Lower inflation data drives market higher: Supply chain disruptions easing

 

US equities finished notably higher in Wednesday trading on the back of a cooler July inflation print. Stocks rose sharply on Wednesday after a key inflation reading showed a better-than-expected slowdown for rising prices.

The headline consumer price index for July rose 8.5 per cent year over year, and was flat compared to June. Economists surveyed by Dow Jones were expecting increases of 8.7 per cent and 0.2 per cent, respectively. The Federal Reserve will weigh the report, along with other key economic data, ahead of its September meeting where it is slated to hike interest rates again.

Over night the Dow Jones Industrial Average 1.63 per cent,. The S&P 500 gained 2.13 per cent its highest level since early May. The Nasdaq Composite rose 2.89 per cent.

Major tech stocks outpaced the broader market on Wednesday, with Facebook-parent Meta rising 5.8 per cent and Netflix gaining more than 6 per cent. The Nasdaq has now moved out of bear market territory following 108 days in a bear market.

Shares of Disney surged more than 5 per cent after hours when the company reported earnings that beat Wall Street estimates on both the top and bottom lines, with strong spending at theme parks. In addition, total subscriptions to Disney+ rose to 152.1 million during the quarter, higher than the forecast estimate of 147 million.

Across the sectors defensive industries underperformed, but still ended higher. Autos, semis, credit cards, homebuilders, road/rail, asset managers, chemicals, banks, airlines were among the standouts.

Headline wise – Musk sold another $7B of Tesla stock in case he is forced to buy Twitter.

President Biden signed the Chips Act this week, kicking into gear one of the federal government’s largest investments in American industrial capacity. The bipartisan law will provide $52 billion in subsidies to chipmakers in the hopes they’ll build their massive foundries in the States rather than overseas, as well as pour more funding into R&D of high-tech industries. Right on cue, Micron said it’ll spend $40 billion on chipmaking factories in the US by 2030.

Behind the strong overnight numbers is an easing in supply chain constraints . The average cost of taking a standard 40-foot metal box across the world’s oceans is down by about 45 per cent from its peak.

Delivery times are easing across the globe. And the number of vessels queueing outside the port of Los Angeles has dropped 75 per cent from the start of the year despite the port recording its busiest June in a century. The global supply chain pressure index, set up by the Federal Reserve Bank of New York, is down 57 per cent in July from its peak.

Of course the trend may reflect weakening demand for goods, as high inflation – which was, in part, owing to the surge in the cost of shipping and materials over 2021 – dents purchasing power.

Whilst the easing of supply constraints is a step in the right direction, in the background the road to pre-pandemic supply chain levels may take years to return to normal.

Either way the battle between inflation and the purchasing demands of the global consumer is now a dominant factor that is playing out in the global supply chain.

Currencies

US Dollar index was down 1.1 per cent, though off worst levels.

One Australian dollar has weakened compared to the US dollar yesterday, buying 70.84 US cents (Wed: 69.66 US cents), 58.00 Pence Sterling, 94.19 Yen and 68.82 Euro cents.

Commodities

Iron ore futures are pointing to a 0.1 per cent gain.

Gold added $1.40 or 0.1 per cent to US$1814 an ounce.

Silver was up $0.26 or 1.3 per cent to US$20.74 an ounce.

Copper was up $6.40 or 1.8 per cent to US$364.95 a pound.

Oil prices rose on Wednesday, rebounding from losses early in the session on a lift from encouraging figures on US gasoline demand and as a lower-than-expected US inflation figure drove investors into riskier assets.Oil gained $1.43 or 1.6 per cent to US$91.93 a barrel..

Corporate reports expected on the ASX today include the AMP (ASX:AMP),  Mirvac (ASX:MGR),  QBE (ASX:QBE) | and Telstra (ASX:TLS).

The SPI futures are pointing to a 1 per cent gain

Figures around the globe

Across the Atlantic, European markets closed higher. Paris added 0.5 per cent, Frankfurt gained 1.2 per cent and London’s FTSE closed 0.3 per cent higher.

Asian markets closed lower. Tokyo’s Nikkei lost 0.7 per cent, Hong Kong’s Hang Seng fell almost 2 per cent and China’s Shanghai Composite closed 0.5 per cent lower.

Yesterday, the Australian sharemarket lost 0.5 per cent to 6993.

Ex-dividends

There are three companies set to trade without the right to a dividend.

Flagship Investments (ASX:FSI) is paying 4.75 cents fully franked
Rio Tinto (ASX:RIO) is paying 383.7 cents fully franked
SSR Mining Inc (ASX:SSR) is paying 7.5714 cents unfranked

Dividends payable

There are three companies set to pay eligible shareholders today.

Centuria Capital Group (ASX:CNI)
Kkr Credit Income Fund (ASX:KKC)
Newmark REIT Management (ASX:NPR)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
Copyright 2022 – Finance News Network

Source: Finance News Network