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Morning Market Wrap: U.S. equities rise to fresh records, ASX to open higher

26 Oct 2021
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U.S. equities rose to new all-time highs on Monday ahead of key earnings from technology heavyweights this week.

The S&P500 rose +0.47% lifted by gains in consumer discretionary +2.11%, technology +0.33% and communications +0.40% with 53% of stocks closing higher. The Dow Jones rose +0.18%, the Nasdaq Composite gained +0.90%, as did the Russell 2000 +0.90% with the VIX declining -1.36% to 15.22. Sentiment was lifted by Tesla Inc which advanced +12.43% after Hertz Global Holdings announced an order for 100,000 Teslas in an ambitious plan to electrify its rental-car fleet. Shares in Facebook edged +0.10% higher as of 7:16 AEDT in aftermarket trading after revenue missed estimates of $28.99b with actual of $28.28b while EPS topped forecasts of $3.17 with actual of $3.22.

Shorter-dated yields fell while longer-dated yields rose partially reversing Friday’s moves after Fed Chair Jerome Powell said inflation could last for longer than originally expected although maintained the view that inflation would likely come down as supply-chain constraints eased. The 2-year yield traded -1.6 basis points lower at 0.437% whole the 10-year edged +0.2 basis points higher to 1.634% and the 30-year rose +1.7 basis points to 2.085%. Continued gains in inflation breakevens across 5 and 10-years of +4.6 and +2.7 basis points pushed real yields lower across the same timeframes by -6.7 and -2.5 basis points respectively to -1.780% and -1.035% and the U.S. dollar index edged +0.20% higher to 93.83.

European equities were generally higher with the Euro Stoxx 600 up +0.07% as gains in materials +0.90% and financials +0.49% offset a -0.74% decline in industrials. Energy was the top performer rising +1.27% after Russian gas giant Gazprom maintained its established outlook for gas deliveries to Europe in line with its previous outlook in April before the recent energy crises had taken hold. The DAX rose +0.36% as did the IBEX +0.16%, FTSE100 +0.25% and FTSE MIB +0.92% while the CAC weakened -0.31%. 103 of the stocks in the Euro Stoxx 600 have reported quarterly earnings with 58% of companies topping analyst estimates for EPS by an average of 9.52%. 10-year yields across the region were lower ranging from -3.4 basis points in Italy to -0.4 basis points in the United Kingdom with the Euro -0.28% lower at 1.1610 and the Pound +0.09% higher at 1.3768.

*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.

The ASX looks set to open higher this morning with ASX200 futures up +14 points or +0.19% to 7,438. The index rose +0.34% on Monday lifted by materials +1.09%, energy +2.64% and financials +0.13% while technology -0.68% and industrials -0.51% lagged. Mineral resources was a notable performer, rising +9% after announcing the restart of operations at its joint venture Wodgina lithium mine which was placed into maintenance in November 2019 due to weak market conditions. Gains in oil prices lifted energy stocks with Beach Energy up +5%, Santos gaining +3.6%, Oil Search up +3.5% and Woodside Petroleum rising +3.7% after it also announced it will build a $1 billion hydrogen plan south of Perth. The yield on 10-year government bonds edged -1.2 basis points lower to 1.788% and the Australian dollar rose +0.39% to 0.7495.

Oil pared gains overnight ahead of upcoming talks between the European Union and Iran to potentially revive the 2015 nuclear deal with WTI trading -0.27% lower while Brent was +0.34% higher. Natural gas futures for delivery in the Netherlands and U.K. rose +1.83% and +1.49% respectively as Gazprom maintained its guidance for delivery to Europe for the year, while Chinese thermal coal weakened -4.81% on Monday after urging coal industry participants to “strictly” meet contractual obligations and said it will investigate energy price index providers.  Gold gained +0.79% to US$1,806 silver rose +0.99% to US$24.56 and Bitcoin rose +2.50% to US$62,689.

Economic data:

  • U.S. House Price Index (MoM Aug) 00:00
  • U.S. Consumer Confidence (MoM Oct) 01:00

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.

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