U.S. equities finished lower on Thursday, although pared larger declines as investors await Friday’s non-farm payroll report.
United States
As of 3:45pm in New York, the S&P 500 weakened -0.50% having fell as much as -1.61%, weighed down by information technology, communication services and consumer discretionary declining by -2.39%, -2.29% and -0.53% respectively. The Dow slipped -0.20%, the Nasdaq dropped by -1.34 while the Russell 2000 edged -0.05% lower. The VIX index weakened -2.63% to 25.41 while the yield on the 10-year US treasury note rose by 3 basis points to 4.13%. CIO at UBS Global Wealth Mark Haefele commented that markets are more concerned with the level of the interest rate, rather the pace of tightening, stating,” “The Fed, along with other major central banks, looks likely to keep tightening rates until the first quarter of 2023.”
Economic data revealed unemployment claims fell by 1,000 to 217k in the current week, compared to the week prior. In focus on Friday is the release of non-farm payrolls data for October forecast to show +200k jobs were added, down from +263k previously while the unemployment rate is expected to edge higher to 3.6% from 3.5%. In related news, Amazon announced it will be pausing ‘new incremental’ hirings, Lyft stated the company will cut workforce by 13%, while Morgan Stanley will begin global restructuring with staff layoffs starting next week. Oanda commented on the recent labour market stating, “It appears that we are finally starting to see more signs of labour market weakness, which means we might be a couple months away from seeing job losses with the nonfarm payroll report. If the labour market can cool quickly, the Fed might be done tightening in February, which means rates might ultimately stop at 5 per cent.”
Europe
In Europe, markets closed in the red after ECB Christine Lagarde warned that a “mild recession” is possible but would be insufficient to stem soaring prices. Stating, we don’t believe that that recession will be able to tame inflation”. Elsewhere, the Bank of England raised interest rates by 0.75% as expected bringing interest rates to 3%. The central bank expects further rate increase to help cool inflation, although pushed back against market pricing noting it expects rates to “peak lower than priced into financial markets” with the Pound slumping -2.04% to 1.1160. The STOXX 600 index closed -0.57% lower, weighed down by information technology declining -2.63%, real estate -2.47% and consumer discretionary -1.55%. The CAC lost -0.54%, the DAX declined -0.95% with the FTSE also -0.43% weaker.
*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 flat this morning with ASX200 futures down just -6 basis points or -0.09% to 6,851. The index slumped -1.84% on Thursday following large declines on Wall Street. Perpetual made the biggest gain, jumping 7.1% after rejecting a takeover bid offer from a consortium of BPEA Private Equity and Regal Partners. Domino’s Pizza was the biggest laggard dropping -11.71% as households curb spending. Woolworths sank -3.5% in light of rising food prices due to surging inflation. In mining, BHP rose 3.2%, Rio Tinto fell -2.2% while Fortescue Metals Group lost -2.9%. New Hope Corporation was up 5.9% after its board approved an on-market share buyback worth up to $300 million. Gold miners fell, St. Barbara dropped -6.9% while Silver Lake Resources sinking -6.4%. Meanwhile, Coles fell -1% and Mercash sank by -1.5%. Downer EDI climbed +5.3% after reaffirming its guidance for the full year between 10-20%. Westpac’s share price sank -2.4% after non-executive director Peter Marriot announced his retirement from the company. The yield on the 10-year Australian treasury bond rose +11 basis points to 3.92% while the local currency weakened against the greenback by -0.9% to 0.6296.
Commodities
Oil prices dropped after the US Department of Energy sold 15 million barrels of oil to six companies, completing the decision by President Joe Biden to release the biggest stockpile. The price of WTI and Brent crude was down -2.1% and -1.61% to $88.13 and $94.68 respectively. The value of precious metals were mixed with spot gold falling by -0.26% to $1,630 while spot silver gained +1.43% to $19.50. Industrial metals saw copper lose -1.17% to $343, nickel rose by +2.31% to $24,065, and SGX Iron ore soared +3.1% to $80.52. The price of bitcoin dropped 1.9% to $20,231.
Economic Calendar:
- RBA Statement on Monetary Policy 11:30
- Eurozone S&P Global Services PMI Final (MoM Oct) 20:00
- ECB President Lagarde Speech 20:30
- US Unemployment Rate and Non-Farm Payrolls (MoM Oct) 23:30
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.
