October's PPI falls to its biggest monthly drop since April 2020

October’s PPI falls to its biggest monthly drop since April 2020

Stocks climbed on Wednesday, building on the strong rally from the previous session, on the back of more encouraging inflation data.

The S&P 500 advanced 0.16 per cent, closing at 4,502.88, while the Nasdaq Composite inched higher by 0.07 per cent and ended at 14,103.84. The Dow Jones Industrial Average added 163.51 points, or 0.47 per cent, closing at 34,991.21.

The yield on the benchmark 10-year U.S. Treasury added 9 basis points to trade at 4.537 per cent. The action comes a day after the rate slipped below the 4.5 per cent threshold.

October’s producer price index, which measures wholesale prices, fell by 0.5 per cent to mark its biggest monthly drop since April 2020. Not all of the economic data was positive, however, since retail sales also declined.

Wall Street is coming off a strong session in which the S&P 500 and Nasdaq had their best day since April. Those gains came after the consumer price index remained flat for October, while a Dow Jones consensus expected a slight gain.

In corporate news, Target popped 18 per cent on better-than-expected results for the third quarter. Target beat fiscal third-quarter earnings and revenue expectations. Although the comparable sales and digital sales fell, and the large retailer said it’s seeing weaker discretionary spending and deal-hungry shoppers.

Shares of apparel company VF added 14 per cent following a JPMorgan upgrade to neutral from underweight.

Shares of auto parts manufacturer, Holley, added 2.7 per cent following an upgrade by Jefferies to buy from hold. The investment bank predicts Holley’s sales will ramp up in the fourth quarter and thinks the stock is trading at a significant discount to historical averages.

Wall Street also had its eyes on Washington as lawmakers tried to avoid a government shutdown. Late Tuesday, the House of Representatives passed a bill to avert a government shutdown. The measure will go to the Senate for a vote. If cleared by lawmakers, the legislation goes to President Joe Biden. Without a funding bill, the federal government is slated to shut down at the end of the week.

In US sector news, Consumer Staples performed the best, while Energy was the worst-performing sector.

Food price inflation is expected to drop due to higher agricultural production and reduced consumer demand amid weak economic growth, per Rabobank's 2024 outlook. Falling prices of staples like sugar, coffee, corn, and soybeans, driven by increased production, will contribute to this decline, alongside consumer challenges from high interest rates and inflation.

The US and China, the world's top polluters, have made a significant commitment to address climate change by agreeing to expedite the adoption of renewable energy sources to reduce their dependency on fossil fuels. This collaborative climate diplomacy was announced in anticipation of a meeting between Joe Biden and Xi Jinping, aimed at improving US-China relations, and signifies a positive step toward environmental cooperation. The meeting between the leaders is the first in over a year.

Shifting to the Australian landscape, rumours suggest China's CATL may bid $4 a share for Azure Minerals, but no formal offer has been made. CATL is considering joining the competition for Azure alongside other major shareholders.

Futures

The SPI futures are pointing to a 0.1 per cent fall.

Currency

One Australian dollar at 8:25 AM was buying 65.09 US cents.

Commodities

Gold fell 0.13 per cent. Silver gained 1.68 per cent. Copper added 0.81 per cent. Oil fell 2.22 per cent.

Figures around the globe

European markets closed higher. London’s FTSE added 0.62 per cent, Frankfurt gained 0.86 per cent, and Paris closed 0.33 per cent higher.

Turning to Asian markets, Tokyo’s Nikkei gained 2.52 per cent, Hong Kong’s Hang Seng jumped 3.92 per cent while China’s Shanghai Composite closed 0.55 per cent higher.

The Australian share market closed 1.42 per cent higher at 7106.

Ex-dividends
ANZ Group Holdings (ASX:ANZ) is paying 94 cents 56 per cent franked
Bisalloy Steel (ASX:BIS) is paying 10.5 cents fully franked
Copper Strike (ASX:CSE) is paying 2.2346 cents fully franked
Orica (ASX:ORI) is paying 25 cents unfranked

Dividends payable
Bank of Queensland (ASX:BOQ)
InvoCare Ltd (ASX:IVC)
Myer Holdings (ASX:MYR)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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