US equities climbed on Tuesday with bond yields lower after US job openings declined, adding to speculation the Federal Reserve may be finally near the end of its tightening cycle.
United States
The JOLTS report fell by more than expected to 8.83 in July versus the forecast of 9.46 million, while the Conference Board’s Consumer confidence index fell more than expected to 106.1, below forecasts to remain little changed at 116. The data infers that the job market is indeed slowing down with traders now only pricing in a 50% chance of a rate hike in November, and pricing in cuts as early as May 2024. Investors will now turn their attention to further economic data tonight, including the 2nd estimate of Q2 GDP expected to show the economy expanded at a 2.4% annualised rate, and private ADP employment forecast to show 195k jobs were added in August ahead of Friday’s non-farm payroll report.
US Job Openings (MoM 000’s)
The S&P 500 climbed 1.45% amid broad-based buying. Communications, consumer discretionary and information technology were the best-performing sectors gaining 2.46%, 2.35% and 2.11% respectively. The Dow Jones firmed 0.85% along with the Nasdaq Composite 1.74% while the Russell 2000 Index jumped 1.42% with the VIX down -4.18% to 14.45. Treasury yields fell with the 2-year Treasury losing fifteen basis points to 4.89%, the 10-year yield lost eight basis points to 4.12% while the 30-year fell four basis points to 4.23%.
Europe
European stocks also advanced on Tuesday amid measures from China to support the economy including lowering borrowing costs for homeowners and potentially further cuts to deposit rates. The Euro Stoxx 600 climbed 0.97% on Tuesday with all sectors closing in the green. Materials, real estate, and utilities were the biggest winners, rising between 1.33% to 1.41%. The CAC jumped 0.67%, the DAX added 0.88% while the FTSE climbed 1.72%. In focus tonight is the preliminary reading of German inflation for August, expected to show a moderation in headline inflation to 6% from 6.2% previously.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX 200 Index is expected to open higher this morning with ASX futures up by 0.65% to 7,209. The index rose 0.71% to 7,210 on Tuesday, with nine out of the eleven sectors closing in the green. The materials sector was the star performer, rising 1.60% boosted by optimistic news on China’s economy receiving a stimulus. Sayona Mining rocketed 26.37% after suffering a drop of -27.2% on Monday, Paladin rallied 5.10%, BHP added 1.24% while RIO firmed 1.10%. The big names in banking also saw gains in their stock prices, notably ANZ (0.90%), Westpac (0.80%), NAB (0.53%), and CBA (0.25%). Healthcare and information technology were the only sectors to close in the red, down -0.08% and -0.31% respectively. Xero jumped 1.01%, while WiseTech dropped -5.17%, Life360 fell -1.36% and Brainchip receded by -0.35%.
The Australian dollar is trading 0.81% higher this morning at 0.6481 while the yield on 3-year government bonds declined -3.7 basis points on Tuesday ahead of this morning’s monthly CPI estimate. Expectations are for inflation to have risen 5.2% over the 12 months to July, a slight moderation from 5.4% in June which would add further evidence that the RBA’s tightening is having the desired effect on bringing inflation back down to target.
Commodities
In commodities, oil prices soared with WTI and Brent Crude up by 1.32% and 1.35% to $81.16 and $85.56 respectively. In precious metals, spot gold rose by 0.90% to $1,937.54 while spot silver gained 2.04% to $24.72. In industrial metals, copper prices jumped 1.03% to $379.45 while SGX Iron Ore was marginally higher at $110.19. The price of bitcoin soared 6.2% to $27,590.
Economic Calendar
30th August 2023
New Zealand Building Permits (MoM Jul) 08:45
Australian Monthly Inflation (MoM Jul) 11:30
Australian Building Permits (Mom Jul) 11:30
German Inflation Rate (YoY Aug) 22:00
US ADP Employment (MoM Aug) 22:15
US GDP Growth Rate (QOQ Q2) 22:30
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.
