Global Markets Report - 24 January
Australian shares are set to gain today after US indices rallied on Monday.
Australia
Australian shares are set to edge higher after Wall Street ended Monday in the green.
ASX futures were up 12 points or 0.16% at 7413as of 8:00 am on Monday, pointing to a gain at the open.
US stocks rose Monday as investors bet the Federal Reserve will dial back its interest-rate increases and braced for a busy week of corporate earnings reports. The S&P 500 added 0.9%. The Dow Jones Industrial Average gained 0.5%. The Nasdaq Composite moved 1.7% higher.
The central bank is preparing to slow its rate increases for a second consecutive meeting, The Wall Street Journal reported Sunday. Officials are set to consider a smaller quarter-percentage-point lift at its policy meeting next week, while deliberating what economic signals they would need to see before pausing rate rises this spring.
"Investors are under the impression that the Fed will likely raise rates by a lesser amount at the upcoming meeting. That's an encouragement to investors," said Sam Stovall, chief investment strategist at CFRA Research.
In commodity markets, Brent crude oil gained 0.43% to $US88.01 a barrel, gold edged up 0.15% to US$1,928.93.
In local bond markets, the yield on Australian 2 Year government bonds rose to 2.96% while the 10 Year rose to 3.44%. Overseas, the yield on 2 Year US Treasury notes declined to 4.23% and the yield on the 10 Year US Treasury notes was down at 3.52%.
The Australian dollar hit 70.17 US cents up from the previous close of 69.67. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged up to 95.21.
Asia
The stock markets in China and Hong Kong are closed for the Lunar New Year Holiday.
Japanese stocks ended higher, led by gains in electronics and tech shares, as the yen's recent strength eased and concerns about borrowing costs abated. Keyence gained 2.8% and Rakuten Group climbed 3.5%. The Nikkei Stock Average rose 1.3%. Investors are focusing on the yen and economic data ahead of the earnings season set to start Tuesday.
Europe
European stocks rose amid an upbeat start to the week's trading on Wall Street. The pan-European Stoxx Europe 600 and French CAC 40 gained 0.5%, the British FTSE 100 advanced 0.2% and the German DAX is up 0.3%.
"US markets have started the week in the same way they ended last week, with the Dow lagging behind the S&P 500, while the Nasdaq has moved to one-month highs after yet another tech company announces a series of cost-saving measures and job cuts," CMC Markets analyst Michael Hewson wrote, referring to music-streaming company Spotify's announcement of 600 layoffs.
North America
US stocks rose Monday as investors bet the Federal Reserve will dial back its interest-rate increases and braced for a busy week of corporate earnings reports. The S&P 500 added 0.9%. The Dow Jones Industrial Average gained 0.5%. The Nasdaq Composite moved 1.7% higher.
"Investors are under the impression that the Fed will likely raise rates by a lesser amount at the upcoming meeting. That's an encouragement to investors," said Sam Stovall, chief investment strategist at CFRA Research.
Areas of the market hardest-hit in last year's selloff have led the rally in the new year as the prospect of slowing rates gave investors confidence to pick up shares of companies promising growth in the future. Technology stocks have climbed, with the Nasdaq Composite up roughly 8% in 2023.
Growth-oriented assets continued to shine on Monday. The S&P 500's information-technology segment was the best-performing sector in the index. Chip stocks moved higher, as Advanced Micro Devices and Nvidia rose about 8% and 7%, respectively.
"Today is a continuation of what we've seen on a year-to-day basis, which is people reallocating to the losers from last year," said Michael Green, portfolio manager and chief strategist at Simplify Asset Management.
Salesforce rose 3% after The Wall Street Journal reported that Elliott Management had taken a big stake in the software company. Spotify Technology shares advanced 2% after the music-streaming company said it was laying off 6% of its staff.
Though traders are betting the Fed will cut rates later this year, some money managers are predicting rates could stay higher for longer as the central bank has more work in store to tame inflation.
Daniel Morris, chief market strategist at BNP Paribas Asset Management, said that is one reason why the firm is taking a cautious stance on stocks. It is also betting that two-year Treasury yields will rise relative to yields on six-month bills, which could happen if market forecasts for interest rates pick up again.
"Inflation isn't going to slow down as fast as the market expects," Mr. Morris said.