US Equity markets reacted to economic data, hinting at a possible increase in the Fed rate.
United States
Economic data out of the US dampened investor hopes of an easing in interest rate hikes by the Fed. The ISM Manufacturing PMI rose from 47.4 in January to 47.7 in February, below forecasts of 47.8. Atlanta Federal Reserve boss Raphel Bostic shared his thoughts, stating “inflation remains too high”, adding, “I think we will need to raise the federal funds rate to between 5 and 5.25 per cent and leave it there until well into 2024.”
The S&P 500 fell by -0.47%, with utilities, real estate and consumer discretionary weighing down the index by declining -1.72%, 1.49% and 1.28% respectively. Energy jumped by 1.94%, materials was up 0.68% and industrials 0.38%. The Dow slipped -0.16%, the Nasdaq by -0.68% while the Russell 2000 edged up 0.08%. The yield on the 2-year treasury note was 4.87%, while the yield on the US 10-year and 30-year note was 3.99% and 3.95% respectively. The VIX index fell by 0.53% to 20.59.
Europe
In Europe, the Euro STOXX 600 Index slid by -0.25%, with 75% of the index closing in red. Real estate sank by -2.89%, utilities dropped -2.23% while information technology slid -0.73%. Materials was the star performer rising by 1.14%, industrials followed by adding 0.53% while consumer discretionary edged up 0.26%. Other indexes performed similarly with the CAC losing -0.46%, the DAX sliding by -0.39%, and the FTSE fell by -0.59%. Meanwhile, economic data out of Germany revealed inflation for February remained the same at 8.7% on a year-on-year comparison, slightly higher than the forecast 8.5%. This further complicates the ECB’s decision for raising the interest rate in the upcoming meeting later on today.
*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 lower today, as ASX futures were down by 0.08% to 7199. The ASX 200 closed -0.09% lower on Wednesday at 7251.6, with ten out of the twelve sectors closing in the red. The biggest laggard was communication services, dropping by -2.26%, followed by real estate sinking -1.73% and financials falling by -1.21%. Materials and energy bucked the trend by jumping 2.29% and 1.62% respectively. Ramelius Resources (RMS) was the star performer on Wednesday, jumping 6.70% while Link Administration (LNK) plummeted -5.68%. In materials, Fortescue Metals (FMG) 3.4%, Rio Tinto (RIO) 2.5%, BHP 2.3%. In energy, Woodside Energy (WDS) was up by 2.5% and Beach Energy (BPT) by 1.4%. In mining, Allkem (AKE) gained 4.6%, Liontown Resources (LTR) firmed 3.3%, while Pilbara Minerals (PLS) was up 1%, Ramelius Resources (RMS) 6.7%, St. Barbara (SBM) 5.5%, and Evolution Mining (EVN) 4%. In banking, NAB dropped -2.1%, WestPac (WBC) slid -2%, Commonwealth Bank (CBA) sank by -1.6%, ANZ lost -1.1%. The yield on the 10-year Australian bond was 3.78% while the local currency gained 0.3% to $0.67 against the US dollar.
In economic data, the economy grew by 0.5% in the last quarter of 2022, compared to 0.7% in the third quarter of last year, falling short of economist forecasts of 0.8%. Meanwhile inflation rose 7.4% in January, down from 8.4% in the previous month and much lower than the forecast 8%. Stephen Wu at Commonwealth Bank commented, “The data is beginning to paint a picture of weakening consumer demand”.
Commodities
In commodities, oil prices closed higher with WTI and Brent crude up by 0.84% and 1.09% to US$ 77.70 and US$ 84.36 respectively. In precious metals, spot gold sealed 0.66% to US$ 1,8383.97 while spot silver edged up 0.46% to US$ 21.01. Industrial metals were mixed, as copper rose by 1.83% to a price of US$ 417, nickel sank by -2.81% to US$ 24,620, while SGX Iron Ore managed to gain 1.08% to US$ 123.37. The price of bitcoin rose 0.6% to US$ 23,411.
Economic Data
March 2nd, 2023
EUR: Core Inflation Rate Year-on-Year (February) 9:00pm
EUR: ECB Monetary Policy Meeting Accounts 11:30pm
March 3rd, 2023
US: Jobless Claims (February) 12:30am
UK: BoE Pill Speech 2:00am
This article was written by Oliver Gordon, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
