U.S. equities declined on Friday amid concerns over hawkish central banks, with the quarterly “triple witching” expiry of options also likely amplifying volatility.
United States
Initial euphoria following softer inflation data earlier in the week faded as Federal Reserve policymakers drove home the message that rates will go higher for longer until they’re confident inflation has been subdued in additional to hawkish stances by both the ECB and BOE. The S&P500 retreated -1.11% on Friday along with the Dow Jones -0.85%, Nasdaq Composite -0.80%, and Russell 2000 -0.63% while the VIX was -0.92% lower at 22.62.
In economic data, the preliminary reading of PMI reports for the US showed both manufacturing and services sectors remained well within contractionary territory. The manufacturing survey declined to 46.2 from 47.7 previously with services down to 44.4 from 46.2 previously with both readings below estimates. The data comes ahead of the final reading of Q3 GDP on Thursday which is expected to show the economy expanded at a 2.9% annualised rate with consumer confidence for December also in focus on Wednesday. Friday will bring the release of the Conference Board’s leading index for November expected to show a monthly decline of -0.5% following a -0.8% fall in October, as well as PCE inflation data expected to show that price pressures are easing. The final piece of data for the week will be the final release of the University of Michigan consumer sentiment survey for December expected to confirm a modest improvement to 59.1 from 56.8 previously although remain well within pessimistic territory.
Europe
European equities were also lower on Friday following rate increases by both the ECB and BOE on Thursday. The Euro Stoxx 600 declined -1.20% along with the DAX -0.67%, CAC -1.08% and FTSE100 -1.27%. Despite a modest improvement from the November readings, PMI reports for December also continued to point to a slowdown in economic growth for the region, with the Eurozone manufacturing and services reports coming in at 47.8 and 49.1 respectively, with readings below 50 signalling contraction. Elsewhere, the final reading of Eurozone core inflation for the 12 months to November was in line with prior readings, increasing at 5%. In focus for the week ahead is the German Ifo Business Climate survey for December tonight followed by Eurozone and German consumer confidence on Tuesday.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX is set to open softer this morning with ASX200 futures down -27 points or -0.38% to 7,072. The index declined -0.78% on Friday weighed by declines in financials and materials of -0.91% and -0.79% respectively while energy 0.36% and industrials 0.18% were the only positive sectors. Aurizon was a notable performer on Fridayy, rising 4% after offloading One Rail’s coal haulage business to a joint venture for $425m in cash. Gold miners were notable underperformers as the price for the precious metal declined with SLR down -6.4% along with NST -1.8%, EVN -2.5% and NCM -1%. The week ahead is relatively quiet for economic data, with the release of the RBA policy minutes on Tuesday and the Westpac leading index for November on Wednesday the only notable releases.
Commodities
Oil prices finished lower on Friday with both WTI and Brent crude down -2.39% and -2.67% to US$74.29 and US$79.04 a barrel respectively with hawkish central banks weighing on sentiment for the growth outlook. Iron ore futures were -0.22% lower on Friday although are a further -1.67% lower this morning at US$109.40. Base metals were lower on Friday with aluminium down -0.38% along with copper -0.33%, lead -0.07%, nickel -0.13%, tin -0.28% and zinc -4.49%. Gold rose 0.91% on Friday to US$1,793.08 an oz along with silver 0.60% to US$23.22 while Bitcoin retreated -3.23% to US$16,837.
Economic data:
- EU Energy Ministers Meeting 19:00
- German Ifo Business Climate (MoM Dec) 20:00
- US NAHB Housing Market Index (MoM Dec) 02:00
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.
