US equity markets traded a choppy session on Thursday, weakening into the close of the day. By the conclusion of the day’s trading, the S&P500 was down 45 points (-1.17%) at 3,807.99, while the Nasdaq100 was 1.59% weaker, closing at 10,741.22. Energy was the only sector from the S&P500 to end in the green, gaining just under 2%, while the information technology sector (-1.96%) led the declines.
Traders were focused on US jobs data, which continues to show that the labour market remains robust, which will allow the US Federal Reserve to continue to lift interest rates to curb inflation, which remains well above the 2% upper boundary of their target range. Private payroll numbers increased by 235K in December, while the number of American’s filing for jobless claims dropped to a 3-month low. We will get a better look at the employment picture on Friday, when US non-farm payroll figures are released. In a roundabout way, ‘good news’ regarding the labour market is being treated as ‘bad news’ as it relates to stock prices, given the implications of higher for longer interest rates as a result. Markets are currently pricing in a terminal rate for the US Fed of over 5% in mid-2023, meaning more rate increases to come over the coming six months.
Federal Reserve Bank of St. Louis President James Bullard gave a speech on Thursday, pointing to optimistic signs that price gains look to slow later this year. On rates, he said that “The policy rate is not yet in a zone that may be considered sufficiently restrictive, but it is getting closer”. He also noted that he believes it is better to get the target rate higher quicker, than to slow the rate of increases.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
To commodity markets, and WTI Crude Oil prices were higher, gaining 1.39% to close at US$73.87 a barrel, while natural gas prices continue to slump, falling a further 10% on Thursday, to US$3.74. Precious metals prices were weaker, with spot gold prices declining US$21.17 (-1.14%) to close at US$1833.36, while spot silver fell 2.2% to US$23.25 an oz. Regarding gold, as the chart below demonstrates, after finding support in the US$1,620 region during the 4th quarter of 2022, prices have rallied strongly over the past two months, recently trading above US$1,850 an oz. Copper prices were slightly firmer, gaining 2.29%, while the remainder of the industrial metals were weaker, led by nickel which fell over 4%.
To the Australian market, and the ASX200 closed off the session highs on Thursday, ending the day at 7,063.63, for a gain of just 0.06%. The financials and materials sectors were slightly firmer, while energy dropped 1.31%. ASX SPI200 futures are largely unchanged in overnight trading, closing 2 points higher at 7014, suggesting a flat start to trade on Friday.
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.
