Markets in the US rallied following positive retail sales data, while European Markets receded after the ECB announced a hike in the region’s interest rate to 4%.
United States
US markets soared after the release of positive retail sales data on Thursday, following the Fed’s decision of a hawkish pause on the cash rate on Wednesday. Retail sales were up by 0.3% in May, beating analysts’ forecasts of a decline by -0.1%. In contrast, the jobless claims report for the first week of June revealed 262k individuals applied for unemployment, much higher than the expected 249k. While the number of individuals who remain unemployed jumped by 20k from 1755k in the last week of May to 1775k in June, 10k higher than forecast. The Philadelphia Fed Manufacturing Index also declined to -13.7, just below forecasts of -14. Oren Klachkin of Oxford Economics’ commented, “The data show that consumers remain willing to spend…”, adding, “We think the economic data will support a persistent pause by the Fed through year-end, but there’s a real risk that policymakers will restart rate hikes in H2 if the upcoming economic data don’t point to a cooldown.”
The S&P 500 Index jumped 1.22% on Thursday’s trading session due to broad based buying. Healthcare, communications and industrials were the best performing sectors gaining between 1.5-1.55%. The Dow added 1.26%, the Nasdaq firmed 1.15%, while the Russell 2000 Index edged up 0.81%. The yield on the 2-Year treasury bill slid 4 basis points to 4.64%. The yield on the 10-Year treasury bill fell by 7 basis points to 3.71%, while the yield on the 30-Year treasury bill fell 4 basis points to 3.83%. Meanwhile the VIX Index jumped 4.47% to 14.50.
Europe
The ECB announced a hike in the interest rate by a quarter of a percentage point from 3.75% to 4%. The BofA commented on the ECB’s decision, “President Lagarde did not provide guidance beyond July and refrained from commenting on the terminal rate. This may be due to the Governing Council’s desire to show data-dependence, but it could also relate to divisions within the Governing Council over how to proceed past July.”
The STOXX 600 Index slid -0.08% at the end of trading on Thursday, with seven out of the eleven sectors closing in the red. The real estate sector was the biggest laggard, declining -0.92%, followed by information technology losing -0.81% and financials falling -0.47%. Consumer staples was the best performing sector, adding 0.64%, communications and healthcare rose by 0.48% and 0.47% respectively. The CAC receded by -0.51%, the DAX slid -0.13%, while the FTSE bucked the trend by rising 0.34%.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX Index is expected to open higher today, with ASX futures up 0.4% to 7167. Thursday’s trading session closed with the index edging up 0.19% higher to 7175. Information technology was the best-performing sector, rising 0.96%, followed by financials gaining 0.79% and industrials adding 0.73%. Healthcare was the biggest underperformer, sinking by -1.97%, utilities lost -0.55% and communication services fell -0.33%. In technology, Xero jumped 2.2%, WiseTech gained 1.07%, Life360 rose 0.29%. In finance, the banking sector witnessed gains in share price, CBA 0.64%, ANZ 0.92% NAB 0.55% and Westpac 0.19%. Elsewhere, IAG jumped 4.59%, AUB Group added 2.96%, Macquarie Group rose 2.33% and Magellan firmed 2.28%. The yield on the 10-Year Australian bond rose by 2 basis points to 4.0%, while the local currency advanced 1.3% against the greenback to 0.68.
In economic data, Australia’s unemployment rate slid from 3.7% in April to 3.6% in May, slightly lower than forecast. The data revealed nearly 76k individuals gained employment in May, easily beating economist’s forecasts of 15k. Elsewhere, China’s unemployment rate was steady at 5.2%. The country’s industrial production continued to rise at a slower rate, from 5.6% last month to 3.5% in May. Meanwhile retail sales plummeted from 18.4% in April to 12.7% in May, missing forecasts of 13.6%.
Commodities
In commodities, the price of oil soared with WTI and Brent Crude gaining 3.44% and 3.27% to $70.62 and $75.59 respectively. In precious metals, spot gold rose by 0.80% to $1,958, while spot silver fell -0.24% to $23.86. In industrial metals, copper closed 0.80% higher at $390. The price of bitcoin rose by 1.8% to $25,627.
Economic Calendar
16th June 2023
New Zealand Business NZ PMI 08:30
JPN BoJ Interest Rate Decision 13:00
USA Fed Bullard Speech 17:00
EuroZone Inflation Rate (YoY May) 19:00
USA Michigan Consumer Sentiment 00:00
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.
