United States
US markets extended their losing streak overnight, with the S&P 500 falling 0.5% to close at 6,604.72, marking the third consecutive session of declines – the longest slide in more than a month. The tech-heavy Nasdaq 100 dropped 0.4%, while the Dow Jones Industrial Average shed 0.4% to finish at 45,947.32.
The market weakness came despite a series of stronger-than-expected economic data releases. Second-quarter GDP was revised upward to show the economy grew at a 3.8% annualised pace, the fastest expansion in nearly two years and well above the previously reported 3.3%. Initial jobless claims fell to their lowest level since mid-July, and durable goods orders rose more than anticipated.
However, this economic strength appears to be working against equity markets, with investors growing concerned that robust data could complicate the Federal Reserve’s easing cycle. The strong figures prompted only minor adjustments to rate cut expectations, with money markets still pricing in about 40 basis points of Fed reductions before year-end.
Valuation concerns are mounting among strategists, with the S&P 500’s forward price-to-earnings ratio recently touching 22.9 – a level exceeded only twice this century during the dot-com bust and the 2020 pandemic rally. The AI investment theme continues to support markets, but individual stock movements showed some cracks, with CarMax plunging after disappointing earnings highlighted the ongoing strain in the used-car market.
Europe
European markets closed marginally lower, with the Stoxx 600 slipping 0.2% as investors tempered optimism around US interest rate cuts. Defence and commodity stocks provided the main support, while most other sectors declined.
Defence stocks rallied strongly after geopolitical developments involving Russia and Ukraine, with Rheinmetall surging 3.5% to a record closing level and BAE Systems gaining 2.2%. The industrial sector benefited from this defence boost, helping offset broader weakness.
Commodities-focused sectors outperformed, with basic resources advancing 1.8% as copper jumped following news that Freeport-McMoRan declared force majeure on its giant Grasberg mine in Indonesia. Anglo American rose 4.7%, while Antofagasta rocketed 9.3% to a record closing level.
Technology stocks underperformed despite SAP gaining ground on partnerships with OpenAI and AWS. The automotive sector struggled, with Stellantis falling 3.3% after announcing temporary production halts at some European plants due to weak demand. Consumer discretionary names also declined, with luxury stocks including LVMH dropping 2.7% and Hermes falling 3.1%.
Australia
Australian index futures are pointing to a mixed start this morning, with SPI 200 futures unchanged at 8,810. The flat opening suggests investors are weighing competing forces as they digest overnight developments from offshore markets.
Mining stocks appear set to continue their strong run, with BHP’s US-listed shares surging 4.1% overnight to trade at a 2.2% premium to yesterday’s Sydney close. The copper supply disruption story is likely to remain in focus, potentially benefiting pure-play copper miners like Sandfire Resources and emerging producers in the sector.
Several key companies are trading ex-dividend today, which could create some volatility in individual names. First Sentier Group’s announcement of a new chief executive will be closely watched, along with Premier Investments’ earnings results that showed a 22.5% decline in profit from continuing operations.
The local market will be navigating the tension between offshore weakness and commodity strength, with yesterday’s hot inflation data continuing to weigh on rate-sensitive sectors. Technology, property, and consumer discretionary stocks may face ongoing pressure as November rate cut expectations remain subdued.
Energy stocks could find support from higher oil prices, while healthcare names may struggle following weakness in offshore-listed peers. The focus will be on whether mining strength can offset broader sector headwinds, particularly given the global growth concerns highlighted by mixed US economic data.
Commodities and currencies
Commodity markets showed mixed movements, with copper emerging as the standout performer following supply disruption concerns in Indonesia. West Texas Intermediate crude rose 0.5% to $65.30 per barrel, while Brent settled above $69, supported by geopolitical tensions.
Gold edged higher by 0.3% to $3,746.59 per ounce despite a stronger US dollar, with the precious metal continuing to trade near record levels. Silver hit $45 for the first time since 2011, extending its impressive rally.
Currency markets saw broad US dollar strength, with the Bloomberg Dollar Spot Index rising 0.5%. The Australian dollar fell 0.7% to 0.6540 against the greenback, while the euro declined 0.7% to $1.1661. The Japanese yen weakened 0.6% to 149.78 per dollar.
Cryptocurrency markets faced significant pressure ahead of a $22 billion options expiry, with Bitcoin tumbling 3.7% to $109,392 and Ethereum falling 6.1% to $3,913. The crypto selloff intensified concerns about volatility in digital assets.
Economic Calendar
US:
- Personal Income Aug 22:30
- Personal Spending Aug 22:30
- PCE Price Index YoY 22:30
- Uni of Michigan Sentiment Sep 00:00
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
