Stocks traded lower in late trading as Treasury yields rose ahead of Wednesday’s Federal Reserve rate decision.
As of 3:45pm in New York, the S&P 500 weakened by -0.49%, with 76% of stocks trading lower. The biggest laggards were communications, utilities and information technology falling by -1.65%, -0.95% and -0.94% respectively. The Dow fell by -0.2%, the Nasdaq slid -0.74%, the Russell was up +0.23%, while the VIX index gained +0.78% to 25.95. Energy stocks spiraled after a White House official stated Joe Biden would call upon congress to introduce a fresh line of tax penalties on oil and gas companies accruing record profits. This week, investor focus will shift from earnings to the Federal Reserve policy decision on Wednesday night and jobs data released on Friday. Investors forecast a further increase in the cash rate by 75 basis points while awaiting clues as to whether the Fed will cease or reduce the pace of interest rate hikes in December. Portfolio Manager at Kingsview Investment, Paul Nolte provided his views, “Market expectations are for the Fed to begin signaling that their very aggressive rate hiking cycle will begin slowing down.” The yield on the 10-year US treasury note rose 4 basis points to 4.05%.
European markets closed higher on Monday, with the Euro STOXX 600 edging up +0.33%. Russia announced a withdrawal from the United Nation’s brokered food security deal after claiming an attack on its forces by Ukraine in Crimea, boosting the price of wheat. Consumer staples jumped +1.03%, communications rose +0.93% while real estate gained +0.83%. The CAC slid -0.1%, the Dax rose +0.8% and the FTSE was up by +0.55%. Economic data for Europe revealed that inflation rate rose to 10.7% for October on a year-on-year comparison, while core inflation rose to 5% in October, from 4.8% in the previous month and modestly above estimates of 4.9%. Meanwhile, the UK government announced that Britons will have to pay higher taxes to offset the fiscal deficit faced by the economy, highlighting the economic challenges faced by PM Rishi Sunak’s administration.
*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 relatively flat today with ASX futures up 5 points or 0.07% to 6,861. The ASX closed +1.15% higher on Monday at 6863.5 points. Consumer discretionary, information technology and communications led the gains on the index, rising by +2.73%, +2.6% and +2.04% respectively. Russia’s announcement to withdraw support from the Black Sea grain export deal thrust the price of wheat higher, boosting Graincorp’s share price up +7.9%. Energy was the only underperforming sector down by -0.44%. Rio Tinto and Fortescue Metals declined by -0.4% each, BHP fell -0.3% and Woodside Energy slid -0.1%. In financials, EML Payments sunk by -35.7% after the company’s UK subsidiary, Prepaid Financial Services, temporarily stopped onboarding new clients. Origin rose 3% after posting a 1% rise in revenue due to improved market conditions. Bubs Australia sunk by -13.8%, after management warned of a decline in its China market. In economic data, Australia’s retail spending remained constant at 0.6% in September on a year-on-year comparison. Meanwhile, China’s manufacturing PMI fell to 49.2 in October, from 50.1 in September, just below forecasts. Investor’s focus will be on the RBA’s interest rate decision today, with expectations of a seventh straight interest rate hike to tame rising inflation.
In commodities, oil prices fell with the price of WTI and Brent crude declining -1.59% and -1.08% to $86.5 and $92.76 respectively. Spot gold fell -0.55% to $1,635.92, spot silver declined -0.42% $19.18, copper fell -1.39% to $338, nickel fell by -1.1% to $22,035, SGX Iron Ore dropped -1.25% to $80.69. The price of bitcoin fell 1.3% to $US20,390.
Economic Calendar:
- Australian S&P Global Manufacturing PMI (OCT) 09:00
- RBA Interest Rate Decision 14:30
- UK Nationwide Housing Prices YoY (OCT) 18:00
- RBA Gov Lowe Speech 19:20
- UK S&P Global/CIPS Manufacturing PMI Final (OCT) 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.
