U.S. equities edged higher after mixed trading with little economic data to drive direction while agricultural commodities gained on expectations of reduced reserves.
The S&P500 finished little changed, up just +0.04% at 3,801.19 after swinging between gains and losses in a tight range. Energy stocks outperformed +3.50% after oil rose to an 11-month high, while communication services were the worst performer, down -1.50%. The Nasdaq Composite rose +0.28%, the Russell 2000 advanced +1.77% to a new all-time high, and the VIX declined -3.11% to 23.33. Yields on government debt were little changed with the 2-year remaining at 0.145% and the 10-year declining just -1 basis point to 1.14%. The U.S. dollar index snapped a four-day winning streak, down -0.44% to 90.07.
European equities closed lower, with the FTSE100 down -0.65%, as was the CAC40 -0.20%, DAX30 -0.08% and Euro Stoxx 600 up just +0.05%. Both the Euro and Pound rose +0.45% and +1.11% against the U.S. dollar, with the latter boosted by comments from Bank of England Governor Andrew Bailey noting there were many issues associated with negative interest rates. In response bond yields jumped across the curve with the 2 and 10-year yields rising +4.1 and +4.3 basis points respectively and expectations of rate cuts were pared back modestly.
Agricultural commodities jumped after the USDA’s World Agricultural Supply and Demand reported predicted tighter global reserves due to increased demand from China. Corn futures rose +5.08%, reaching the limit-up price for the session which halted trading, wheat also benefited rising +4.73% as did soybeans +3.68%. Cotton futures also rose +1.58% after the same report estimated a weaker harvest in the U.S. due to lower production in Texas.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set for a flat open with ASX 200 futures down just -0.11% at 6,610. The ASX 200 declined -0.27% on Tuesday as a rise in financials +0.73% failed to offset declined in materials -0.80% and health care -1.02%. The major banks were all higher led by NAB +1.08%, WBC +0.99%, CBA +0.85% and ANZ +0.84%, boosted by sentiment in financials overseas thanks to steeper yield curves in the U.S. and Australia.
ARB Corporation was the top performer, up +5.75% after a trading update noting a doubling pre-tax profit from the prior year to A$72m, with auto parts sales boosted by local holidays due to travel restrictions. Super Retail Group, the operator of retail stores offering automotive parts, tools, gardening and camping products, was the second-best performer, up +5.47% after UBS upgraded the stock on better employment data, rising house prices and savings built during the pandemic. PolyNovo was the worst-performing stock, plunging -12.98% after flagging slower than expected sales in October and November.
- ECB President Lagarde Speech 20:00
- E.Z. Industrial Production (YoY Nov) 21:00
- U.S. Core Inflation (YoY Dec) 00:30
- U.S. Crude Oil Stockpiles (Jan 8th) 02:30
- Fed Beige Book 06:00
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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