U.S. equities finished lower on Tuesday, weighed by a downbeat outlook from chipmakers as investors await tonight’s inflation figures.
The S&P500 finished -0.42% lower weighed by technology -1.0% and consumer discretionary -1.54% while energy outperformed +1.77% in mixed breadth with 44% of stocks trading higher. The Dow Jones was also -0.18% lower along with the Nasdaq Composite -1.19% and Russell 2000 -1.46% with the VIX rising +2.25% to 21.77. Memory chip maker Micron Technologies declined -3.74% after warning its fourth quarter sales are expected to be at the low end or below its previous guidance as customers reduce their stockpiles, adding to concerns of a recession. Shares in Nvidia also declined -3.97% after reporting quarterly revenue that missed estimates after the close on Monday.
Treasury yields traded higher with the 2-year yield rising +5.8 basis points to 3.263% while the 10 and 30-year rates edged +2.4 and +1.4 basis points higher. The spread between the 2 and 10-year rates declined a further -3.4 basis points to -0.483% reaching the lowest levels since 2000, signalling investors are pricing in weaker growth and the increased likelihood of rate cuts following the current hiking cycle. Headline inflation for the month of July released tonight is expected to show a +0.2% increase month-on-month down from +1.3% previously with core prices expected to moderate to +0.5% from +0.7% over the month. According to Lindsey Bell, chief markets and money strategist for Ally “hotter-than-anticipated CPI report will pressure markets this week. An in-line report could be taken in stride as investors have priced in a 75 basis point move by the Fed….either way, we still have to get through another jobs report, more inflation data, and Jackson Hole before we get to the Fed’s September meeting. It could be a volatile several weeks ahead”.
European stocks fell on Tuesday tracking U.S. markets lower with the Euro Stoxx 600 down -0.67% along with the DAX -1.12% and CAC -0.53% while the FTSE100 edged +0.08% higher. Technology shares within the Euro Stoxx 600 led declines down -3.10% after bond yields ticked higher on expectations of a half-point interest rate increase by the ECB in September. According to Nick Brooks, head of economic research at ICG, “Uncertainty and volatility will remain high as slower growth, earnings downgrades, front-loading of interest rate hikes by major central banks and a likely intensified squeeze on Europe’s natural gas supplies over the winter months weigh on investor sentiment”.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set to open lower this morning with ASX200 futures down -0.58% or -40 points to 6,891. The index edged +0.13% higher on Tuesday with gains in consumer discretionary +1.37% and real estate +1.18% helping to offset weakness in financials -0.81% following disappointing earnings by NAB. Shares in NAB declined -2.9% after reporting third-quarter profit rose +6% to $1.8 billion while net interest margin was modestly weaker due to performance from its markets and treasury business. Shares tied to clean energy outperformed buoyed by BHP’s recent bid for OZ Minerals as well as the U.S. Senate passing the climate change and energy security legislation with LKE shares climbing +15.3% along with LTR +5.3% and CXO 2.94%. In economic data, the Westpac consumer confidence index for August weakened modestly to 81.2 from 83.8 in July posting a ninth consecutive monthly decline. Westpac chief economist Bill Evans noted, “A strong message from the collapse in the index over the last nine months has been the negative attitude to major household purchases where confidence has fallen almost as fast as the 12-month economic outlook”.
Oil prices edged lower overnight with both WTI and Brent crude down -0.29% and -0.32% respectively to US$90.49 and US$96.34. Iron ore futures in Singapore declined -1.87% on Tuesday although have recovered most of those losses early this morning trading +1.16% higher at US$110.85. Gold edged +0.30% higher to US$1,794 an oz while silver was -0.69% weaker at US$20.53 along with Bitcoin -3.85% to US$23,144.
Economic data:
- Chinese Inflation (YoY Jul) 11:30
- German Inflation Final (YoY Jul) 16:00
- U.S. Inflation (YoY Jul) 22:30
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.
