Opening Call: The Australian share market is to open higher.
U.S. stocks rose, capping a volatile week as investors weighed recent economic data and hawkish comments from Federal Reserve officials. The yield on the 10-year Treasury rose to 3.83%, while the two-year yield reached 4.51%, resulting in the widest inverted gap in 40 years. The WSJ Dollar Index climbed to 99.72. Oil prices fell and logged a 10% weekly drop, the largest in about seven months. Fed hawkishness also pushed gold prices lower.
Australia’s S&P/ASX 200 ticked up 0.2%, a late-afternoon dip snapping its run of three consecutive weekly gains. The benchmark index finished down less than 0.1% for the week. Energy stocks were the biggest drag on the index, falling alongside lower oil prices.
Stocks rose, capping a tumultuous week with investors assessing the outlook for interest rates. The S&P 500 gained 0.5%, while the Nasdaq Composite edged ahead less than 0.1%. The Dow Jones Industrial Average ticked up 0.6%. For the week, the Dow industrials finished roughly flat. The S&P 500 and Nasdaq Composite notched weekly declines of 0.7% and 1.6%, respectively.. A slowdown in inflation sent stocks ripping higher the prior week, and the dollar and bond yields into retreat, with the S&P wrapping up its best stretch since the summer. But in recent days, hopes that the Federal Reserve will back off its campaign of aggressive interest-rate increases have faded somewhat.
“We had a 6% rally in the S&P 500 last week. We don’t think the Fed wants to see a return of the animal spirits,” said Derek Amey, co-chief investment officer at Strategic Point Investment Advisors in Rhode Island. Amey said he is hiding out from the volatility by holding industrials and healthcare stocks along with bonds. “There is nothing that guarantees that inflation is behind us,” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “Where it settles out is really what’s most important here. Do we go back to its pre-Covid trend of 1 to 2% or settle out at 3 to 4%?”
Gold prices ended the week lower, a day after St. Louis Federal Reserve President James Bullard suggested that the Fed’s benchmark policy might need to rise as high as 7%. Gold prices for December fell 0.5% to end at $1,754.40 per ounce. The most-active contract ended the week with a 0.9% loss after rising more than 5% the prior week. “Gold is proving to be impressively resilient despite a reality check from Federal Reserve officials on the prospect of any pivot away from the bank’s series of interest rate hikes,” said Rupert Rowling, a market analyst at Kinesis Money.
Oil futures logged their second straight weekly declines, pressured as a resurgence of Covid-19 worries clouded the energy demand picture, and broader markets kept eyes on a hawkish Federal Reserve. U.S. crude prices ended at their lowest since late September, as China’s zero-Covid policy revived concerns the world’s second-largest economy would buy less oil and gas. West Texas Intermediate crude for December delivery fell 1.9% to settle at $80.08 a barrel on the New York Mercantile Exchange.
January Brent crude shed 2.4% to $87.62 a barrel on ICE Futures Europe. “The market will no doubt be focusing its attention on OPEC+ supply in the next few weeks, as it remains to be seen how much daily output will actually decline after the official announcement of a 2-million-barrel reduction,” said Barbara Lambrecht, writing for the Commerzbank commodities research team, in a daily note.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from US$1.0390 to US$1.0310 and was near US$1.0325 at the close of US trade. The Aussie dollar fell from highs near US67.30 cents to US66.60 cents and was near US66.70 cents at US close. And the Japanese yen eased from near 139.65 yen per US dollar to near JPY140.40 and was around JPY140.35 at the US close of trade.
European sharemarkets were firmer on Thursday. Autos rose 2.1% with retailers up 0.8%. Shares in Austrian hydropower producer Verbund and energy and environmental services provider EVN rose by between 6-9% after the Austrian government announced plans to introduce a temporary windfall tax of up to 40% for oil, gas and power companies. The continent-wide FTSEurofirst 300 index rose by 1.1%. And the UK FTSE 100 rose by 0.5%.
Earlier Friday, Chinese shares ended mixed, dragged down by electronics and lithium producers as daily Covid-19 cases rose above 25,000, focusing attention on the pandemic once again. The Shanghai Composite Index dropped 0.6%. The Shenzhen Composite Index gave up 0.5% but the ChiNext Price Index added 0.2%. Investors will be watching for PBOC’s loan prime rate announcement due Monday.
Hong Kong’s Hang Seng Index lost 0.3%, extending its losing streak to a third session, weighed by rising Covid-19 cases in China and fading hopes that the Fed may slow its pace of interest-rate increases. The Nikkei Stock Average slipped 0.1%, as investors continued to digest data that showed that Japan’s overall October consumer inflation rose on year as well as comments by Bank of Japan Governor Kuroda that the central bank will support economic recovery by continuing its program of monetary easing.