01 Aug

The RBA left the interest rate unchanged again. Rising oil prices boost energy sector growth

August 1, 2023

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.28%, while the S&P 500 Index (US500) was up by 0.15%. The NASDAQ Technology Index (US100) closed positive by 0.21% on Monday. The Dow Jones Index closed higher for the second consecutive month. Investors are waiting for the US Federal Reserve to end its tightening cycle soon. But the market volatility indicator VIX, which is known in trading circles as the fear indicator, is still near this year’s lows and at its lowest point since the global pandemic began in 2020. That means a correction could occur on stock indices in the near term.

Energy stocks are rising on the back of Chevron’s upgrade. Energy stocks were boosted by a more than 3% increase in shares of Chevron (CVX) after Goldman Sachs upgraded the major oil company’s rating, indicating its strong growth potential. Energy stocks were also boosted by a rise in oil prices to multi-month highs amid expectations of tightening supply and rising demand.

Johnson & Johnson (JNJ) fell by 4% after a court on Friday rejected the company’s plan to put its subsidiary LTL Management into bankruptcy to deal with tens of thousands of lawsuits alleging the company’s talcum powder causes cancer.

Equity markets in Europe traded flat yesterday. Germany’s DAX (DE40) decreased by 0.14%, France’s CAC 40 (FR40) added 0.29%, Spain’s IBEX  5 (ES35) lost 0.45%, and the UK’s FTSE 100 (UK100) closed positive by 0.07%.

In the Eurozone, overall inflation fell in July, while core inflation remained unchanged. At the same time, services inflation rose again. Services inflation increased to 5.6% y/y in July from 5.4% y/y in June. An increase in services inflation is not what the ECB would like to see, as services prices are most sensitive to wage growth and could indicate that the labor market remains too tight. ECB President Christine Lagarde reiterated that the ECB could still raise rates in the future if needed, calling GDP data from Spain, France, and Germany “encouraging.” This increases the likelihood that the ECB will hold another 0.25% rate hike at its September meeting.

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The growing divergence between gold futures and the spot price indicates that traders expect the Fed to complete its rate hike cycle before the end of the year, which is expected to lead to a large influx of funds into precious metals.

Asian markets rallied strongly last week. Japan’s Nikkei 225 (JP225) rose by 1.26% yesterday, China’s FTSE China A50 (CHA50) added 0.27%, Hong Kong’s Hang Seng (HK50) gained 0.82% on Monday, and Australia’s S&P/ASX 200 (AU200) ended the day positive by 0.09%. Most Asian stocks continued to rise on Tuesday. Optimism about an improving global economic outlook amid lower inflation and sustained growth in major economies is driving capital inflows into risky stocks. Sentiment for Japanese stocks was boosted by the Bank of Japan’s emergency bond purchases, raising bets that the BOJ will not be in a rush to tighten policy.

Australia’s Central Bank left its interest rate at 4.1% for the second consecutive month but warned that some more tightening may be needed to contain inflation. The Reserve Bank of Australia (RBA) forecasts core inflation to slow to around 3.25% by the end of 2024 and return to within the target range of 2-3% by the end of 2025.

S&P 500 (F)(US500) 4,588.96 +6.73  (+0.15%)

Dow Jones (US30)  35,559.53 +100.24 (+0.28%)

DAX (DE40)  16,446.83 −22.92 (-0.14%)

FTSE 100 (UK100) 7,699.41 +5.14 (+0.07%)

USD Index  101.89 +0.26 (+0.26%)

Important events for today:
  • – Japan Unemployment Rate (m/m) at 02:50 (GMT+3);
  • – Australia RBA Interest Rate Decision (m/m) at 07:30 (GMT+3);
  • – Australia RBA Rate Statement (m/m) at 07:30 (GMT+3);
  • – German Manufacturing PMI (m/m) at 10:55 (GMT+3);
  • – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
  • – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
  • – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
  • – Canada Manufacturing PMI (m/m) at 16:30 (GMT+3);
  • – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+3);
  • – US JOLTs Job Openings (m/m) at 17:00 (GMT+3).

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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