U.S. equities extended losses on Monday, with investors likely reducing risk ahead of this weeks Jackson Hole Symposium following a sharp rally that left stocks highly stretched from a technical perspective.
The S&P500 fell -2.14% with all sectors negative in broad-based selling with 95% stocks lower as technology -2.78% and consumer discretionary -2.84% weighed the most on the index. The Dow Jones was also -1.91% lower along with the Nasdaq Composite -2.55% and Russell 2000 -2.13% with the VIX surging +15.78% to 23.85. According to a survey by Bloomberg, 68% of respondents see price pressures as eroding corporate margins and sending equities lower. Victoria Greene, founding partner at G Squared Private Wealth noted “this is a bear-market trap….Inflation is the big, bad boogie man. Even if there really is a sustained decrease in inflation, it could take a while before prices actually come down significantly”.
Looking ahead to the Jackson Hole Symposium later this week, Ed Moya senior market analyst at Oanda noted Jerome Powell “may try to send a clear message that even if they have a slower pace of rate hikes, that won’t signal a lower peak rate or that they will be quick to cut rates…After this week, Wall Street should not be surprised if Fed fund futures start pricing in rate hikes for next year”. Treasury yields rose overnight with the 2-year rate up +8 basis points to 3.314% as were both the 10 and 30-year rates by +4.8 and +1.4 basis points respectively while key spreads across the yield curve remained inverted, signalling the market remains concerned about the outlook for economic growth.
European equities were also lower weighed by higher bond yields and worries over the energy market. The European stock rally, which has seen the benchmark rise more than 9% from July lows, is facing a flurry of headwinds as economic growth remains at risk from surging inflation, hawkish central banks, and a looming energy crisis. The Euro Stoxx 600 declined -0.96% on Monday along with the DAX -2.32%, CAC -1.80% and FTSE100 -0.22% which was protected somewhat by a weaker Pound, which declined -0.51%. Looking ahead to the release of PMI reports for August tonight, analysts are forecasting declines that are expected to add to sign that a recession in the Eurozone is now more likely than not.
*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 markets lower with ASX200 futures down -44 points or -0.63% to 6,909. The index declined -0.95% on Monday in broad-based selling with 80% of stocks lower and all sectors negative with financials -1.20% and materials -0.90% weighing the most heavily. Shares in Adbri, a supplier of cement, concrete, sand, and gravel tumbled -16.9% after wet weather and soaring fuel and energy prices ate into profit with net profit down -15% over the financial year to $48.1m from $56.6m previously. Elsewhere shares in Ampol rose +2.3% after doubling its interim dividend to $1.2 per share and analysts suggested a buyback may be announced amid soaring profits in refining and spiking pump prices with net profit increasing +113.8% from $325.5m to $695.9m. Aerial imaging software company Nearmap also gained +5.3% after the board unanimously recommended a $2.10 takeover offer from private equity firm Thoma Bravo.
Oil prices were little changed overnight with WTI edging +0.03% higher to US$90.47 and Brent down -0.10% to US$96.62 a barrel. Iron ore futures in Singapore rose +0.87% on Monday although are -0.55% lower this morning at US$101.15 with copper also -0.34% lower. Gold declined -0.69% to US$1,734.94 an oz with silver also -0.35% lower at US$18.98 along with Bitcoin -1.80% to US$21,088.
Economic data:
- Australian PMI (MoM Aug) 09:00
- Eurozone PMI (MoM Aug) 18:00
- U.S. PMI (MoM Aug) 23:45
- Eurozone Consumer Confidence (MoM Aug) 00:00
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.
