“You have better than expected earnings, a Fed that is following a well telegraphed path and the economic data for the most part has seen some sequential improvement as we start to get the October reports,” said Art Hogan, chief market strategist at National Securities in New York.
“You put all those things together, and you get markets ultimately making new highs.”
In a review of the week’s central bank meetings, Capital Economics’ Jonas Goltermann said the RBA, Fed and Bank of England “all delivered relatively dovish policy announcements, pushing back, to varying degrees, against the relatively aggressive policy rate paths discounted in money markets”.
As a result, Capital Economics sees a re-steepening of yield curves as shorter-term yields ease and longer-term yields rise amid a reset of rate expectations – rates will start to rise somewhat later than investors anticipated prior to this week.
Local: RBA Statement on Monetary Policy at 11.30am AEDT
Overseas data: China third quarter current account, October trade data; German industrial production September; US October jobs report, September consumer credit
ASX futures up 9 points or 0.1 per cent to 7408 at 4.20am AEDT
- AUD -0.7% to 73.97 US cents
- Bitcoin on bitstamp.net -2.1% to $US61,159.89 near 4.20am AEDT
- On Wall St near 1.30pm: Dow -0.3% S&P 500 +0.2% Nasdaq +0.8%
- In New York: BHP -1.2% Rio -2.4% Atlassian +0.8%
- Tesla +1.9% Apple -0.2% Amazon +2.8% NYSE Fang +1.1%
- In Europe: Stoxx 50 +0.6% FTSE +0.4% CAC +0.5% DAX +0.4%
- Spot gold +1.3% to $US1792.23/oz at 1.09pm New York time
- Brent crude -0.4% to $US81.70 a barrel
- US oil -0.7% to $US80.32 a barrel
- Iron ore % to $US a tonne
- 2-year yield: US 0.42% Australia 0.62%
- 5-year yield: US 1.12% Australia 1.35%
- 10-year yield: US 1.52% Australia 1.82% Germany -0.23%
- US prices as of 1.33pm in New York
From today’s Financial Review
Domino’s, Inghams investors start to fear cost crunch: A market punishing of Domino’s and Inghams signals that food companies must show they can pass on rising costs, or risk investor wrath.
Moderna slashed the 2021 sales forecast for its COVID-19 vaccine by as much as $US5 billion, grappling to fill vials and distribute them to meet unprecedented world demand, sending its shares tumbling.
On the pending October jobs report from Morgan Stanley: “We expect nonfarm payrolls increased by 460,000 in October. After falling last month, we expect participation to rise 0.1pp, lowering the unemployment rate to 4.6 per cent. We expect average hourly earnings rose 0.4 per cent over the month, lifting the year-over-year rate from 4.6 per cent to 4.9 per cent.”
Bank of England defies markets, keeps interest rates on hold: The decision is likely to raise questions about the credibility of the bank and especially governor Andrew Bailey.
European shares rose for a fifth straight session on Thursday to hit record highs. The pan-European STOXX 600 closed 0.4 per cent higher.
The STOXX 600 has hit a series of all-time highs in November, driven by a relatively strong earnings season despite rising cost pressures.
The euro zone’s volatility gauge fell further to its lowest since mid-June.
Gains on the STOXX 600 were led by a 2.3 per cent jump in real estate stocks after a takeover offer for German real estate company Alstria Office REIT AG from Canadian investment firm Brookfield.
Drugmaker Roche gained 0.5 per cent after it bought back its nearly one-third voting stake from rival Novartis for $US20.7 billion. Novartis was up 2.4 per cent.
Germany’s blue-chip index DAX rose 0.4 per cent, hitting a record high, after strong earnings from Deutsche Post led to a 3.0 per cent rise in its stock.
China stocks rose on Thursday after three straight sessions of falls, as consumer staples and automobiles jumped, a day after the government advised people to stock up on essential groceries for the winter.
The blue-chip CSI300 index rose 1 per cent to 4868.74, while the Shanghai Composite Index gained 0.8 per cent to 3526.87.
Consumer staples gained 2.8 per cent, with liquor makers surging 4.3 per cent.
In Hong Kong, the Hang Seng Index rose 0.8 per cent to 25,225.19, while the China Enterprises Index gained 1.1 per cent to 8953.12 points.
The Hang Seng Tech Index gained 1.6 per cent, with tech giants Meituan, Alibaba Group and Tencent Holdings up more than 2.5 per cent each.
Tencent touted progress in semiconductor chip development and investment on Wednesday, offering a rare public glimpse of its R&D initiatives.
Automaker BYD jumped 7.8 per cent and was the biggest percentage gainer on the Hang Seng, after data showed its total sales volume of new energy vehicles from January to October surged 212 per cent year-on-year.
Economists accelerate RBA rate timing on inflation fears: Economists have brought forward their forecasts on the first cash rate increase by six months to February 2023 after the RBA upgraded its inflation outlook.
Some Bank of England comments:
RBC Capital Markets said it maintains its forecast that the MPC will lift the bank rate when it meets on December 16.
“Market implied Bank Rate expectations, via the spot SONIA forwards, are now pricing-in a 15bps hike in December followed by 25bps in February, and hence sees an 85 per cent probability that Bank Rate will be at 0.5 per cent before the 7th March 4 per cent 22 gilt redemption.
“The market also now sees Bank Rate reaching the 1 per cent level, which would trigger active gilt sales by the BoE, to be reached by the end of 2022 vs June 2022 pre-MPC and also now sees Bank Rate reaching its highest level of 1.17 per cent in September 2023 vs 1.38 per cent pre-MPC.”
TD Securities, which had expected a rate hike this meeting, said the message from the BoE was clear, it’s willing to be patient. “The messaging today was cautious, and with a 7-2 vote to hold Bank Rate, it’s clear that the committee isn’t chomping at the bit to hike rates. We continue to expect a gradual pace of rate hikes from here.”
TD also said: ”Looking forward, we expect the MPC to hike Bank Rate in February 2021, taking Bank Rate to 0.25 per cent, though a December hike can’t be ruled out. While the MPC expects inflation to peak around 5 per cent y/y in April, we expect the pace of hikes in 2022 to be measured: uncertainty around COVID, the persistence of supply shocks and re-opening mis-match, and Brexit, remain elevated.
“We look for a subsequent 25bps hikes in August and November, followed by two more hikes in 2023. This means the MPC will need to make a decision on reinvestments after its August 2022 meeting, and a decision on active selling of Gilts following its February 2023 meeting.”
Aluminium prices fell sharply on Thursday as the biggest producer China said its coal output had shot up and would continue to rise, helping to ease a power crisis that has forced smelters to produce less metal.
Benchmark aluminium on the LME was down 3.3 per cent at $US2568.50 a tonne at 1604 GMT after touching $US2552, its lowest since August 20.
Prices have tumbled 20 per cent from a 13-year high of $US3229 a tonne in mid-October. Chinese coal prices peaked around the same time and have since fallen by around 50 per cent.
“Firing up the smelters!!” said a trader in London, referring to China’s coal output.
Chinese stainless steel futures fell more than 2 per cent on Thursday as traders anticipated higher production this month after some key producing regions relaxed power curbs.
Planned stainless steel output in November is expected to rise 14.4 per cent from a month earlier, analysts with GF Futures wrote in a note, citing data from Mysteel consultancy.
“Jiangsu and Fujian provinces have eased controls on power consumption, capacity at steel mills is gradually recovering,” according to GF Futures.
The Baltic Exchange’s dry bulk sea freight index fell for the 11th straight session on Thursday, dragged lower by a dip in rates across its vessel segments.
The overall index, which factors in rates for capesize, panamax and supramax vessels, fell by 123 points, or 4.3 per cent, to 2769, its lowest level in five months.
ASX rallies late to rise 0.5pc: The Australian sharemarket was buoyed by a solid session from technology and financial stocks that offset weakness from the energy sector.
Chanticleer: Two strategies investors are using to deal with climate concerns: Investors are increasingly using two tactics to address climate concerns: asset-level engagement and flat out exclusion.