Proactive Investors
Published Sep 26, 2023 09:36
Updated Sep 26, 2023 10:00
The morning catch up: Markets remain bearish on interest rates and China concerns
The ASX is likely to lose ground today after the S&P/ASX 200 closed 8 points higher, up 0.11% last night. ASX 200 futures are trading 7 points lower this morning, down -0.10% as of 8:20 am AEST.
Iron ore miners were a drag yesterday, as Chinese property developers tumbled over concerns of a possible Evergrande (HK:3333) liquidation.
Meanwhile, Qantas Airways (ASX:QAN) Ltd finished near fresh 52-week lows as investors baulked at the airline’s pricey fuel bill.
Of the sectors, Technology snapped a five-day losing streak, supported by broad-based gains from Technology One (+4.0%), Megaport (+3.3%), Xero (+2.0%) and Wisetech (+1.6%). Real Estate broke its five-day losing streak where it fell 4.4% and Materials led to the downside after a slew of negative headlines from China.
Losses today shouldn’t be too bad after the S&P 500 snapped a four-day losing streak to finish at best levels overnight.
“The rally was aided by Amazon (NASDAQ:AMZN) (+1.67%) after the head of the company's cloud unit noted he was seeing 'huge demand' for chips used in AI. Netflix (NASDAQ:NFLX) added 1.3% after striking Hollywood screenwriters reached a tentative new agreement,” noted IG Markets analyst Tony Sycamore.
“Last week's FOMC meeting reinforced our view that the interest rate market is too complacent about the possibility of one final Fed rate hike before year-end.
"However, with core PCE inflation expected to fall to 3.9% YoY from 4.2% this week, the most likely catalyst for a hawkish repricing for the November FOMC is the September non-farm payroll jobs report, due for release next week (October 6).
Markets across the globe are generally bearish on high interest rates and pessimism surrounding China.
What happened overnight?
Here’s what we saw (source Commsec):
US markets
Ended higher on Monday. Energy led the sector gainers, up 1.3%. But utilities and consumer staples fell 0.2% and 0.4% respectively.
Shares in Amazon rose by 1.7% after the mega-cap technology firm said it would invest US$4 billion in start-up Anthropic to compete with firms in the artificial intelligence sector.
Reuters reported that Chicago Fed president Austan Goolsbee said in an interview with CNBC on Monday that inflation staying above the Fed's 2% target remained a greater risk than tight central bank policy slowing the economy more than needed.
European markets
Were weaker on Monday as investors assumed interest rates would be higher for longer. Weighing on sentiment was data showing the fifth straight fall in the influential German Ifo business climate index to 85.7. Also, German 10-year yields rose to 12-year highs.
The travel & leisure sector fell by 2.9% and personal and household goods fell by 2%. Shares of China-exposed stocks fell in response to news of further weakness in the property sector. Shares in Evergrande fell 21.8% in China
Currencies
Were generally weaker against the US dollar in European and US trade.
Commodities
Global oil prices were mixed on Monday. Russia lifted the export ban on low-quality diesel, marine fuel.
Base metal prices were weaker on Monday.
What about small caps?
The S&P/ASX Small Ordinaries (XSO) was 0.25% higher at 2,735.00 yesterday.
It’s been a more solid start to the day on the small cap news front than yesterday with no public holiday to hold the market back.
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