U.S. equities reversed losses of up to 2% before edging higher in the final hours of trading.
The S&P 500 edged +0.24% higher as of 3:45pm in New York with gains concentrated in technology +0.83%, energy +2.54% and health care +0.57% with the remaining seven sectors lower. The DOW was up by +0.29%, the NASDAQ +0.07% while the Russell 2000 fell -0.53% and the VIX index declined –1.58% to 28.61. Jacob Manoukian, the US head of investment strategy at JPMorgan Private Bank commented on the recent market performance, “The stock and bond rally of the last few days was driven by weaker economic and labor market data. Today, stocks and bonds are both selling off after a more hawkish policy decision from New Zealand and stronger economic data from the US.” The yield on the 2-year US treasury bond rose one basis points to 4.15%, the 10-year bond yield was up sixteen basis points to 3.76% and the 30-year bond yield was 3.7%. In economic data, the private ADP employment report for September showed +208k jobs were added, slightly above the 200k forecast ahead of Friday’s non-farm payrolls report which is expected to show +250k jobs were added in September. Elsewhere, the reading of ISM non-manufacturing PMI for September was slightly higher than expected at 56.7 compared to estimates of 56.
In Europe, equities dropped with the Euro Stoxx 600 declining by -1.03%, weighed down by real estate, communications and consumer discretionary which fell by -4.24%, -2.25% and -2.04% respectively. The FTSE edged -0.48% lower, the CAC slipped -0.9% and the DAX lost -1.21%. Strategists at Barclays Plc continue to downgrade earnings by corporates of the region stating, “Equity valuations have normalized on surging real rates, but earnings reset still lies ahead.” Economic data revealed that Britain’s private sector suffered the greatest decline witnessed since the COVID lockdown, underlying the challenges for the new British PM, Ms. Liz Truss. The region is fighting off geo-political turmoil, as the EU is proposing a new package of sanctions against Russia to include a cap on oil sales.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX is expected to open lower this morning, with ASX futures down 9 points or -0.13% to 6,792. Shares rallied on Wednesday with the ASX closing +1.74% higher at 6815.7, extending gains a day after the RBA announced a hike in the cash rate which was lower than forecast. Consumer staples was the only sector which underperformed, slipping -0.4%. Information technology, consumer discretionary and financial sectors made the largest gains, rising +3.85%, +2.71% and +2.33% respectively. The rate sensitive technology sector saw Afterpay’s parent Block soar +7.5%, Zip rose by +6.4%, and WiseTech Global gained +5.7%. In financials, the top four banks climbed on hopes of avoiding arrears. Link gained +6.7% on talks of a new $1.27 billion buyout proposal by Dye&Durham while the BHP Group edged +1.1% higher. In economic data, retails sales rose by 0.6% in September, compared to 1.3% in August, while the S&P Global Services PMI was stable at 50.6. The RBNZ announced raising the cash rate by another 0.5% to 3.5% while the yield on the Australian 10-year bond fell-9.5 basis points to to 3.635% while the local currency dropped -0.22% to 0.6489.
In commodities, oil prices soared after OPEC+ announced cutting production by two million barrels/day on Tuesday, while Russia warned of reducing output even further. WTI and Brent crude jumped +1.29% and +1.56% to $87.64 and $93.24 respectively. The prices of precious metals were lower, with spot gold declining by -0.62% to $1,715.33 and spot silver falling -1.98% to $20.64. Iron ore futures in Singapore rose +0.40% on Wednesday although are modestly lower by -0.14% this morning at US$93.60 with copper +1.78% higher.
Economic Calendar:
- Australian Balance of Trade (MoM Aug) 11:30
- Eurozone Retail Sales (YoY Aug) 20:00
- ECB Policy Minutes 22:30
- U.S. Initial Jobless Claims (Oct 1st) 22:30
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.
