European stocks benefit from the slowing price growth
Today’s focus will be on the European markets, as the US was closed overnight due to the public holiday of Martin Luther King Day.
European equity markets closed higher: the STOXX 600 closed 0.4 per cent higher, the FTSE closed up by 0.2 per cent, whilst the DAX and CAC added 0.3 per cent.
European stocks in particular have benefited from signs of slowing price growth: the roughly 19 per cent outperformance of the MSCI Europe index relative to the MSCI US index in dollar terms over the past 90 days marks the highest return in more than 30 years, according to analysts at Morgan Stanley. “This does not necessarily signal the start of a multi-year period of European outperformance,” the US bank said in a note, “however, we think there is a good chance that it marks the end of Europe’s persistent, structural underperformance post the [great financial crisis”.
Meanwhile when evaluating the UK’s FTSE 100 0.2 per cent gain, the index is continuing to move toward an all-time high, benefitting from the boom in energy and commodity stocks last year.
Healthcare and Real Estate led; Travel/Leisure and Basic Resources lagged.
European bond yields firmer with 10-year Gilt up 4 basis points while the Bund was flat. The Dollar is firmer with the biggest move against Japanese yen and Pound.
Oil down. Gold softer. Industrial metals mixed.
When looking at futures, the US equity futures are softer with S&P off ~0.1 per cent. Volumes were light due to Martin Luther King Day in the US. Bond markets; with the US 10-year flat overnight at 3.50 per cent.
Futures contracts tracking the major U.S. indexes continued to trade—though American stock and bond markets are shut for the federal holiday—with futures for the Dow Jones Industrial Average, S&P 500, and tech-heavy Nasdaq all hovering around flat.
Investors can expect a quiet day for global markets amid low trading volumes with Wall Street on holiday. That should all change Tuesday as investors pour back into the market and continue to focus on narratives that have dominated in 2022 and into 2023: inflation, interest-rate hikes, and recession risk.
The week ahead holds more catalysts. On the US economic front, Tuesday brings the January Empire State manufacturing index, while on Wednesday data are due on December retail sales, producer-price index inflation, and industrial production, before jobless claims data on Thursday alongside December building permits and housing starts. There will also be murmurs out of the Fed, with Vice Chairwoman Lael Brainard due to speak Thursday and Governor Christopher Waller delivering a speech Friday.
In commodity markets, European natural gas prices continued to slide on a warmer than expected winter. Dutch TTF gas futures for the coming month dropped as much as 15.1 per cent to €54.85 per megawatt hour — its lowest level since September 2021.
Davos starts today with a focus on climate change. The World Economic Forum in Switzerland is a key focus for European markets this week. Heads of state and business leaders mingle with academics and innovators in Davos. The key themes for delegates to debate and discuss are the war in Ukraine, economic instability and uncertainty and climate change, among other things.
According to WEF’s 2023 timetable, more than a third of the sessions are related to the topic of climate change. The word “climate” was mentioned 35 times in the agenda, more than “energy” at 27 times, “geopolitic” at 18 times, “war” at 7 times, “inflation” at 6 times, and “recession” at 4 times.
The climate-related talks that have been scheduled touch on a range of topics, including the rising tide of climate litigation, artificial intelligence for climate adaptation, innovative financing mechanisms for net-zero projects, and traceability for greenhouse gas emissions data.
In Electric Vehicle related news, according to preliminary research from LMC Automotive and EV-Volumes.com, EVs Made Up 10 per cent of All New Cars Sold Last Year for the first time. Global sales of fully electric vehicles totaled around 7.8 million units, an increase of as much as 68 per cent from the previous year.
This was driven mainly by strong growth in China and Europe, providing relief to a broader car market that suffered from economic worries, inflation and production disruptions.
Futures
The SPI futures are pointing to a 0.3 per cent fall.
Currency
One Australian dollar at 9:00 AM has weakened compared to the US dollar yesterday buying 69.54 US cents (Mon: 69.79 US cents).
Commodities
Iron ore futures are pointing to a 2.0 per cent fall. Iron ore is 4.9 per cent lower at US$120.75 tonne.
Figures around the globe
Across the Atlantic, European markets closed higher. London’s FTSE added 0.2 per cent, Frankfurt gained 0.3 per cent and Paris rose 0.3 per cent.
In Asian markets, Tokyo’s Nikkei fell 1.1 per cent, Hong Kong’s Hang Seng closed flat and China’s Shanghai Composite closed 1.01 per cent higher.
Yesterday, the Australian sharemarket added 0.82 per cent to close at 7,388.
Ex-dividend
Katana Capital (ASX:KAT) is paying 0.5 cents fully franked
Tower (ASX:TWR) is paying 3.1449 cents unfranked
Dividend-pay
Garda Property Group (ASX:GDF)
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
Disclaimer
The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Any prices published are accurate subject to the time of filming and shouldn’t be relied upon to make a financial decision. Commentators may hold positions in stocks mentioned and companies may pay FNN to produce the content at times. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.
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