Stocks and Treasuries edged lower on Thursday, paring back larger declines after Federal Reserve officials reiterated their resolve to persist in their fight against inflation.
United States
The S&P 500 closed -0.31% lower having initial fell as much as -1.21%. The biggest laggards were utilities, consumer discretionary and real estate falling by -2%, -1.71% and -1.52% respectively. The Dow was little changed, the Nasdaq Composite declined -0.35% and the Russell 2000 fell -0.76%. St. Louis Fed President James Bullard stated the Fed would continue to raise interest rates up to at least 5-5.25% to tame inflation, warning of continued financial turbulence ahead. This came a day after President Mary Daly stated a reduction in the interest rates was “off the table.” Cleveland Fed President Loretta Mester also echoed Bullard’s comments on Thursday, noting the Fed is “just beginning to move into restrictive territory”.
In economic data, US initial jobless claims fell by 4000 to 222k, compared to forecasts of 225k, highlighting the labour market continues to remain tight despite the Fed’s best attempt to cool the market. The yield on the US 10-year note rose by 7.8 basis points to 3.77% while the VIX index edged lower by -0.12% to 24.08.
Europe
The European markets closed lower, with the EURO STOXX 600 slipping by -0.22%. Energy was the biggest laggard falling -1.02%, followed by materials declining -0.98% and real estate losing -0.66%, The CAC fell -0.47%, the DAX rose by +0.23% and the FTSE lost -0.78% although the more domestic-focused FTSE250 was little changed as UK Chancellor of the Exchequer Jeremy Hunt raised taxes for the highest earners as the government seeks to stabilise public finances. In addition, the government announced it will raise the windfall profit tax on the oil and gas sector to 35% from 25% and extend it until 2028 which had largely been expected. The final reading of inflation for October in the Eurozone was modestly lower than expected, although still rise at 10.6% over the year compared to 10.7% previously, with core inflation in line with estimates rising 5%.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX is expected to open relatively flat this morning with ASX200 futures up 6 points or 0.08% to 7,162. The ASX 200 closed slightly higher on Thursday at 7135.7. Energy and materials were the only underperformers, sliding by -2.06% and -1.16% respectively. Consumer staples lead the gains going up +1.91%, healthcare +1.31% and consumer discretionary +1.26%. Pendal’s stock price leapt by +10.5% while Perpetual slumped -12.6%, after a court ruling that Perpetual could not opt out of the merger between the two companies. Woodside energy fell by -2.2% on the back of declining oil prices, Rio Tinto by -1.8% and BHP Group slid -1.5%. Webject jumped +10.1% on higher-than-expected profits. ASX shares ASX shares fell 0.2% after writing off pre-tax costs of ipto $255 million. Seek was up +1.7% on after announcing EBITDA guidance for the year 2023 to range between $560-590 million. Australian Agricultural Company fell 5% due to falling cattle prices. Sonic Healthcare fell by -1.2% after announcing a decline in total revenue to $2.73 billion. Altium rose 2.4% after announcing the company would meet guidance for 2022. Meanwhile, economic data showed employment rose by 32k in October, with the unemployment rate at 3.4% adding to the case for the RBA to continue raising interest rates, albeit at a more modest pace of increases.
Commodities
Oil prices sunk with WTI and Brent crude losing -4.39% and -3.23% to $81.3 and $89.87 respectively. Copper declined -2.57% to $368 while SGX Iron Ore up 0.83% this morning to US$97.75 after being little changed on Thursday.
Economic Calendar:
- JPN Inflation Rate Year-on-Year 10:30
- UK Retail Sales Year-on-Year (Oct) 18:00
- US Fed Collins Speech 00:40
- US Existing Home Sales (Oct) 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.
