01 Nov

Oil declines amid rising US production. RBA raises interest rate by 0.25%

November 1, 2022

By JustMarkets

The US indices fell yesterday amid weakness in the technology sector and ahead of a US Federal Reserve meeting, where a  0.75% interest rate hike is expected. At Monday’s close, the Dow Jones Index (US30) decreased by 0.39%, while the S&P500 Index (US500) lost 0.75%. The technology index NASDAQ (US100) dropped on Monday by 1.03%.

Nevertheless, experts believe the dollar’s gains could be limited if the Fed signals on Wednesday that the pace of rate hikes will slow down as it assesses the impact of its policy tightening. At the December meeting, federal funds futures forecast a 55% chance of a 50 basis point rate hike, down from 67% chance last Friday.

Famous companies reporting today are Pfizer (PFE), Toyota Motor (TM), AMD (AMD), BP (BP), Uber Tech (UBER), AIG (AIG), and Electronic Arts (EA).

Equity markets in Europe traded without a single dynamic yesterday. German DAX (DE30) gained 0.08%, French CAC 40 (FR40) dropped 0.10%, Spanish IBEX 35 (ES35) jumped by 0.51%, and British FTSE 100 (UK100) closed on Monday with a 0.66% gain.

Eurozone GDP grew slightly better than expected by 0.2% in the third quarter, indicating a clear slowdown from the 0.8% growth in the second quarter. Germany and Italy beat expectations, growing 0.3% Q/Q and 0.5% Q/Q, respectively, while Spain and France grew by 0.2% QoQ. The annualized Eurozone inflation rate reached 10.7%, against expectations of 10.3% growth. The core consumer price level, which excludes food and energy prices, rose to 5.0% from 4.8%. The purchasing managers’ composite index (PMI) showed a decline, with activity in all sectors gradually decreasing. Analysts believe a recession in the Eurozone is inevitable, and the next quarter will point to a significant drop in GDP.

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German Chancellor Olaf Scholz promised a rapid introduction of natural gas price subsidies to mitigate the impact of skyrocketing energy prices. Germany, Europe’s largest economy, is at the center of an energy crisis engulfing the continent as Russia cuts gas supplies to the region and the country assembles a 200 billion euro emergency aid package. According to the Independent Natural Gas and Heating Commission, which presented its report Monday, about half of the money must be used to subsidize households and businesses.

Although Moscow has suspended its participation in a UN program to secure ships carrying grain from Ukraine amid the ongoing war, Ukrainian President Vladimir Zelensky said his country would continue a program brokered by the UN and Turkey in July to ensure an uninterrupted supply of food products to world markets.

The US is increasing its oil production, which puts downward pressure on oil quotes. Monthly government data showed that US oil production rose to nearly 12 million BPD in August, the highest since the COVID-19 pandemic. The coronavirus outbreak in China is expanding and starting to affect other cities, dampening hopes for a recovery in oil demand.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 1.78%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.18%, and Australia’s S&P/ASX 200 (AU200) increased by 1.15%.

The Reserve Bank of Australia (RBA) raised its target interest rate by 25 basis points (BPS) to 2.85%, bringing interest rates to their highest level in 9 years. The Central Bank pledged to continue raising interest rates as necessary and will continue its data-driven approach. The RBA raised its inflation forecast for the year to 8% from 7.75%. Also, Australia’s GDP is now expected to grow by 3% in 2022, down from the previous forecast of 3.25%.

S&P 500 (F) (US500) 3,871.98 −29.08 (−0.75%)

Dow Jones (US30) 32,732.95 −128.85 (−0.39%)

DAX (DE40) 13,253.74 +10.41 (+0.079%)

FTSE 100 (UK100) 7,094.53 +46.86 (+0.66%)

USD Index 111.58 +0.83 (+0.75%)

Important events for today:
  • – Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
  • – Australia RBA Interest Rate Decision (m/m) at 05:30 (GMT+2);
  • – Australia RBA Rate Statement (m/m) at 05:30 (GMT+2);
  • – Australia RBA Governor Lowe Speaks (m/m) at 10:20 (GMT+2);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
  • – Canada Manufacturing PMI (m/m) at 15:30 (GMT+2);
  • – US ISM Manufacturing PMI (m/m) at 16:00 (GMT+2);
  • – US JOLTs Job Openings (m/m) at 16:00 (GMT+2);
  • – New Zealand RBNZ Financial Stability Report at 22:00 (GMT+2);
  • – New Zealand Unemployment Rate at 23:45 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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