United States
Wall Street had a rough start to September, with major indexes seeing a dip as bond yields and concerns about the economy weighed on markets. The S&P 500 fell 0.7%, the Nasdaq 100 dropped 0.8%, and the Dow was down 0.5%. Longer-term government bonds took the hardest hit, with the 30-year yield nearing 5% and the 10-year pushing to 4.27%. Tech stocks didn’t fare well, especially Nvidia, which saw its longest losing streak since March. The stock was down nearly 5% at one point, and analysts are now questioning the sustainability of the tech rally. Meanwhile, Alphabet saw a slight rebound after a court ruling in its favour, which prevented it from having to sell off its Chrome browser. Economic data didn’t help either—manufacturing numbers were weaker than expected, showing a contraction for the sixth month in a row. Traders are now focusing on upcoming job reports and other economic indicators to gauge how resilient the US economy remains. Despite these concerns, the futures market is still pricing in a few rate cuts from the Fed before the end of next year. While the Fed’s rate hikes have been a key concern, some analysts suggest that the markets have already priced in a potential slowdown in the economy. The US dollar strengthened, which put more pressure on riskier assets, making equities and commodities less appealing to investors.
Europe
European stock markets took a bit of a beating, with the Stoxx 600 falling 1.5%. This drop was driven by rising bond yields, which caused fears of higher borrowing costs for businesses. UK-focused stocks were hit hard as worries about the UK’s budget discussions weighed on sentiment. Sectors like real estate, tech, and financials were the worst performers. Siemens, a major industrial player, took a hit after being downgraded by analysts due to concerns over its future earnings growth. But not all was bleak: luxury brands LVMH and Kering stood out, benefitting from positive analyst upgrades as expectations grow for a rebound in demand from China. Both companies saw an uptick in their stock prices, with analysts predicting that demand for luxury goods in China could recover as the region’s economy stabilises. Nestlé also saw some recovery after a leadership change, and the energy sector fared a bit better as oil prices held steady. The energy stocks were supported by a steady price for oil, despite broader market weakness. Travel and leisure stocks lagged behind, largely due to weakness in airlines and the gambling sector, with major airline stocks like Ryanair and IAG suffering losses. Despite the broader sell-off, some stocks found support thanks to positive earnings results or broker upgrades, giving investors pockets of opportunity where solid fundamentals or market-specific catalysts remained intact.
Australia
The Australian market is likely to open cautiously today, with ASX 200 futures trading 0.4% lower at 8,841 as of 7:00 am. However, a lot of attention will be on the GDP data due out at 11:30, which could sway sentiment in the market. The economy is expected to show modest growth, but any surprises could shift the market either direction. Economists are forecasting a growth of around 0.4% for the quarter, though any deviation from this could lead to increased volatility. On the corporate front, Woodside Energy’s CEO reassured investors that the Russia-China energy pact won’t pose a risk to their operations, which could help stabilise energy stocks, especially given the rising oil prices. Meanwhile, AustralianSuper, the country’s largest superannuation fund, pledged a significant A$26 billion for local investments, which could have a positive impact on local stocks, particularly in infrastructure and real estate sectors. Macquarie also made headlines with its AirFinance arm purchasing 30 Boeing 737-8s and increasing its stake in Diamond Infrastructure Solutions to 49%, both moves indicating a growth strategy focused on expanding its aviation and infrastructure investments. There were some broker updates, with RBC upgrading Collins Foods (target price A$11.70) and Worley (target price A$18.50), but downgrading Xero to Sector Perform (target price A$187). Jarden also lowered Lottery Corp to Underweight (target price A$5.65). Today also sees several stocks going ex-dividend, including AEF, DOW, EVN, NWL, ORG, PME, RHC, SEK, SHL, and WHC. Overnight, BHP’s ADRs eased 0.2%, while Rio’s ADRs fell 1.3%. With strong local data expected, the market is likely to find a catalyst in this, with attention focused on whether GDP figures meet expectations or surprise.
Commodities and currencies
The commodities market saw strong gains, with gold hitting fresh record highs as demand for safe-haven assets increased. Spot gold rose about 1.8%, touching USD 3,537 per ounce, driven by a mix of geopolitical uncertainty despite the firm US dollar. Oil also performed well, with WTI crude rising 2.5% to USD 65.62 per barrel, and Brent adding 1.4%, reaching USD 69.12 per barrel. The rally in oil was supported by stronger demand and favourable supply dynamics, particularly with OPEC’s cautious stance on production increases. Oil markets are also being buoyed by expectations that the global economy, especially in Asia, will drive up demand. The US dollar strengthened across the board, with the Bloomberg Dollar Spot Index climbing by 0.5%, which in turn dragged the euro 0.6% lower to USD 1.1642. The Aussie dollar dropped 0.5% to USD 0.6521, while the New Zealand dollar fell 0.6% to USD 0.5866. Bond yields in the US steepened, with the 30-year nearing 4.96%, and Australian bond yields also edged higher. Cryptocurrencies showed mixed results, with Bitcoin trading at USD 110,800, while Ethereum saw a slight dip. The overall theme across the markets was a ‘higher-for-longer’ rates outlook: a stronger US dollar, rising gold prices, and a cautious tone in risk assets. Investors are keeping a close watch on inflationary pressures and central bank policies, particularly the Fed’s stance on interest rates.
Economic Calendar
US:
- MBA Mortgage Applications 21:00
- JOLTS Job Openings 00:00
AU:
- GDP YoY 11:30
EU:
- HCOB Eurozone Services PMI Aug 18:00
- HCOB Eurozone Composite PMI Aug 18:00
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
