Global equities climbed on Friday, despite stronger-than-expected employment data, with risk assets supported by optimism that China may soon begin easing COVID-19 restrictions.
United States
The S&P 500 closed +1.36% higher after all sectors closed in the green. Materials made the largest gains jumping +3.41%, financials were up by +1.87% and communications climbed +1.76%. The Dow gained +1.26%, the Nasdaq closed +1.28% higher, the Russell 2000 was up by +1.13%. The yield on the 10-year US Treasury bond was 1 basis point higher to 4.16% while the VIX index fell -2.96% to 24.55. Non-farm payroll data showed 216k jobs had been added, above the forecast 200k, whilst the unemployment rate rose to 3.7% in October, above the forecast 3.6%, from 3.5% in September. The employment data continues to point to a robust jobs market, adding weight to the case for the Federal Reserve to continue raising interest rates.
Analysts at Oxford Economics commented on the expected rise in Fed rate, “We look for the Fed to raise rates by 50bps at the December meeting and now see the risks as tilted heavily toward more rate hikes coming in early 2023. We will probably add additional rate hikes to our December baseline unless the November CPI report shows a significant moderation in price pressures.” Meanwhile, expectations for the US midterm election on Tuesday suggest the Republicans will take both the House and Senate from the Democrats, creating hurdles for any legislation which Biden may wish to push through until 2024.
Europe
The Euro STOXX 600 rose by +1.86%, with all sectors closing higher, with the exception of healthcare which slid by -0.06%. Consumer discretionary led the gains soaring +4.6%, followed by materials climbing +3.67% and real estate up by +2.26%. The CAC rose +2.77% the Dax climbed +2.51%, the FTSE rose +2.54%. Analysts at US banks continue to downgrade the Euro regions performance, with Goldman Sachs commenting on the third-quarter results, “2022 EPS estimates are down -1 per cent since the start of the season, with the consensus now expecting STOXX 600 EPS to grow 22 per cent in 2022. Indeed, this quarter has catalysed downward revisions to 2022 and 2023 estimates for most sectors. Only energy and banks have seen positive revisions since the start of the season.” Bank of America commented that the region’s political sensitivity will add to the energy vows and their impact of markets, “The lack of Russian energy will become a more acute problem next year. That means the recovery after the winter recession will need to be very shallow. There is not enough energy to let activity rebound freely if governments want to avoid a tougher winter in 2023/2024 than the upcoming one.”
*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 higher today, with ASX futures up 91 points or 1.32% to 6976. The ASX edged up by 0.5% to close at 6892.5, with gains in energy, materials and utilities of +3.37%, +1.8% and +1.52% helped to boost the index up. The biggest laggard was the healthcare sector down by -0.78% and communications falling -0.44%. The energy sector showed the most promise on the back of rising oil prices. Whitehaven Coal was up by 6%, New Hope Corporation gained 5.9%, Woodside Energy climbed 3.9% while Santos rose 2.3%. Coronado saw the largest gain rising by 22.04% while Domino’s declined further by -12.48%. In banking, Westpac gained 1%, while Commonwealth Bank declined -1.4%, NAB lost 0.1% and ANZ fell -0.7%. Afterpay soared 10.9% after reporting earnings beat expectations. Perpetual gained 1% after news circulated of BPEA Private Equity backed consortium would return for a renewed takeover bid. Magellan fell by -2.4% after reporting a net outflow of $2.4 billion. CSR edged up 3.5% after reporting its building arm’s earnings rose 15%. The yield on the 10-year Australian treasury bond was down to 3.84%, while the Australian dollar gained strength against the greenback to close 2.88% higher at 0.64.
Commodities
Oil soared with the price of WTI and Brent crude climbing +5.04% and +4.12% to $92.61 and $98.57 respectively supported by hopes of China easing COVID-19 restrictions after German Chancellor Olaf Scholz’s comments after a one-day visit to China and meeting with Xi Jinping. Scholz said he had been assured that China’s approval process for COVID-19 vaccines made by BioNTech would be sped up. Precious metals jumped with spot gold up by 3.21% to $1,681.87 while spot silver was up 7.12% to $20.86. Industrials metals were also up, with copper soaring 7.57% to $369, nickel up 4.46% to $23,723 and SGX Iron Ore climbing 5.18% to $85.95.
Economic Calendar:
- China Balance of Trade (OCT) 14:00
- German S&P Global Construction PMI (OCT) 19:30
- ECB Panetta Speech 20:30
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.
