30 Aug

Stock indices were supported amid weak US economic data. Australia is experiencing a drop in inflation

August 30, 2023

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) increased by 0.85%, while the S&P 500 Index (US500) added 1.45%. The NASDAQ Technology Index (US100) closed positive by 1.74% on Tuesday. The S&P 500 Index (US500) hit a 2.5-week high, the Dow Jones Industrials (US30) hit a 1.5-week high, and the Nasdaq 100 Index hit a 3-week high. The stock indexes rose after weaker-than-expected economic news from the US on Tuesday regarding JOLTS job openings for July and consumer confidence for August, pushing bond yields lower and raising the possibility that the Federal Reserve will pause its rate hike campaign.

US JOLTS job openings for July fell by 338,000 to a 2-year low of 8.827 million, weaker than expectations of 9.500 million. The Conference Board’s US consumer confidence index for August fell by 7.9 to 106.1, weaker than expectations of 116.0. Today, the US will release GDP data for August as well as labor market data from ADP. GDP growth on the back of solid labor market data may give confidence to the dollar and correct stock indices.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) climbed 0.88%, France’s CAC 40 (FR40) gained 0.67%, Spain’s IBEX 35 (ES35) jumped by 1.05%, and the UK’s FTSE 100 (UK100) closed positive by 1.72%.

As the ECB’s September meeting approaches, hawks have begun to actively advocate for policy tightening. Market pricing for the September meeting is likely what ECB policymakers are concerned about. Markets are very reluctant to price in the possibility of another rate hike from the ECB, and the implied probability of a September rate hike is below 50%. But a lot will depend on Eurozone inflation data to be released today and tomorrow.

Asian markets were also mostly up yesterday. Japan’s Nikkei 225 (JP225) increased by 0.18%, China’s FTSE China A50 (CHA50) gained 0.52%, Hong Kong’s Hang Seng (HK50) added 1.95% on Tuesday, and Australia’s S&P/ASX 200 (AU200) was positive by 0.71% yesterday.

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China’s actions over the weekend to stimulate its markets have sparked optimism about a possible resumption of economic growth, which is having a positive impact on energy demand and crude oil prices. In addition, gains in US stock markets on Monday boosted confidence in the economic outlook, supporting energy demand. But investors are refraining from taking large oil positions ahead of the release of key economic indicators from the US and China later this week.

Australia’s ASX 200 Index (AU200) was the best performer among its peers on Wednesday, rising more than 1% after data showed that the Consumer Price Index (CPI) declined more than expected in July (from 5.4% to 4.9% y/y, expectation 5.2% y/y). The data suggests that the Reserve Bank of Australia’s aggressive rate hikes are taking their toll, which in turn gives the central bank less incentive to raise interest rates further. However, separate data showed that Australia’s new construction fell in July, and current construction also rose less than expected in the second quarter, suggesting that high-interest rates are putting pressure on the country’s real estate market. Australia’s economic growth is expected to slow this year.

Japan’s unemployment rate rose in July for the first time in four months, while a measure of labor demand fell slightly. The number of employed people fell by 100,000 from the previous month, while the number of unemployed rose by 110,000. The weakening labor market risks triggering a negative spiral that would lead to lower wage growth, which is contrary to the BoJ’s plans as the BoJ wants demand to fuel inflation rather than cost increases.

China is set to cut mortgage interest rates by trillions of yuan for the first time since the global financial crisis. In addition, China’s state-owned banks plan to cut deposit rates for the third time in a year.

S&P 500 (F)(US500) 4,497.63 +64.32 (+1.45%)

Dow Jones (US30) 34,852.67 +292.69 (+0.85%)

DAX (DE40)  15,930.88 +138.27 (+0.88%)

FTSE 100 (UK100) 7,464.99 +126.41 (+1.72%)

USD Index  103.44 -0.62 (-0.60%)

Important events for today:
  • – Australia Consumer Price Index (m/m) at 04:30 (GMT+3);
  • – German Consumer Price Index (m/m) at 15:00 (GMT+3);
  • – US ADP Non-Farm Employment Change (m/m) at 15:15 (GMT+3);
  • – US GDP (m/m) at 15:30 (GMT+3);
  • – US Pending Home Sales (m/m) at 16:45 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (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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