US markets rally: Extreme weather events threatening Chinese & European economies

 

US equities finished higher in uneventful Thursday trading, rallying toward best levels in the last hour of trading.

Market has been anxiously anticipating Fed Chair Powell's speech in Jackson Hole tomorrow. But in some sense these risks have already been priced in, and Powell is not expected to say anything that will settle the 50 vs 75bp rate rise debate for September.

The Dow jumped almost 1 per cent with gains accelerating in the final hour of trading. The S&P 500 rallied 1.41 per cent and the Nasdaq Composite advanced 1.67 per cent to 12,639.27.

Materials, communication services and information technology outperformed in the S&P 500. Consumer staples and utilities underperformed the broader market index.

In company news Snowflake jumped 23.1 per cent after posting a beat on revenue.

Shares of Peloton dropped 18.3 per centh after the equipment maker reported an earnings miss.

In the background climate change is dominating global economies with, extreme heat and severe drought continuing to disrupt energy and water supplies. In China diminished water levels are causing hydropower failure, leading to power being cut to factories and homes, as well as plant shutdowns.

Local governments are racing to maintain power output and find fresh water supplies to irrigate crops, including a critical rice crop, ahead of autumn harvest. Already facing the slowest pace of growth in years due to stringent Covid lockdowns, extreme weather is adding to China's economic woes and contributing to lowered growth forecasts.

Experts are suggesting that there is nothing in world climatic history which is even minimally comparable to what is happening in China at the moment. In response China boosted its collective policy support by nearly $150B on Wednesday.

In Europe they are experiencing what many consider to be its worst drought in 500 years, the ramification of which are being felt across energy markets with energy traders witnessing price increases that are hard to fathom. Natural gas now costs about 10 times more than it did a year ago. Driving the prices is a fear that Europe will run out of gas this winter.

Natural gas is the key driver for European electricity prices. Unlike the United States, which has an ample surplus of natural gas to export, thanks to shale drilling, Europe needs to import the bulk of its gas, with Russia traditionally supplying around one-third. Russia has slashed gas flows to Germany and other countries. Even before the coming three-day shutdown, Nord Stream 1, a key conduit of fuel to Germany, gas has been flowing at only 20 percent of capacity.

This relationship makes Europe more vulnerable to Russia’s energy weapon.

Add it all up, and the eurozone is far closer to recession than the US

Currencies

One Australian dollar has strengthened compared to the US dollar yesterday, buying 69.80 US cents (Thu: 69.09 US cents), 59.01 Pence Sterling, 95.29 Yen and 69.99 Euro cents.

Commodities

Iron ore futures are pointing to a 0.8 per cent gain.

Gold added 0.6 per cent to US$1771 an ounce.

Silver was up 1 per cent to US$19.16 an ounce.

Copper gained 1.4 per cent to US$369.80 a pound.

Oil fell 2.5 per cent to US$92.52 a barrel.

Futures

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

Figures around the globe

Across the Atlantic, European markets closed mixed. Paris lost 0.1 per cent, Frankfurt rose 0.4 per cent and London’s FTSE closed 0.1 per cent higher.

Asian markets closed higher. Tokyo’s Nikkei added 0.6 per cent, Hong Kong’s Hang Seng jumped 3.6 per cent and China’s Shanghai Composite closed almost 1 per cent higher.

Yesterday, the Australian sharemarket added 0.7 per cent to 7048.

Ex-dividends

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

Argo Investments (ASX:ARG) is paying 17 cents fully franked
Alumina (ASX:AWC) is paying 6.094 cents fully franked
Fiducian Group (ASX:FID) is paying 14.9 cents fully franked
G.U.D. Holdings (ASX:GUD) is paying 22 cents fully franked
Lendlease Group (ASX:LLC) is paying 11 38.89
Newcrest Mining (ASX:NCM) is paying 28.8725 cents fully franked

Dividends payable

There are two companies set to pay eligible shareholders today.

Djerriwarrh Investments (ASX:DJW)
Flagship Investments (ASX:FSI)

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