Markets closed lower on Monday while bond yields soared on fears of higher interest rates
United States
The possibility of the Fed keeping interest rates high for a longer period led to a sell-off on Monday. Fed Reserve vice chair Michael Barr reiterated Jerome Powell’s narrative of holding the cash rate steady for longer. Federal Reserve governor Michelle Bowman added that future interest rate hikes may be considered by policy makers to bring down inflation to acceptable levels, “I continue to expect that further rate increases will likely be needed to return inflation to 2 per cent in a timely way.”
The S&P 500 closed marginally higher on Monday, despite eight out of the eleven sectors closing in the red. The index was boosted by the technology sector advancing 1.33% with the help of big caps Microsoft, Apple and Nvidia. Communications was the best performing sector, advancing 1.47%. Utilities, energy and real estate were the biggest laggards, declining by -4.72%, -1.91% and -1.75% respectively. The DOW slid -0.22%, the NASDAQ firmed 0.67% while the Russell 2000 Index fell -1.58%.
House Speaker Kevin McCarthy abruptly shifted course and moved to pass a bill with support from Democrats on Saturday. Wall street was largely muted to the US government averting a shutdown with bond yields soaring. The yield on the 2-Year US treasury note rose by six basis points to 5.10%. The 10-Year note soared eleven basis points to 4.68% while the 30-Year note jumped nine basis points to 4.79%.
Europe
Markets in Europe closed lower at the end of trading on Monday. The Euro STOXX 600 Index closed -1.08% lower amid broad-based selling. Utilities, materials and energy were the biggest underperformers, declining by -2.78%, -1.51% and -1.47% respectively. The CAC fell -0.94%, the DAX was down by -0.91% while the FTSE closed -1.28% lower. Bond yields in Europe jumped, with the German 10-Year note gaining eight basis points to 2.92% and the UK’s 10-year note soaring thirteen basis points to 4.57%.
Australia
The ASX 200 Index is expected to open lower this morning, with ASX futures down by -1.36% to 6968. The RBA is expected to meet later today, where it is widely expected that the interest rate will be kept unchanged at 4.1%. The Index fell by -0.22% to 7033 on Monday, with eight out of the eleven sectors closing in the red. Healthcare was the biggest underperformer down -1.34%. The energy sector declined by -0.35%. Whitehaven Coal climbed 1.13%, New Hope advanced 0.94%, while Santos slipped by -0.38% and Woodside fell -0.66%. In Banking, the big names saw their share prices recede namely ANZ, NAB, CBA and Westpac between -0.09% to -0.66%. The tech sector fell -0.14% on the back of mixed performance from stocks. Webbit jumped 5.66%, Xero added 0.46% and Life360 advanced 0.36% while big cap Wisetech receded -0.72%. Utilities was the best performing sector, gaining 0.64%. Sayona Mining was the best performing stock rocketing 12.90%, boosting the materials sector up by 0.55%. Big caps South32 jumped 2.95%, RIO 1.14% and BHP 0.79%. The yield on the 10-Year note remained at 4.48% while the local currency dropped by -1.1% against the greenback to 0.6364.
Commodities
Oil prices slumped on Monday, with WTI and Brent crude falling by -2.28% and -1.82% to $88.72 and $90.52 respectively. The price of spot gold receded by -1.10% to $1,828 while spot silver plummeted -5.14% to $21.04. Copper prices dropped by -2.46% to $364.55, while SGX Iron Ore was up by 0.92%. The price of bitcoin jumped 2.7% to $27,857.
Economic Calendar
03rd October 2023
Fed Mester Speech 10:30
RBA Interest rate decision 14:30
Fed Bostic Speech 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.
