US equities declined on Wednesday after the US economy expanded at a slightly slower rate than initially estimated.
United States
The second estimate of Q4 GDP showed the US economy expanded at a 3.2% annualised rate, down from 3.3% previously. The release also showed that inflation for the GDP measure came in at a 1.6% annualised rate, with core inflation coming in at a 2.1% annualised rate. This comes ahead of tonight’s PCE inflation data which is forecast to show headline prices rose 2.4% in the 12 months to January and core prices rose 2.8%.
The reaction in markets was mixed, with Treasury yields falling with both the 2 and 10-year rates down by -5 and -3.5 basis points respectively. In equities, the S&P500 was -0.17% lower along with the Nasdaq Composite -0.55% and Russell 2000 -0.77%. In terms of Fed policy makers, Susan Collins of the Bosten Fed said officials will likely lower rates later this year as inflation trends towards target. John Williams of the New York Fed said the bank still has “a ways to go” in its battle over inflation. Finally, Raphael Bostic of the Atlanta Fed said they are comfortable taking a patient approach.
Europe
European equities were mixed overnight with the Euro Stoxx 600 down -0.35% and the FTSE100 -0.76% lower, while the CAC and DAX were 0.08% and 0.25% higher respectively. There was little economic data to guide investors overnight, who will turn their attention to the latest German unemployment and inflation data for February tonight.
Australia
The ASX is expected to open weaker this morning, with ASX200 futures down -11 points or -0.14% to 7,618. The index was flat on Wednesday, finishing just -0.03% lower amid mixed sector performance with technology the star performer, up 2.87% while financials, which account for 30% of the index were -0.45% lower. Shares in Biotech Neuren Pharmaceuticals dropped -10.9% after sales of its Daybue drug failed to meet expectations, while NextDC surged 13.1% after reporting a 31% jump in revenue to $209.1m. The Australian dollar is -0.72% lower overnight at 0.6497 with the move driven by strength in the USD, as well as the latest inflation data. For the year to January, inflation rose 3.4% unchanged from December compared to estimates of 3.6%. This shows price rises remain below the RBA’s own forecast, adding to the case for rates to ease in the latter half of 2024.
Commodities
In commodities, oil prices edged lower with both WTI and Brent crude down -0.61% and -0.23% respectively. Iron ore futures in Singapore were -1.28% lower on Wednesday and are a further -0.75% lower this morning at US$115.15 and copper is -0.13% lower. Gold edged 0.16% higher overnight to US$2,033 while silver is -0.07% lower while Bitcoin continues its recent surge, up a further 6.18% to US$60,236.
Economic Calendar
29th February 2024
Australian Business Confidence (MoM Feb) 11:30
German Retail Sales 18:00
German Unemployment (MoM Feb) 19:55
German Inflation (YoY Feb) 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.
