United States
A disappointing private employment report from ADP caused U.S. markets to open lower. However, sentiment improved after news broke of a trade agreement between the U.S. and Vietnam, which helped lift U.S. indexes. The trade deal established a 20% tariff rate on most goods exported to the U.S. from Vietnam. Additionally, the Trump administration hinted that an agreement with India could be reached soon.
By the end of the day, the S&P 500 had gained 0.47%, adding 29 points to close at 6,227. Seven of the eleven sectors saw positive movement, with energy and technology leading the way. In contrast, the healthcare sector was the worst performer. The Dow Jones saw little movement, dropping just 0.02% to close at 44,484, while the Nasdaq Composite rose by 190 points, or 0.94%, closing at 20,393. Small-cap stocks continued their upward trend, with the Russell 2000 gaining 1.31%, reflecting broader optimism about the U.S. economy.
The ADP jobs report showed a decrease of 33,000 private payroll jobs last month, the first decline since March 2023. Economists had predicted a gain of 95,000 jobs. The losses were mainly in “white-collar” occupations, while manufacturing and construction saw job gains. The official non-farm payroll data is due today, one day early due to the July 4th Independence Day holiday in the U.S. Economists are forecasting an increase of 106,000 jobs, down from May’s 139,000. The yield curve steepened in response to the employment data and the passage of a budget bill that increased the deficit. The 2-year note rose by 1 basis point to 3.79%, and the 10- and 30-year yields increased by 4 and 5 basis points, respectively. The 30-year bond yield now sits at 4.81%. The U.S. dollar slipped slightly, down 0.02% on the Bloomberg U.S. Dollar Index.
Tech stocks were back in focus, with Nvidia regaining some of its recent losses, rising 2.58% to $157.25. Apple also benefited from the Vietnam trade news and broker upgrades, adding 2.22% to close at $212.44. Tesla announced a 13% year-over-year decline in second-quarter EV sales. Although this performance was worse than analysts had anticipated, it was not as bad as some feared. Tesla’s shares rose, rising 4.97% to close at $315.65, as investors speculated that the worst of the sales slump was over.
In the healthcare sector, managed care company Centene saw a dramatic 40% drop in its share price after it withdrew its profit guidance, citing lower enrolments and higher costs in its Medicaid business. This news negatively impacted the broader managed healthcare sector, with United Health Group falling 5.70% and Elevance Health dropping 11.50%. However, pharmaceutical companies posted a slight gain on the day.
Oil prices surged by almost 3%, leading to a boost in oil stocks. The sector was the day’s best performer, gaining 1.70%. Rising commodity prices also benefited miners, with Freeport-McMoRan rising by 3.9% and U.S.-listed BHP increasing by 4.23%.
The focus today will be on the non-farm payroll numbers, with a shorter trading session due to the holiday. Lower volumes could lead to larger-than-usual moves in response to any unexpected results.
Europe
European equities moved slightly higher, with the EuroStoxx 600 gaining 0.18% to close at 541.21. Regional bourses also saw positive movement, with the French CAC leading the way, adding 0.99%. The French index was boosted by gains in the luxury goods sector. In the UK, the FTSE 100 slipped 0.12%, closing at 8,774, as concerns about public finances were raised following a series of costly U-turns on welfare reform announced by Finance Minister Reeves.
The UK index was weighed down by losses in construction stocks, while commodity-related stocks saw gains, driven by rising prices for various commodities. Copper miner Antofagasta added 4.59%, and Glencore, which also announced a US$1 billion buyback, increased by 5.06%. Oil companies advanced following a 3% surge in oil prices, with BP rising 3.03%.
The announcement of the trade deal spurred a return to stocks exposed to Asia. The auto sector rose by 1.6%, and luxury goods makers, such as LVMH, gained 4.15%. Shares in renewables also advanced, as the details of the US tax bill were less onerous than initially expected for the sector.
In economic news, the eurozone’s unemployment rate for May increased by 0.1%, reaching 6.4%. Concerns over UK finances caused the 10-year bond yield in the UK to soar by 16 basis points to 4.61%. The German benchmark 10-year bond yield also rose, closing with an 8-basis point increase to 2.65%.
Australia
Australian stocks closed at a new record high on Wednesday, driven by strength in the mining sector as iron ore and copper prices advanced. The ASX200 rose 56.60 points (+0.66%) to finish at 8,597.70. While the index approached an intraday high of 8,639 set in early June, it remains just below this key level.
The rally was broad-based, with ten of the eleven sectors closing higher. The only laggard was the technology sector, which declined following a weak lead from Wall Street, where investors rotated out of tech stocks.
Tech shares fell 0.73%, led by Xero, which dropped 2.08% to $178.24. This follows last Thursday’s 8% fall after the company raised $2 billion to fund its acquisition of fintech firm Melio at $176 per share. NextDC also declined, down 1.05%, while WiseTech Global defied the sector trend, gaining 1.46% to $109.57 after receiving a broker upgrade.
Following the U.S. lead, investors rotated into recently underperforming sectors. Materials rose 1.78%, supported by a late rally in iron ore prices after Tuesday’s stronger-than-expected manufacturing data. Fortescue Metals surged 3.84%, and BHP added 1.72% to $37.20.
James Hardie Industries continued its upward momentum, rising 5.30% to $42.93 after completing its merger with U.S.-based AZEK. The real estate sector also advanced, gaining 1.77%, with sector leader Goodman Group adding 2.05%. The sector posted its second consecutive day of solid gains, with analysts optimistic about upcoming earnings results.
In company-specific news, Qantas shares fell 2.23% to $10.52 after the airline disclosed a cyberattack affecting 6 million customers as part of a broader assault on global aviation companies. While Qantas confirmed no credit card information was compromised, sensitive customer data, including birth dates and phone numbers, were accessed.
Domino’s Pizza plunged 15.79% after its CEO announced his departure from the company after just one year. Former chairman and major shareholder Jack Cowin will step in as interim CEO until a successor is appointed.
On the macro front, retail sales data came in weaker than expected, rising just 0.2% for the month. Building approvals showed a modest 3.2% monthly increase but also missed forecasts. These signs of economic softness have bolstered expectations that the RBA will cut interest rates by 25 basis points to 3.60% at its meeting next Tuesday.
Despite the rate cut expectations, bond yields moved higher. The 10-year yield rose 4 basis points to 4.15%, while the 2-year yield also climbed 4 basis points to 3.23%.
Overnight futures were lower, with the ASX200 dropping 11 points (-0.13%). In contrast, shares of BHP traded on the US markets showed a significant gain, closing at the equivalent of A$38.52, a 3.5% increase from the Australian close of A$37.20. The Australian dollar remained steady against the US dollar, opening the day at 0.6582.
Commodities
Oil prices surged on Wednesday as Iran suspended cooperation with the UN nuclear watchdog, prompting traders to reintroduce a geopolitical risk premium to the market. Additional buying interest was driven by the announcement of the Vietnam trade deal, which sparked optimism for stronger global growth. West Texas Intermediate (WTI) rose by 3.09%, adding US$2.02 to close at US$67.49, while Brent crude increased by 2.95%, closing at US$69.09. Supply increases expected from in OPEC+ for August does not seem to be concerning market participants currently.
Copper also saw gains, rising 0.80%, or US$79, to close at US$10,013 per tonne on the LME, boosted by the positive trade deal announcement. Iron ore continued its upward trajectory from Asian trading, finishing at US$95.55 on the August futures contract, marking a 2.08% gain in the last 24 hours with a US$1.95 increase.
Soft commodities experienced significant rebounds from June lows, with futures prices for Corn rising by 3%, Soybeans adding 2%, and Wheat increasing by 2.91%.
Gold advanced by 0.56%, closing at US$3,357. Safe-haven demand continued to support the metal near record highs, with geopolitical tensions and rising U.S. deficits remaining key themes. Silver followed suit, gaining 1.43% to reach US$36.55.
Bitcoin surged by 3%, reflecting a return of risk appetite, and is currently trading at US$109,213
Economic Calendar
AU:
- Trade Balance (May) – 11.30am
China:
- Caixin Composite PMI’s (Jun) – 11:45am
US:
- Non-Farm Payrolls (Jun) – 10:30pm
- Factory Orders (May)- 12:00am
- ISM Services PMI (Jun) -12:00am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
