United States
The Dow and S&P 500 indexes slipped in Thursday’s trading, while the Nasdaq gained 43 points to close at 17,127.66, an increase of 0.25%, after pulling back from an early morning high that saw the index 1.25% higher. The Dow fell by 0.54%, dropping 219 points to finish at 40,755, and the S&P 500 declined by 0.30%, losing 16 points to close at 5,503.41. Most sectors saw marginal declines, with Consumer Discretionary emerging as the best performer, rising by 1.41%.
Markets were in a holding pattern as investors awaited the crucial August non-farm payrolls report due on Friday. Preliminary employment data released today gave mixed signals: weekly jobless claims were lower than expected, but the ADP report for private employers showed the lowest employment numbers in over three years for August, along with downward revisions to July’s figures.
In individual stock news, Tesla rose 4.90% following its announcement of plans to roll out advanced driver assistance technology in Europe and China by 2025, with its stock climbing $10.76 to close at $230.17. Nvidia increased by 0.94% to $107.21, marking a rare day without any major news for the company. JetBlue’s stock jumped 7.16% to close at $5.39 after the airline raised its third-quarter revenue estimates, now expecting a 1% increase versus a previously forecasted 1.5% decline, prompting a rally in other airline stocks. Citigroup and JP Morgan were down 0.54% and 0.78%, respectively, as traders awaited the upcoming payroll numbers.
The non-farm payroll number that is to be released today is expected to show an increase of +165K for August. The prior number for July was +114K and the market will be keen to see if the July number is revised down as similar statistics have been in the recent past. The unemployment rate is expected to be 4.2%
US 10-year Treasury yields fell by 3 basis points to 3.72%, reflecting growing concerns about US economic growth. The US dollar weakened, with the Dollar Index declining by 0.2% to 101.08. The USD was trading at 143.35 against the Japanese yen, as interest rate differentials drew attention.
Europe
Shares in Britain fell, with the FTSE 100 declining by 0.34% to close at 8,241.71. The loss was primarily driven by pharmaceutical companies, particularly AstraZeneca, whose shares dropped 3.9% following reports of employees being detained in China amid investigations into potential illegal activities. Data released indicated that activity in the construction sector slowed in August, despite a rise in home building, which caused the home building sector to jump by 2.59%. Homebuilder Vistry announced a share buyback after posting better-than-expected results. Associated British Foods saw an 8.5% decline after issuing a profit warning from its sugar division and reporting a drop in sales at its retailer, Primark, which was attributed to poor weather in Britain.
In Europe, the Euro Stoxx 600 slipped 0.54% to 512.05. The French CAC 40 led the losses, dropping 0.92% to close at 7,431.96, a decrease of 69 points. The decline was driven by luxury stocks, particularly after reports that Tiffany & Co. is considering downsizing its luxury store in Shanghai. Shares of LVMH fell 3.6% on the news, and the luxury sector as a whole fell by 3%, with Hermès dropping 5.8% amid concerns over reduced demand from China, which has been a key growth driver for the sector in recent years. The German DAX saw little movement, declining by 0.08%, or 15 points, to close at 18,576.5. The IFO Institute cut its forecast for German growth to zero (previously +0.4%), stating that the economy remains stuck in the doldrums.
Yields on German and British bonds fell again on Thursday. The yield on the UK’s 2-year bonds decreased by 3.5 basis points to 3.985%, while Germany’s 2-year bond yield fell by 3 basis points to 2.29%. The EUR/USD is trading at 1.1107.
Australia
A small rise in the ASX200 futures in overnight trade see prices up by 10 points, a rise of 0.12%. The AUDUSD gained ground to be at 0.6736
Australian equities saw a cautious rebound on Thursday, with the ASX200 rising by 0.40%, gaining 31.9 points to close at 7,982.40. Seven of the eleven sectors closed higher, with Information Technology leading the gains. Data centre operator NextDC was the standout performer, surging by 8.4%, an increase of $1.35, to finish at $17.42. This spike was triggered by Blackstone’s purchase of competitor AirTrunk, which prompted a re-rating of stocks in the sector. The substantial jump prompted a price query from the ASX. Other stocks in the sector also saw gains of 1-2% following declines in previous days, and the sector closed up 2.3% for the day.
The energy sector, however, finished lower as oil prices stabilized at recent lows. The sector fell 3.86%, with Woodside, a heavyweight in the sector, going ex-dividend at US$0.69 (A$1.02). Woodside’s stock closed at $25, down 81 cents after the dividend, representing an additional 3% drop. Analysts also downgraded the stock to a sell. Yancoal declined by 2.49%, dropping 15 cents to $5.29.
A drop in global yields brought renewed interest in the real estate sector and banks. The real estate sector rose by 1.95%, with Goodman Group adding 52 cents to reach $33.15, while Charter Hall Group advanced 5.03%, or 73 cents, to $15.32. Positive sentiment was further fuelled by the AirTrunk acquisition news, which highlighted potential locations for the placement of services. The Big Four banks attracted bargain hunters, with increases of 1-2.5%, led by ANZ, which surged 79 cents to $31.25, a gain of 2.59%. This rally occurred despite RBA Governor Bullock reiterating the importance of maintaining the 2-3% inflation target due to the risks of persistent inflation. She emphasized that the RBA’s “full employment goal is not served by letting inflation stay above target indefinitely.”
Yields on Australian bonds were slightly lower, with the 2-year yield falling 2 basis points to 3.66% and the 10-year yield dropping by the same amount to 3.925%.
Commodities
Oil prices remained near their lows, with West Texas Intermediate Crude settling at $69.31 per barrel, reflecting a modest increase of 10 cents. Brent Crude also saw little change, rising by 0.14% to $72.80 per barrel. OPEC announced it would delay the planned increase in oil production for the fourth quarter. In the US, weekly inventory data showed a larger-than-expected increase in withdrawals from oil storage last week.
Copper rose by $132 to $9,092 per tonne on the London Metals Exchange. Iron ore rebounded from its recent lows, climbing 1.5% to close at $92.45 for the October Singapore futures contract.
Gold gained 0.73%, increasing by $18.32 to reach $2,514.04, driven by a weaker US dollar and growing speculation of a 50-basis point cut in the Federal Funds rate at the September meeting. Silver also advanced, rising 1.67% to close at $28.75.
Bitcoin experienced a sharp decline, falling by $2,060 to $55,964, a drop of 3.5%, marking its lowest level since early August.
Economic Calendar
AU:
- Lending Indicators (Jul) – 11.30 am
EU:
- GDP growth 2nd Quarter – 07.00pm
US:
- Non- farm payrolls (Aug) – 10:30 PM
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.
