Market update - 26th of October 2023
Written and accurate as at: Oct 06, 2023 Current Stats & Facts
Equity markets worldwide have found themselves on shaky ground, as movements in bond yields have intensified uncertainties. In the US, 10-year yields surged to their highest point since 2007, sparking a ripple effect in Australia and beyond.
A Surge in Bond Yields
Both the US and Australian markets have been jolted by significant hikes in 10-year bond yields. Closing at nearly 4.6%, the US 10-year yields increased by 14 basis points for the week and a whopping 69 basis points for the month. Meanwhile, Australian yields showed a similar trajectory. However, this upward trend in yields has thrown equity markets into a quandary, casting doubt on previous assumptions about interest rates remaining low.
CPI and the RBA's Decisions
In Australia, the Consumer Price Index (CPI) for August jumped to 5.2% year-on-year, slightly up from 4.9% in July. This rise, spurred by escalating fuel and housing costs, aligns closely with forecasts. Yet, despite this inflationary uptick, the Reserve Bank of Australia (RBA) opted to keep interest rates stable. Experts are now speculating that another rate hike could be on the horizon.
Market Performance and Volatility
Market indicators highlight the strain. The S&P/ASX 200 in Australia was down 0.3% for the week, and 2.8% for September. In the US, the S&P 500 fared worse, with declines of 0.7% for the week and 4.8% for the month. The Nasdaq provided a small glimmer of positivity, inching up by 0.1%. The bottom line? Equities in both regions posted their worst quarter since the second quarter of 2022.
A Host of Global Concerns
The stakes are high not just due to interest rates but also due to geopolitics. The potential for a US government shutdown loomed large, causing palpable tension among investors. Although a temporary solution seems to have been reached, the threat to the US's triple-A credit rating and potential furloughs for millions of workers persist.
Commodity Markets and Economic Indicators
On the commodities front, industrial metals found some support with increases in copper, zinc, and aluminium. Yet iron ore dropped by 1.3% to $120 per tonne. Further buoyancy might be anticipated with the bounce in Chinese PMI activity. Meanwhile, US inflation figures and Chicago's PMI missed their marks, reflecting mixed signals in the economic landscape.
Company Highlights
- Pro Medicus soared by 16.4%, announcing a record contract win, securing a minimum of $14.0m/year.
- Core Lithium jumped 14.1% following better-than-expected net profit guidance.
- Paladin Energy surged by 11.7%, buoyed by uranium prices increasing over 30% in the last three months.
- Genesis Minerals dipped 10.1% due to rising short interest in the stock.
- De Grey Mining also declined by 10.1%, following news of increased capital expenditure and a delayed production schedule.
- Star Entertainment dropped by 12.0% after announcing a softer trading update and a capital raise.
- Resmed Inc climbed 9.3%, regaining investor interest.
- ANZ Group ascended 2.5%, enjoying a stable asset quality environment.
- Auckland Airport rose 2.4%, recovering from recent underperformance.
- Mineral Resources closed lower by 2.6% on sector weakness.
- AUB Group fell 2.8% possibly due to profit-taking.
- IDP Education lost 2.9% on concerns regarding Canadian visa volumes.