US equities were weaker in overnight trading, with the S&P 500 closing 0.41% lower, weighed down by the communications, consumer discretionary, and information technology sectors, which fell by 1.81%, 1.35%, and 0.86% respectively.
The Dow slipped 0.24%, while the Nasdaq closed 0.89% lower, with the likes of Amazon (AMZN) and Alphabet (GOOGL) down strongly. The VIX Index, which is a barometer of market fear, declined to 25.81, after trading closer to 35 over the past month.
Economic data revealed 400k new jobs were created in September, as reported by the US Labor Department, while the US manufacturing activity was below forecasts at 45.2, rising by its slowest pace since the COVID-19 lockdown. The data hints towards the Fed maintaining its hawkish position on interest rates. Investors will be keen on finding the results from the Fed’s meeting scheduled for Thursday, and employment data on Friday, to assess the pace at which future interest rates will be raised. Lazard Asset Management’s head of US Equities, Ronald Temple commented, “Despite other signs of economic deceleration, the job openings data taken together with nonfarm payroll growth indicate the Fed is far from the point where it can declare victory over inflation and lift its foot off the economic brake.” The yield on the 2-year US treasury bond lifted to 4.54%, while the yield on the 10-year and 30-year bond is currently trading at 4.05% and 4.12% respectively. In corporate news, Uber saw its share price rise after announcing revenue that beat expectations, dampening concerns of an economic slowdown would hurt revenue.
In Europe, the STOXX 600 closed +0.6% higher on Tuesday, with healthcare as the only underperforming sector sliding by 0.41%. The biggest gains were made by the real estate sector which rose 2.28%, consumer discretionary increasing by 1.97%, and energy rising by 1.97%. The CAC was up 0.98%, the DAX edged up by 0.64%, and the FTSE closed 0.63% higher. Housing prices in the UK dropped below forecasts in October to 7.2%, from 9.5% in September. The yield on the UK 10-year bond was 3.45%.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX is set to open flat on Wednesday, with ASX futures up 5 points p or 0.07% to 6978. Equity markets in Australia rallied on Tuesday, despite the RBA again lifting interest rates. The cash rate was raised by 25 percentage points from 2.6% to 2.85%. The ASX closed 1.65% higher at 6976.9. Materials and utilities made the largest gains by rising by 2.64% and 2.53%. The biggest winner was Imugene, soaring 11.43%, followed by Nickel Industries up 7.53%, while Chorus and Brickworks were the biggest laggards dropping by 3.55% and 2.26% respectively.
Genworth Mortgage share price rose by +5.2% after confirming the upper tier limit for its 2022 guidance. ReadyTech saw its share price soar +28.1% when the company confirmed a non-binding bid from Australian private equity firm Pacific Equity Partners (PEP). EML Payments climbed +30%, regaining the decline from Monday. In economic data, weekly inflation expectations jumped 0.5 percentage points to 6.6%, while the S&P Global PMI report showed a decline from 53.5 last month to 52.7 in October. The building permits report and home loans survey is set to be released today, with Morgan Stanley bank sharing their reservations about the Australian construction industry, stating headwinds are ahead and making way “for a perfect storm to hit the Australian housing construction market”. The yield on the Australian 10-year bond was 3.75%, while the local currency weakened against the US dollar by -0.03% to 0.63
In commodities, oil prices soared with WTI and Brent crude prices rising 2.24% and 2.09% to $88.48 and $94.77 respectively. In precious metals, spot gold gained 0.93% to $1,648 an oz while spot silver rose 2.75% to $19.69 an oz. Industrial metals were mixed, the price of copper jumped by 2.92% to $347 while nickel dropped 1.44% to $21,717, and SGX Iron Ore dropped 2.8% to $77.17.
Economic Calendar:
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- NZ Unemployment Rate and Employment Change 08:45
- RBNZ Press Conference 09:00
- AUS Building Permits MoM (SEP) 11:30
- EURO S&P Global Manufacturing PMII Final (OCT) 20:00
- US MBA Mortgage Applications 22:00
- US Fed Interest Rate Decision 05:00
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.
