U.S. equities rose with Treasury yields on Tuesday as investors await inflation data on Thursday.
As of 07:21 am AEDT the S&P500 was +0.72% higher lifted by gains in technology +1.07%, consumer discretionary +1.37% and financials +1.31% with 74% of stocks trading higher. The Dow Jones also rose +0.99%, as did the Nasdaq Composite +1.07% with the Russell 2000 rising +1.02% and the VIX weakening -2.67% to 22.23. Shares in Pfizer declined -3.75% after its revenue forecast for 2022 was short of analyst estimates. Shares in Apple rose +0.94%, as did Amazon.com +0.91% while Alphabet traded -1.21% lower along with Meta Platforms -3.67% after billionaire investors Peter Thiel announced they would step down from the company’s board. Shares in Peloton surged +22.91% rising for a second consecutive session by a similar amount on speculation the company would look for a potential takeover and announced it will replace the CEO and cut jobs in a bid to revive sagging sales.
Ahead of inflation data on Thursday Treasury yields rose with the 2-year yield up +4.9 basis points to 1.339% as were both the 10 and 30-year rates +3.8 and +3.3 basis points respectively. Breakeven inflation rates were higher with the 5 and 10-year rate up +1.8 and +2.5 basis points, limiting a rise in real yields over the same periods to +2.8 and +1.4 basis points. The U.S. dollar index traded +0.26% higher at 95.65. The minutes from the latest Federal Reserve meeting will also be released next week as investors assess whether the five rate hikes currently priced in for 2022 is potentially too much or too little.
A rise in European bond yields saw European equities erase earlier gains with the Euro Stoxx 600 edging up just +0.01% as weakness in health care -0.69% and energy -1.72% offset a +1.11% gain for financials on higher yields. The DAX rose +0.23%, as did the CAC +0.27% while the FTSE100 slipped -0.08% weighed by declines in BP -2.4% and Shell -3.2% on lower oil prices. 10-year government bond yields were mostly higher across the region, ranging from +3.4 basis points in Sweden to +8.2 in the U.K., the exception was Greece where the yield edged -1 basis point lower following a surge on Monday. Yields have risen on expectations the ECB will need to take a more hawkish stance and begin to lift rates, although ECB President Lagarde has reinforced that any adjustments to policy will be gradual. The Euro weakened -0.20% to 1.1419 with the Pound edging +0.07% higher to 1.3546
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set for a flat open this morning with ASX200 futures unchanged. The index climbed +1.07% on Tuesday with materials +2.20% and financials +1.35% lifting the index. Travel stocks extended gains following the announcement that international borders would reopen in two weeks’ time. WEB gained a further +7.4%, as did FLT +6.7%, CTD +4.3% and QAN +1.1%. Shares in Suncorp rose +5.5% after its profit and dividend were higher than market expectations, Macquarie also gained +3.9% after it expects a record quarter although did not quantify what that meant as part of an operational update on Tuesday. The Australian dollar rose +0.22% to 0.7142 and the yield on 10-year government bonds was +12.5 basis points higher at 2.12%.
Oil prices declined on reports a nuclear deal was close between the West and Iran that could see the countries oil production come back to the market. Both WTI and Brent crude weakened -2.27% and -2.13% respectively to US$89.24 and US$90.71 a barrel. Iron ore futures in Singapore rose +0.52% on Tuesday although has given back those gains in early trade this morning, down -0.42% at US$147.60. Gold rose +0.39% to US$1,827 as did silver +0.85% to US$23.21 with Bitcoin down -1.68% at US$43,361.
Economic data:
- Australian Consumer Confidence (MoM Feb) 10:30
- U.S. Wholesale Inventories (MoM Dec) 02:00
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.
