Inflation in Australia is falling. US stock indices are under pressure from rising government bond yields

March 29, 2023

The US indices fell on Tuesday under pressure from rising Treasury yields amid signs that consumers remain optimistic. If the consumer confidence index is rising, it indicates the economy is not all bad, which in turn could increase the likelihood of another rate hike by the US Fed. As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 0.12%, and the S&P 500 Index (US500) fell by 0.16%. The NASDAQ Technology Index (US100) was down by 0.45% on Tuesday.

Shares of Apple (AAPL), Meta Platforms (META), Alphabet (GOOGL), and Microsoft (MSFT) ended the day down, with Microsoft coming under regulatory scrutiny. The German antitrust authority said Tuesday that it is examining Microsoft for potentially anti-competitive practices. Meanwhile, Alibaba (BABA) shares rose more than 14% after detailing plans to split the business into six divisions, each of which could raise outside capital, including through initial public offerings.

Equity markets in Europe were mostly up yesterday. German DAX (DE30) gained 0.09%, French CAC 40 (FR40) added 0.14%, Spanish IBEX 35 (ES35) increased by 0.41%, and British FTSE 100 (UK100) closed up by 0.17% on Tuesday.

European stock indexes rose for a second session on Tuesday, driven by commodities and banking stocks after a deal to buy out a bankrupt Silicon Valley bank raised hopes of containing the banking crisis. Economically sensitive sectors such as oil and gas, mining, and insurance companies were among other growth leaders in Europe.

European Central Bank (ECB) Supervisory Board Chairman Andrea Enria weighed in on further updates to the EU banking system, supporting the need for “strong and demanding supervision,” which he said is needed now more than ever. Another ECB Governing Council spokesman Mario Centeno said Monday that the European Central Bank should consider recent financial market stress when deciding on interest rates. Still, the main task now is to control inflation and bring it down to 2%.

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The OPEC+ coalition shows no sign of adjusting oil production ahead of next week’s meeting, sticking to its previously set production plan. OPEC+ leader Saudi Arabia has publicly stated that the 23-nation alliance should maintain stable supplies throughout 2023. Last week, crude oil prices fell to a 15-month low on fears that the economic fallout from the Silicon Valley Bank collapse and the Credit Suisse Group AG takeover would hurt oil demand. But oil prices have since recovered.

Gold is approaching $2,000, even as the US banking crisis subsides. The yellow metal’s behavior suggests that investors don’t think the mini-banking crisis is behind us.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.15%, China’s FTSE China A50 (CHA50) gained 0.19%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.11%, India’s NIFTY 50 (IND50) was down by 0.20%, and Australia’s S&P/ASX 200 (AU200) ended Tuesday positive by 1.04%.

Japan’s parliament on Tuesday approved a record budget of 114.38 trillion yen ($870 billion) for the new fiscal year beginning in April to strengthen defense capabilities in the face of security threats from neighbors and to support the economy in fighting inflation. The defense budget will reach 6.82 trillion yen, the largest ever. Prime Minister Fumio Kishida’s government intends to double its annual defense budget from the current 1% to about 2% of the Gross Domestic Product. About one-third of the budget of 114 trillion yen, or 36.89 trillion yen, will be used to cover social welfare costs, as Japan’s population is one of the fastest ageing in the world. Separately, the Cabinet decided to use 2.22 trillion yen ($16.82 billion) of reserve funds for the current fiscal year ending Friday to finance a new package of inflation-reducing measures. Mitsubishi UFJ Research and Consulting estimates that average Japanese households will have to spend 60,000 yen more on food in 2023 than a year earlier, as businesses are expected to raise prices in the coming months.

Australia’s inflation rate has fallen from 7.4% to 6.8% year-on-year. Such data increases the likelihood that the Reserve Bank of Australia will not raise interest rates further and will end its tightening cycle at its next meeting.

S&P 500 (F) (US500) 3,971.27 −6.26 (-0.16%)

Dow Jones (US30)32,394.25 −37.83 (−0.12%)

DAX (DE40) 15,142.02 +14.34 +(0.095%)

FTSE 100 (UK100) 7,484.25 +12.48 (+0.17%)

USD Index 102.43 −0.43 (−0.42%)

Important events for today:

– Australia Consumer Price Index (m/m) at 03:30 (GMT+2);
– US Pending Home Sales (m/m) at 17:00 (GMT+2);
– US Crude Oil Reserves (w/w) at 17:30 (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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Inflation in Australia is falling. US stock indices are under pressure from rising government bond yields