while the Russell 2000 climbed +0.92%. The yield on the US 10-year treasury bond fell 2 basis points to 3.819, while The VIX index dropped 4.2% to 22.5. In economic data, the Michigan Consumer Sentiment report revealed a decline for November to 54.7, compared to 59.9 in October highlighting the impact on consumers from higher inflation and interest rates. Given consumer spending accounts for two-thirds of the US economy, deteriorating sentiment is certainly concerning for hopes of a soft landing, with the sentiment measures now on par with 2008 readings during the GFC.
On the outcome of the US elections, analysts at BCA researchers stated that the US is currently engaged in three struggles abroad, which will prevent global stabilization anytime soon, “the US political and geopolitical context is fundamentally negative and will cap [a relief] rally at an unexpected time over the coming months”. Adding that the US is currently heavily engaged in 3 regions internationally (China, Europe and Iran), “Investors should view the global policy environment as giving a red light, whatever else they may believe about the macro or market environment.”
Europe
In Europe, the Euro Stoxx 600 edged up 0.03%. The index was boosted by gains in consumer discretionary, +2.67%, materials +1.63% and information technology +1.40%, offsetting the losses in healthcare which dropped -2.63% utilities losing -1.48%. The CAC and DAX closed slightly higher rising 0.58% and 0.56% respectively. Analysts at Societe Generale stated the European market has been the worst year for US investors, given the US and Euro parity along with the region’s underperformance,” MSCI Europe is down 8.1 per cent year-over-year in euro in total return, a poor performance but nothing unusual.” Ahead for the week, investors will be focused on the release of inflationary data for Europe, the UK and Japan to test market conviction around the speculation of the worst of inflation to be over.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX 200 is expected to open higher today, with ASX futures up 42 points or 0.59% to 7204. The ASX closed +2.78% higher on Friday after the rally on Wall Street spilled over to the AXX. All sectors closed higher except utilities, which slid -0.47%. Information technology rocketed +4.99%, followed by real estate and materials leaping +3.93% and +3.73% respectively. The biggest winner was Origin Energy rallying 32.06% while New Hope Corp sunk -20%. Ramsay Health Care rose +4.7% after news of COVID-19 cases declined in the community. Pilbara Minerals added +0.9% after announcing securing a loan for $250 million from the government for its Pilbara region. Australian Eagle Asset chief investment officer Sean Sequeira suggested caution to investors stating, “Is this a change in sentiment? It’s just an easing of the worst scenario so far, it’s not something to get carried away with yet.” Investors focus will shift to the RBA meeting minutes to be released on Tuesday, which may reveal at what pace interest rates may be hiked in December. The yield on the 10-year Australian bond was 3.65%, and the local currency rose 1.4% against the USD to 0.67.
Commodities
Commodities closed higher on Friday after news out of China of an easing of COVID restrictions, reducing the amount of time travelers and close contacts must spend in quarantine, helped boost investor’s risk sentiment. Oil prices leapt with WTI and Brent Crude rising +2.88% and +2.48% to $88.96 and $95.99 respectively. In precious metals, spot gold gained +0.9% to close $1,771.24, while spot silver edged +0.11% higher to $21.7. Industrial metals up, with copper jumping +4.14% to $391, nickel rising +3.88% to $26,856, and SGX iron ore leaping by +5.51% to $91.28. Meanwhile cryptocurrencies continued their sell off with the price of bitcoin falling -2.2% to $16,461.
Economic Calendar:
- Fed Waller Speech 08:00
- Industrial Production YoY (SEP) 21:00
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.
