Wall Street saw a strong trading session to start the week and Asian stocks were likewise mostly higher on Tuesday as the narrative set in that the Federal Reserve (Fed) is likely done hiking interest rates and may even begin cutting rates as early as the spring. Yields on ten-year US Treasuries fell below the 4.4% mark while the dollar was hovering around two-month lows versus other major currencies. Investors will focus on Tuesday on the minutes of the Fed last monetary policy meeting, due out late today.
In macroeconomic data, the Conference Board Leading Economic Index was down by 0.8 per cent in October, coming in at 103.9 after falling in September as well. The Leading Economic Index was flashing recession in the near term. Bad news once again proved to be good news with stock indices in New York rallying on Monday and tech stocks being the biggest winners. The Dow Jones Industrial jumped 0.6% and the S&P 500 gained 0.7%. The Nasdaq-100 ended Monday’s session 1.2% higher. Microsoft shot up 2% after Sam Altman, who was ousted as the head of ChatGPT maker OpenAI just days ago, was appointed to lead a new AI team at the software giant.
The dollar fell on Monday as the peak rates narrative dominated market sentiment and market participants began considering when the Fed could begin cutting rates. The dollar index continued declines from last week while the euro reached a multi-month high against the greenback trading around USD 1.095.
In the Asia-Pacific region, stock markets followed Wall Street and were mostly trading higher on Tuesday. The biggest winners could be found in tech and the Chinese property sector after media outlets reported that a series of Chinese real estate companies may soon be receiving government financing. Japan’s Nikkei 225 closed 0.1% lower while South Korea’s Kospi jumped 0.8%. In Australia, the S&P/ASX 200 gained 0.3%. Hong Kong's Hang Seng Index was up 0.1%, while the Shanghai Composite slipped 0.1%.
In Europe, the German Producer Price Index (PPI) slipped again in October, the fourth consecutive month of shrinking prices for producers in Europe’s largest economy. German PPI was down 11% when compared with the same month a year ago. Energy and metal prices were the main drivers of the lower PPI. This time last year, Germany was entering a period of uncertainty regarding energy supplies as the war in Ukraine was putting constraints on supplies just as winter approached. Germany’s DAX was down 0.1% on Monday and the Euro Stoxx 50 finished the session slightly higher.
Oil prices rose to start the week with Brent trading near USD 83 and WTI around USD 78 per barrel on Monday after media reports emerged stating that the group of oil producing nations known as OPEC+ are considering further supply cuts at their next meeting at the weekend. The prices came down slightly on Tuesday. Oil prices have slumped nearly 20% since September despite OPEC+ limiting oil exports since late last year in an effort to prop up prices. Slowing global economic output are driving energy prices lower.
Corporate news in focus: Quarterly figures from Nvidia and Best Buy.
Economic data in focus: Swiss trade balance (08:00 CET), Bank of England Governor Andrew Bailey speaks in British parliament (11:15), Chicago Fed National Activity Index (14:30), US existing home sales (16:00), European Central Bank President Christine Lagarde speaks at German Finance Ministry (17:15), FOMC meeting minutes (20:00).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.