Weekly market update - 18th of September 2023
Written and accurate as at: Sep 18, 2023 Current Stats & Facts
Market Volatility and Shifts: A Week of Unpredictable Turns in Global Finance
Last week, the global equity markets saw a rollercoaster of events. While U.S. inflation numbers startled analysts, a China-led commodity price rally ultimately swung the pendulum in a more positive direction. Crude oil prices climbed past US$90 per barrel, and iron ore broke through the US$120 per tonne threshold. However, the markets ended on a mixed note: while Australia's S&P/ASX 200 saw a boost, U.S. indices faltered.
Volatility Reigns Supreme
In a volatile week for significant indices, investors seemed to downplay the impact of higher-than-anticipated U.S. inflation. Instead, their focus shifted towards a robust commodity rally spearheaded by China. The S&P/ASX 200 ended the week on a high note, gaining 1.8%. However, the optimism around Softbank's $60 billion IPO of Arm Holdings couldn't salvage the American market. The S&P 500 declined by 0.1%, and the NASDAQ lost 0.4%.
China's Unlikely Rally
China was back in the spotlight as the central bank eased reserve requirements and rolled out encouraging economic data, giving a much-needed lift to materials and energy sectors. This positive sentiment managed to counterbalance recent negative headlines, pushing resources stocks like Materials and Energy up by 4.0% and 1.3%, respectively.
U.S. Inflation: A Cause for Concern?
While the U.S. Consumer Price Index (CPI) posted its most significant monthly increase this year in August, rising by 0.6% for the month and 3.7% year-on-year, markets seemed relatively unfazed. However, fixed income yields reacted, as the U.S. 2-year and 10-year bonds increased over the week.
The Commodity Surge
Crude oil prices touched ten-month highs, reflecting increasing demand from China and supply cuts. Other commodities like thermal coal, coking coal, and copper also experienced gains. Iron ore hit its highest level in four months, reaching $122 per tonne.
Accelerated Growth in China
China’s industrial production for August increased by 4.5% year-on-year, exceeding forecasts and marking the fastest growth pace since April. Retail sales followed suit, rising by 4.6% year-on-year, surpassing market expectations.
Troubles in the UK and Europe
While the European Central Bank (ECB) hiked interest rates to combat inflation, the UK economy faced a swift contraction. GDP fell by 0.5% in July, affected by poor consumer spending and ongoing public sector strikes.
Domestic Outlook
Australia's consumer sentiment dipped slightly despite an otherwise resilient labour market. Upcoming key data includes the U.S. Federal Reserve's interest rate decision and the Reserve Bank of Australia's minutes.
Company Highlights
Champion Iron saw a 14.1% boost, buoyed by surging iron ore prices.
Coronado Global rose by 12.3%, thanks to rising met coal prices.
Fortescue Metals gained 9.4%, aided by the robust iron ore market.
Bluescope Steel and Sims Ltd experienced declines of 6.8% and 9.6%, respectively, indicating challenging conditions in steel and scrap markets.
Viva Energy saw a 7.6% decline after major shareholder Vitol Investment Partnership sold approximately 16% of its shares.
While last week featured a series of ups and downs, the primary takeaway is that markets are exceedingly sensitive to macroeconomic indicators. Investors are now looking ahead to key data releases to decipher market trends further. The situation remains fluid, offering both cautionary tales and glimmers of optimism. But, all eyes are set on the upcoming economic updates and their potential market impact.