US equities were higher on Wednesday on the back of Jerome Powell’s comments that the Fed continues to expect rate cuts in 2024.
United States
The major indices in the US were higher on Wednesday on the back of Fed chairman, Jerome Powell, reiterating the view that the Fed see rate cuts later in the year should inflation and the economy evolve as “broadly expected”. On the first day of his two-day testimony, Powell restated that the Fed “would like to see more data that confirms and makes us more confident that inflation is moving sustainably down to 2 per cent” before committing to any rate cuts. Although Powell confirmed that the Fed continues to see rate cuts in 2024, he did not provide a time horizon, with current Fed fund futures pricing in a 62% chance of a rate cut in the Fed’s June meeting. Powell also sought to ease fears of the US economy entering a potential recession, adding “there’s no evidence, there’s no reason to think, that the US economy is in, or in some kind of short-term risk of, falling into recession”.
In economic data, Wednesday saw the release of the latest ADP employment data, with the report coming in below expectations of 150k at 140k. Investors will be focusing on the latest jobless claims data, with the report expected to show continuing and initial jobless claims at 1880k and 217k respectively, while focusing on the second day of Powell’s testimony.
At the close, the Dow Jones was up +0.20%, the S&P500 was +0.51% higher, and the Nasdaq Composite rose +0.58%, with the VIX at 14.50. At the close, treasury yields were relatively unchanged, with the 2-year rate up 0.4 basis points to 4.562% and the 10-year down -4.5 basis points to 4.108%, while the US dollar was -0.40% weaker.
Europe
European equities were higher on Wednesday on the back of comments from Powell boosting investor sentiment, while investors prepare for the latest ECB interest rate decision overnight. Wednesday saw the release of the latest retail sales data for the Eurozone, with the report showing retail sales rose 0.1% on the month and contracted -1.3% over the year, slightly weaker than expectations of 0.2% and -1.3% respectively. Investors will now shift their focus to the ECB meeting, where the central bank is expected to hold rates at 4.50%, while traders hope to get a better insight into the path for rate cuts.
The Euro Stoxx 600 closed +0.39% higher along with DAX +0.10% and CAC +0.28% while the FTSE100 finished +0.43% higher.
Eurozone Retail Sales (YoY %)
Australia
The ASX is expected to open higher this morning with ASX200 futures up +38 points or +0.467% to 7,749. The index rose +0.12% on Wednesday on the back of the financial sector leading gains to finish +0.80%, with information technology leading losses down -1.44%, while the Australian dollar rose +0.95% on the back of comments from Fed Chair Jerome Powell.
In stocks on Wednesday, the big banks closed higher with CBA, NAB, and Westpac up 1.2%, 1%, and 1.1% respectively, while Magellan rose 7.9 % after total funds management increased to $37.2 billion in February. While the information technology sector led declines with WiseTech sliding -2.6% on the back of traders taking profits.
In local economic data, Wednesday saw the release of the latest GDP data for the fourth quarter, with the report showing GDP rose 0.2% over the quarter and 1.5% over the year, in line with RBA expectations.
Australian GDP (Q4 %)
Commodities
Oil prices were higher on Wednesday on the back of the latest EIA report showing WTI Crude stockpiles rose by 1367k compared to expectations of 1720k, signalling an improvement in demand. WTI and Brent crude were up +1.23% and +1.05% respectively to US$79.12 and US$82.90 a barrel. Iron ore futures in Singapore finished +0.74% higher on Wednesday and are up +0.36% this morning to US$115.70, with copper also +0.53% higher. Gold has continued its recent rise, up a further 0.84% overnight to US$2,145 while silver is +2.06% higher along with Bitcoin +5.44%.
Economic Calendar
7th March 2024
Australian Balance of Trade (MoM Jan) 11:30
ECB Interest Rate Decision 00:15
US Jobless Claims 00:30
ECB Press Conference 00:45
Fed Chair Powell Testimony 02:00
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.
