United States
Wall Street delivered another session of mixed fortunes overnight, with the technology-heavy sectors charging ahead while broader market participation remained tepid. The S&P 500 edged up 0.2% to close around 6,850, though beneath the surface, more than 300 companies in the index actually retreated. The Nasdaq gained 0.5%, whilst the Dow slipped 0.5%.
The standout performer was Amazon, which surged 4.1% after announcing a massive $38 billion deal with OpenAI to supply computing power through Amazon Web Services. The ChatGPT maker will gain access to hundreds of thousands of Nvidia graphics processing units as part of a seven-year arrangement, underscoring the insatiable demand for AI infrastructure.
The Magnificent Seven group of mega-cap tech stocks collectively rose 1.2%, continuing their dominance of market returns. Nvidia itself climbed 2.3%, with one analyst from Loop Capital raising their price target to a street-high $350, suggesting potential gains of 75% from current levels. However, the rally’s narrow breadth is raising eyebrows among some strategists. The S&P 500’s equal-weighted version, which gives smaller companies the same influence as tech giants, actually fell during the session. Several Wall Street commentators noted that whilst November historically delivers strong returns for equities, the market’s recent six-month winning streak may have already priced in much of the seasonal strength.
On the economic front, US factory activity contracted for an eighth consecutive month in October, though inflationary pressures showed signs of easing. Federal Reserve officials offered mixed signals on the prospect of a December rate cut, with the probability standing at 65% by day’s end. Governor Stephen Miran maintained that policy remains too restrictive, whilst Chicago Fed President Austan Goolsbee expressed concerns about persistent inflation.
Microsoft also made headlines, signing a $9.7 billion deal with Sydney-based Iren for AI computing capacity, marking the Australian company’s largest customer win.
Europe
European markets managed modest gains, with the Stoxx 600 nudging up 0.07% despite weakness in several key sectors. Travel and leisure stocks led the advance, with Ryanair jumping 4% to an all-time high following bullish comments from management about exceeding passenger growth targets. Lufthansa added 5.7% after strike updates and positive analyst commentary.
The automotive sector outperformed after China announced it would ease chip export restrictions, alleviating concerns about supply disruptions for European carmakers. Mercedes-Benz rose 2%, whilst Volkswagen gained 2.3%.
However, miners suffered their worst session in months, with the sector falling 1.5% after disappointing economic data from China added to worries about demand. Rio Tinto dropped 2.3%, Anglo American declined 2.6%, and Glencore shed 2.1%.
The chemicals sector also struggled, sliding to its lowest level since April with a 0.6% decline. Media stocks fared even worse, plunging 1.8% to mark their weakest close since November 2023.
Australia
The local market faces a critical day ahead, with all eyes firmly fixed on the Reserve Bank’s policy statement due at 2:30pm AEDT, followed by Governor Michele Bullock’s press conference an hour later.
Expectations for near-term rate relief have evaporated following last week’s hotter-than-expected inflation data. The third quarter CPI figures showed headline inflation at 3.2% year-on-year, the highest in more than a year, with the trimmed mean measure rising to 3%, both exceeding the RBA’s forecasts.
Market analysts now anticipate the central bank will maintain its hawkish stance, with Janus Henderson pushing back its expectations for rate cuts to the first half of 2026. The firm now forecasts just two reductions taking the cash rate to 3.10%, suggesting policy will remain above neutral for an extended period.
Australian bond yields rose in response, with three-year yields climbing to 3.64% and ten-year yields reaching 4.34%.
Sydney-based Iren soared 13.4% in offshore trading following news of its substantial Microsoft deal, which is expected to generate billions in revenue over five years.
Commodities and currencies
Oil markets found support after OPEC announced it would pause production increases through the first quarter of 2026, responding to fresh uncertainty over Russian supply following new US sanctions. Brent crude edged up 0.1% to $64.86 per barrel.
Gold continued its remarkable run, adding 0.2% to trade at $4,011.42 per ounce, hovering near record levels as investors maintained their safe-haven positions.
Iron ore declined 1.3% to $104.75 per tonne, weighed down by concerns about Chinese demand and the looming threat from Guinea’s Simandou project, which could significantly disrupt the market dynamics currently dominated by Australian and Brazilian producers.
The Australian dollar slipped 0.1% to US65.39 cents, whilst Bitcoin retreated 3% to $106,645 as cryptocurrency markets consolidated recent gains.
Economic Calendar
US:
- Trade Balance Sep 00:30
- Factory Orders Sep 02:00
- Durable Goods Orders Sep 02:00
AU:
- RBA Cash Rate Target 14:30
This article was written by James Woods, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
