United States
US markets continued their advance on Friday, with the S&P 500 rising 0.54% to 5,626.26, an increase of 30 points. The Nasdaq climbed 114 points (+0.65%) to 17,683.98. Both indices posted their strongest weekly gains of the year. The Dow also increased by 0.72%, adding 297 points to close at 41,398. However, these gains were outpaced by the Russell 2000, which surged 2.49% to finish at 2,149. The Russell 2000 has added 4% since the release of the Consumer Price Index (CPI) last Wednesday.
The broader rally was attributed to increased conviction that a larger rate cut might be announced at the Federal Reserve’s meeting this year. The probability of a 50-basis point cut jumped to 50% from 28% on Thursday, according to futures pricing data. The market now suggests an equal chance of either a 25 or 50 basis point cut.
All sectors in the S&P 500 closed higher on the day, with Real Estate and Consumer Staples reaching one-year highs. The latest US consumer sentiment report showed improvement, with inflation expectations falling for the fourth consecutive month.
In stock news, Walmart rose 1.18% to close at $80.60. Uber announced plans to expand its autonomous ride-hailing services to Austin and Atlanta, leading to a 6.4% increase in its share price. This initiative is in collaboration with Alphabet, whose shares rose 1.79% to $157.46.
Boeing shares fell 3.7% to $156.77 after workers overwhelmingly voted against the company’s latest proposal, causing further complications for the new CEO, who is already grappling with high debt levels and production delays.
The shift in expectations for the size of the rate cut this week caused yields on US 2-year Treasury notes to drop by nearly 6 basis points to 3.58%, while the 10-year yield fell 2.5 basis points to 3.65%. This change also led to weakness in the US dollar, with the dollar index falling to 101. The most significant weakness was against the Japanese yen, which traded at 140.85, its lowest level in nine months.
Europe
European markets closed higher on Friday, with the Euro Stoxx 600 rising 0.76% to finish at 515.95. The DAX was the best-performing index, rallying 0.98%, or 181 points, to close at 18,699. The French CAC 40 also gained, adding 30 points (+0.41%) to end at 7,465.
The German DAX received a significant boost from Siemens Energy, which surged 9.4%, or 2.52 points, to close at 29.21, following stock upgrades by brokers and a surge in trading volumes. The automotive sector also performed well, rising 1.69%. BMW climbed 2.6%, up 1.96 points to 73.32, while Mercedes-Benz Group gained 1.9%.
In the UK, the FTSE 100 increased by 0.39%, or 32 points, to close at 8,273. This rise came after the Bank of England reported that consumer inflation expectations had fallen to a three-year low. The commodity mining sector, particularly gold miners, was in demand, rising 1.51%. However, the healthcare sector was the worst performer, with AstraZeneca falling 1% following broker downgrades.
In economic news, French inflation was reported at 0.2%. This week, markets will focus on the UK inflation data and a Bank of England interest rate meeting, where no change in rates is widely expected. Bond yields inched higher in both the UK and Germany on Friday, with the German 10-year yield at 3.51% and UK gilts of the same duration at 3.77%, down 1.5 basis points. The EUR/USD is trading at 1.1075.
Australia
The Australian market is expected to open the week higher, following positive overseas trends. Futures rose by 16 points, or 0.2%, on Saturday morning. The AUD/USD closed at 0.6704.
The ASX 200 finished the week with a gain of 0.30%, advancing 24.2 points to close at 8,099.9. The index traded higher earlier in the day but pulled back as it approached record highs. Five of the eleven sectors ended the week in positive territory, with Materials and Real Estate being the best performers. The Energy sector also rose by 0.84%, marking a rare two-day rally.
The Materials sector was buoyed by increases in commodity prices, with gold trading at a record high, which boosted demand for gold stocks. Evolution Mining surged 28 cents (+6.93%) to close at $4.32, while Regis Resources climbed 12 cents (+6.69%) to $1.915. The Lithium and uranium sectors also saw gains amid ongoing supply concerns. Mineral Resources added 0.82% to reach $38.33, supported by several brokers upgrading their forecasts and price targets. Fortescue Metals Group rose 5.04% to $17.50, an increase of 84 cents, while BHP advanced 79 cents (+2.04%) to $39.60, driven by higher iron ore prices during Australian trading hours. Woodside Energy gained 1.38%, or 33 cents, to trade at $24.25, following a slight increase in oil prices.
The Real Estate sector increased by 1.02% and has quietly but steadily risen by 11% since its low in early August, closing the week at a record high. Goodman Group rose 84 cents (+2.43%) to $35.38, while most other large-cap stocks in the sector posted modest gains. Pexa Group, the digital property exchange, rose by 2.62% to $14.09.
Banks generally performed lower, with NAB down 1.24% and CBA declining 0.92%. Internet-based stocks also fell, with Seek dropping 2.57% to $22.35, a loss of 59 cents, making it the worst-performing large-cap on the day. Carsales.com also fell by 80 cents (-2.14%) to $36.50. The company is set to trade ex-dividend on Monday, with a dividend of 38.5 cents.
Australian bonds ended the week with lower yields. The two-year bond yield fell by 4.5 basis points to 3.55%, while the ten-year bond yield dropped by 3 basis points to 3.815%. Unemployment data on Thursday for August will provide the main focus for Australian economic news this week.
Commodities
Oil prices edged lower on Friday, with West Texas Intermediate (WTI) crude falling by 0.46%, or $0.32, to close at $68.65. Brent crude also declined, dropping $0.36, or 0.5%, to settle at $71.61. The effects of Hurricane Francine continue to impact the market, with 30% of oil production and 40% of natural gas output in the Gulf of Mexico still offline as of Saturday. Additionally, further reductions in long positions by fund managers during the week contributed to a bearish sentiment.
Copper prices rose by 1% to $9,308.00 at the close of trading on the London Metal Exchange (LME) on Friday. This increase was attributed to a weaker US dollar, as traders anticipated a higher likelihood of a 50-basis point interest rate cut next week. Chinese data also indicated a drawdown in inventory levels, further supporting the price rise.
Iron ore prices fell in Asian trading on Friday afternoon, ending the week at $92.60, a 2.2% decline from Thursday’s close in Singapore. The commodity had traded around $95 for most of the day before dropping late in the session.
Gold continued its upward momentum, reaching a new record high of $2,577.70, an increase of $19.80 (+0.77%). Retail investors have been active buyers, with the micro gold futures contract traded in Chicago hitting record volumes. Silver also gained, breaking through the $30 mark to close at $30.72, up 2.72%.
Bitcoin rose by $1,990 to close at $60,184, a jump of 3.4%. This increase follows a report to the SEC on Friday of a large purchase by US hedge fund MicroStrategy, which acquired $1.1 billion worth of Bitcoin over the past six weeks.
Economic data released from China on Saturday further highlighted the slowdown in the country’s economy. Industrial output growth dropped to a five-month low, while retail sales grew by just 2.1%, significantly below expectations. Coupled with a lower GDP growth rate of 4.7% for the second quarter, these figures have led some analysts to anticipate the introduction of stimulus measures to help the economy reach the 5% GDP target that President Xi Jinping urged authorities to achieve last Thursday.
Economic Calendar
Europe:
- Wage Growth PMI (Q2) – 7:00 pm
US:
- NY State Manufacturing Index (Sep) – 10:30 PM
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
