Australian stocks are poised for a robust opening, mirroring gains on Wall Street overnight.
ASX futures point to an 88-point, or 1.3%, uptick to 7,113. Also on the upside, the Aussie dollar has shown strength, edging past the 65 US cents mark.
The Dow recorded a 1.4% jump, the Nasdaq surged by 2.4% and the S&P 500 climbed 2.1% to 4,503, marking its highest level in over two months.
In Europe, there were also gains with the FTSE adding 0.2% to 7,740 points and EuroStoxx up 1.3% to 453 points.
Among the standout performers, Tesla (NASDAQ:TSLA) led the gains among mega-cap stocks, while Nvidia extended its rally for the 10th consecutive session. Additionally, regional US banks posted a 6% increase.
Global surge as US CPI starts to deflate
This global surge comes on the heels of the latest US inflation report, which has ignited speculation that interest rates may have reached their zenith.
US Consumer Price Index (CPI) data showed a 3.2% increase over the year ending in October – a welcome decline from the 3.7% observed in September and August.
What’s more, prices in October remained flat compared to the prior month, a situation not seen since July 2022.
This changes observers’ calculations about what happens next on the monetary policy front.
A report from ANZ Research predicts a significant shift in the market's expectations regarding US interest rates. The report says: “The probability of a US rate hike in December and January is now zero, and the first rate cut is priced for May as opposed to July yesterday.”
Australian investors await the third quarter wage price index, which is due to be released at 11.30am, to gain insight into the state of inflation pressure.
Other trading partners are set to receive economic indicators today, with Japan’s third quarter GDP set for 10.50am AEDT and China’s October industrial production and retail sales out at 1pm our time.
Aubrey Capital Management director Sharon Bentley Hamlyn, reflecting on when global interest rates will ease and how the markets performed in October, had this to say:
“Markets continued to drift southwards in October. Reaction after the outbreak of hostilities in Israel was ambivalent, initially rising on the expectations that this could mark the end of US monetary tightening and then falling away again on robust employment numbers and Q3 GDP figures.
“The fact that the incremental growth in GDP was entirely mirrored by an increase in government debt suggests to us that this growth is not sustainable. In fact, the private sector in the US may already be in recession.
“In Europe, money markets are already pricing in an 80% probability of ECB rate cuts by April next year and a 100% likelihood of a cut within the next 12 months. It could be that October has seen the Fund's low point in 2023; indeed, the last few trading days have been noticeably stronger, in both absolute terms and relative to the index.
“We are encouraged by market movements in recent days and believe that the Fund is poised for a rebound. This makes entire sense if the next movement in interest rates is going to be down.
“The USD has been weakening off which is also a sign that risk appetite may return to the markets and that growth equities may have a resurgence. They are certainly looking cheap. The portfolio is trading on PEG ratios of 0.8x for the next 2 years which on a historic basis looks good value, in our view.”
Currencies and commodities
Here’s snapshot of today’s commodities movements:
- Australian dollar: +2% at 65.10 US cents
- Spot gold: +0.9% to $US1,963/ounce
- Brent crude: flat at $US82.50/barrel
- Iron ore: +0.2% to $US128.45/tonne
- Bitcoin: -3.4% to $US35,283
- Gold futures: +0.8% to US$1966.50
- US 10-year bond: -19 points to 4.4%
What’s happening in small caps?
The S&P/ASX Small Ordinaries closed at 2,690.44 yesterday, shedding 7.12% on the previous day.
Making news this morning, which you can read more about throughout the day with Proactive: