Stock markets slowed their gains after the confirmation of a 2 million barrels cut in OPEC+ supply and the release of better-than-expected service sector business confidence data in the United States, which suggests that the economy continues to expand. Both data point to the fact that the Fed has no reason to slow the pace of rate hikes. In conjunction, two Fed committee members signaled yesterday that it is highly unlikely to see rate cuts in 2023, maintaining the Fed’s aggressive message.
Nevertheless, the indices, after starting the session with sharp declines, rebounded to close with modest losses and with the S&P 500 comfortably above 3,700 points. On the other hand, fixed income began to unwind the gains, recognizing that signs of weakness in the US economy appear premature to give way to a rapid change of stance by central banks. In addition, investors are still awaiting U.S. employment data due tomorrow and inflation data next week, which will also be coupled with the start of the U.S. earnings season.
The rebound in the US session was led by the technology sector. The good performance of the technology sector boosted the index to the point where it turned positive for the day, although in the end it was not enough and the stock markets ended with modest losses. Rises in the energy sector (+2%) also helped, favored by the rebound in oil prices. On the negative side, the sectors most sensitive to the rise in interest rates, such as utilities (-2.25%) and real estate (-1.9%). In addition, investors are waiting for the results season that will start next week, starting with the main players in the financial sector.
Setbacks on the stock markets of the old continent (EuroStoxx 50 -1.0%; Ibex -1.5%). The session confirmed, on the one hand, a significant cut in crude oil production by OPEC, on paper up to 2 million barrels, which only favored the oil sector (Exxon +4%; Repsol +2.5%; Eni +1.5%). On the other hand, the day saw the release of several macro data releases in the US. In addition, several US macro data releases – private job creation, service sector activity – indicated that the US economy continues to show signs of strength, which is an impediment to the Fed’s change of tone.
By sectors, in the Stoxx 600 only Energy (+0.6%) escaped declines, in contrast to Real Estate (-4.1%) and Autos (-2.7%). In Spain, there were no advances apart from Repsol, while the falls were led by stocks linked to the cycle or with high debt, such as Colonial (-5.1%), Meliá (-5%) and Grifols (-4.8%).
Asian stock markets rose for the third consecutive day. The MSCI Asia Pacific index advanced 0.6%, boosted by technology companies such as Taiwan Semiconductors, Samsung and Sony. It is precisely the Korean and Japanese stock exchanges that lead the advances in the region, with rises for both the Korean Kospi (+1%) and the Japanese Nikkei (+0.7%) and Topix (+0.5%) indices. In Hong Kong, the Hang Seng is down 0.4% this morning, after the previous day’s strong rally and with modest trading volumes as mainland Chinese markets remain closed for Golden Week.
Fixed income is not buying a quick turnaround from the Fed. Called yields rose sharply again in both the United States and Europe, a move that was also accompanied in both curves. On the European side, the German 10-year bond yield this morning is back above 2%, while European spreads widened slightly yesterday but remain below the highs we saw in June, with the Italian 10-year bond spread at 240bp.
In the currency market, yesterday’s gains were seen for the dollar, which retained the euro’s rally of recent days. Yesterday it rose by +1.20% at the close. This morning it opens with slight corrections of -0.1%, with the cross at 0.9894 EUR/USD. On the pound side, yesterday there were some corrections of -0.26%, which added to today’s -0.16%, move the cross to 0.8739 EUR/GBP.
As for commodities, yesterday we again saw rises in the oil market. The Brent benchmark appreciated +1.71% yesterday, opening this morning with slight corrections of -0.16%. The price of the barrel is currently at $93.22 dollars. The cut approved by OPEC+ yesterday at a rate of two million barrels per day ended up boosting the price. Regarding gold, yesterday we saw the first negative close of the session in the last 7 days, where the bullion depreciated -0.57%. This morning, it is up +0.3% for the moment, with a valuation of $1,721 per ounce.