United States
Wall Street clawed back some recent losses overnight as technology stocks led a broad recovery, though gains were tempered after Federal Reserve minutes revealed some policymakers are open to lifting interest rates if inflation proves stubborn.
The S&P 500 advanced 0.6% to around 6,880, while the Nasdaq 100 added 0.8% and the Dow Jones Industrial Average gained 0.3%. About 320 of the 500 stocks in the benchmark index finished in the green, a sign of improving breadth after weeks of concentrated selling driven by artificial intelligence disruption fears.
The session was characterised by a tug of war between solid economic data on one hand and hawkish Fed signals on the other. US industrial production climbed in January by the most in nearly a year, orders for business equipment came in stronger than expected in December, and housing starts hit a five-month high. The data collectively painted a picture of an economy in good health, supporting risk appetite early in the day.
Minutes from the Fed’s late January meeting proved the fly in the ointment. While the vast majority of policymakers voted to hold rates steady, a handful flagged the possibility of tightening if inflation fails to cool further. The revelation caused equities to pare their earlier gains and reinforced market expectations that rate cuts remain firmly off the table for the foreseeable future. Treasury yields edged higher, with the 10-year note adding two basis points to 4.08%.
Chipmakers and software firms led the rebound, with a gauge of semiconductor stocks climbing 1% and an ETF tracking software companies jumping 1.3%. Retail traders were particularly active, snapping up technology shares at a record pace on at least one major platform. The buying spree reflects a growing view among investors that the recent AI-driven selloff in software stocks was an overreaction, and that the market is approaching a bottom.
On the corporate front, Palo Alto Networks tumbled after delivering a weaker-than-expected earnings forecast. EBay topped estimates, crediting its focus on luxury and refurbished goods. DoorDash disappointed with a soft outlook, flagging the impact of winter storms and growth investments. Booking Holdings delivered upbeat first-quarter gross bookings, pointing to ongoing strength in travel spending. Berkshire Hathaway trimmed its Amazon stake by more than 75% in the December quarter while picking up shares in the New York Times. Options markets are also in focus, with around $3 trillion in US-listed contracts set to expire on Friday in what would be the largest February expiry on record.
Europe
European stocks powered to a fresh all-time high, with the Stoxx 600 advancing 1.2% for a third consecutive day of gains. The rally was driven by an ongoing rotation into European equities from US counterparts, with investors drawn to strong earnings and improving sentiment across the continent.
Defence names were among the standout performers as geopolitical tensions kept demand elevated. BAE Systems surged 4% on strong cash flow and encouraging guidance, while Rheinmetall jumped 5.1% and Leonardo added 4.7% after inking a cybersecurity cooperation agreement. The broader industrials sector closed at a record high, gaining 2%.
Mining stocks bounced strongly after four straight sessions of declines. Glencore delivered a solid earnings beat, rising 4.5%, while Antofagasta surged 10.6% as copper prices climbed. Rio Tinto added 3.8% after lifting its stake in Canadian lithium miner Nemaska ahead of its own results. The basic resources sector as a whole gained 4.2%.
Energy was another bright spot, climbing 2.2% to its highest level since 2007 as oil prices surged on mounting fears of a US-Iran military confrontation. Aker BP, Equinor and Siemens Energy were the largest contributors to the advance. Banks also had a strong session, posting their biggest single-day gain in more than three months with a 2.1% advance, led by SocGen, Santander and NatWest.
On the downside, chemicals fell 1% after IMCD missed expectations across multiple metrics. Bayer dropped 7.1% amid uncertainty over its Roundup lawsuit settlement strategy. EssilorLuxottica shed 2.9% on reports Apple is fast-tracking development of competing smart glasses. Telecoms retreated 0.8%, dragged lower by Deutsche Telekom, Telefonica and BT.
Australia
Australian shares are set for a firmer open, with ASX 200 futures pointing up 0.3% to 8,995 ahead of what shapes up as one of the busiest reporting days of the current earnings season.
Today’s results calendar is extensive. Wesfarmers delivered a solid first-half performance, with group net profit rising 9.3% to $1.6 billion on a 3.1% lift in sales to $24.2 billion, underpinned by Bunnings and Kmart. Telstra boosted its share buyback to $1.25 billion after posting a 9.4% jump in interim net profit to $1.1 billion. Transurban swung to a $343 million net profit from a $15 million loss a year earlier. Brambles lifted its interim dividend 21% after growing net profit 14% to $US511 million, though it trimmed full-year revenue guidance slightly given expectations for softer consumer spending.
On the resources side, Sandfire Resources nearly doubled half-year net profit to $US97.1 million on surging copper prices, while Regis Resources posted a record $323 million net profit, up 265%, as gold’s rally delivered a 52% increase in the average realised price. Whitehaven Coal swung to an underlying loss of $19 million as coal prices fell sharply. PLS Group and IGO both narrowed their losses as lithium markets showed signs of life.
Broker activity included upgrades for Santos at both Evans & Partners and RBC, with Suncorp and Technology One lifted to outperform at Macquarie. Dexus was raised to hold at Jefferies. Healius was cut to neutral at Evans & Partners.
January employment data is due at 11:30am, with NAB forecasting a 20,000 gain in jobs alongside a modest rise in the unemployment rate to 4.2%.
Commodities and currencies
Oil surged overnight on fresh concerns about the prospect of a US-Iran conflict, with reports suggesting American military action could come sooner than anticipated. Brent crude jumped 4.2% to $US70.24 a barrel, while West Texas Intermediate gained 4.9% to $US65.39.
Gold continued its impressive run, rising 2.1% to hover just below $US5,000 an ounce at $US4,985. Iron ore eased 0.3% to $US95.95 a tonne as stockpile concerns weighed.
The Australian dollar weakened 0.7% to US70.35 cents as the greenback strengthened broadly following the Fed minutes. The euro fell 0.6% to $US1.1784, while the Japanese yen retreated 1% to 154.80 per dollar.
Bitcoin fell 2.3% to $US66,103, with ethereum declining 3.1% to $US1,937.
Economic Calendar
AU:
- Unemployment Change 11:30
- Unemployment Rate 11:30
US:
- Trade Balance 00:30
- Wholesale Inventories MoM 00:30
- Initial Jobless Claims 00:30
- Leading Index 02:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
