United States
Stocks fell in trading on Wednesday. The S&P 500 was down 0.77% to 5,199.5, and the Nasdaq Composite fell by 1.05% to trade at 16,195.81. The markets had opened higher, but the advances were rejected as sellers of technology shares appeared. The information technology sector in the US was down 1.36%, matching the worst-performing sectors of the day. Nvidia fell 5.1%, and Tesla lost 4.4%. The theme of investors punishing result misses continued, with Super Micro Computer falling 20% after the server company missed analyst estimates.
The Dow Jones fell 0.60%, or 234 points, to close at 38,763.45. The broad-based Russell 2000 was lower by 1.4%, closing at 2,035. Banks did not follow their European counterparts higher and ended the day unchanged. Disney reported a moderation of demand in its theme parks, continuing the trend of lower demand from consumer discretionary companies. Disney finished the day down 4.46% at $85.96.
Concerns from earlier in the week reasserted themselves after a poor auction for US Treasuries. Further data on weekly jobless claims will be released on Thursday. Although this data is volatile and usually not given much weight because of that volatility, it will be very important in this jittery market. The VIX index reflected this ongoing concern, closing at 27.85%. This elevated reading indicates that traders are expecting markets to continue their wild gyrations in the immediate future. The US 10-year government Treasury note moved up in yield by 6 basis points to 3.95%. The 2-year note was unchanged at 3.98%.
Europe
European stocks gained on Wednesday, with the EuroStoxx 600 gaining 1.5% to 495.96. The leading sector on this index was the banking sector, which gained 2.7%, its biggest move higher in two years. ABN Amro announced better-than-expected profit results and increased guidance, leading ABN’s shares to rally 5.6%. BNP was higher by 2.82%, and NatWest rose 1.6% in London. Poor income announcements from Commerzbank saw their shares drop 3.7%.
The CAC rose 1.91% to 7,266, and the DAX was up by 260 points to close at 17,615, a rally of 1.5%. In the UK, the FTSE moved higher by 1.75% to 8,166.88. More company results led to swings in several shares. The drug maker Novo Nordisk issued poor sales results for its weight loss drugs with a reduced profit outlook, and its shares fell 6.7%. Roche Pharma rose 3% in contrast. Tyre and car parts maker Continental rose 6.8% after indicating better returns. Puma, the German sportswear maker, fell 10.8% after announcing a reduction in their profit outlook.
ECB member Oli Rehn suggested that there could be further rate cuts in the Euro region if the trend of lower inflation continues. German industrial production picked up in June, adding to the confidence of the day. Government bonds were unchanged, with the UK 10-year at 3.65% and the German bund at 2.27% for the 10-year instrument.
Australia
The Australian market is expected to open lower as the ASX200 futures fell 39 points overnight, a drop of 0.48%. BHP was trading 1.3% lower in NY trading, finishing at A$40.46, down from an Australian close of A$41.02. The AUDUSD is trading at 0.6521, a fall from last night where it was at 0.645.
In Wednesday’s trading, the ASX200 rose 0.25% to close at 7,699.80, an increase of 19 points. Most sectors were higher, with the Materials and Financial sectors experiencing slight declines.
The Materials sector was dragged lower by Rio Tinto, which lost 1.4% to close at $116.50 after being downgraded by a broker. BHP fell 0.58% as iron ore in Singapore dropped 1.4% to US$100.95. Arcadian Lithium rose 7.55% after releasing results and indicating they would pause expansion plans due to low commodity prices. Pilbara Minerals rallied with other miners, closing up 6.4% at $2.98. The big four banks were all slightly lower, with Macquarie rising 0.78% to $199.83.
The best-performing sector was Real Estate, with an increase of 1.67%. The smaller REITs were the best performers, with GPT gaining 3.37% and Mirvac rising 2.93%, as investors look forward to results from the majors in the sector next week. Woodside reversed some of the week’s earlier losses, rising 1.1%.
Markets in Asia were comforted by comments from BOJ Vice-Governor Uchida, who noted that the BOJ could hold off on future rate increases if markets are unstable. This saw the Nikkei add 1%. Chinese balance of trade numbers showed that export growth was lower than expected, while imports were higher. In light of these numbers, doubts were again raised about China reaching its growth aspirations.
Australian government bonds were higher on the day, with the 10-year bond yield rising by 6 basis points to 4.07% and the 2-year bond yield up by 4 basis points to 3.80%.
Commodities
The oil price surged, with West Texas crude rising 3% to close at $75.40 and the Brent contract rallying 2.02% to close at $78.50. The increase was driven by larger-than-expected drawdowns from inventories and heightened geopolitical concerns, including reports that Ukrainian troops had seized control of a gas transit point and that a retaliatory attack on Israel from Iran could still be coming.
Stockpiles of copper increased by 42,175 tonnes, the biggest jump since 2020. As a result, copper fell 1.7% to close at $8,777 on the LME. Iron ore increased to $101.65 in New York trade, a rise of 0.70%. The commodity continues to fluctuate around the $100 level after its fall from recent highs.
Gold dipped by $5.20 to $2,385, a fall of 0.22%, and silver was lower by 1.13% to $26.68. The selloff in Bitcoin continued, trading at $55,120, a drop of 2.5%.
Economic Calendar
- AU Speech by RBA Governor Bullock 12.40pm
US – Initial Weekly Jobless Claims 11.30pm
-Wholesale Inventories (Jun) 12.00am
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.
