US markets
On Wednesday, US equities extended gains following recent dovish remarks from Federal Reserve officials. However, stocks bounced back and forth in choppy trading as investors digested producer price index (PPI) readings and the Fed’s latest meeting minutes. The bellwether S&P 500 added 0.4 percent, the tech-heavy NASDAQ gained 0.7 percent, and the blue-chip Dow Jones Industrial Average firmed 0.2 percent.
Minutes from the Fed last meeting in September showed a cautious stance and divided views among policymakers. Some supported another interest rate hike at a future meeting, while others judged that no further increases would be needed. However, all agreed that monetary policy should remain restrictive for some time until inflation moves towards the central bank’s 2.0 percent target sustainably, and that future policy decisions will be proceeded carefully and remain data dependent due to uncertainty around the economic outlook.
On the economic data front, producer prices in the US rose 0.5 percent month-on-month in September, driven by energy costs. It was the least increase in three months but slightly beat market expectations of a 0.3 percent expansion. Core producer prices edged up by 0.3 percent, following a 0.2 percent rise in the previous month and slightly above market forecasts of a 0.2 percent increase. Focus has now shifted to the highly anticipated September consumer price inflation figures due on Thursday.
Most of the S&P sectors closed higher, while energy stocks, consumer staples and health care made up the rare decliners. Rate-sensitive real estate, utilities, communication services and information technology led the gains. Treasury yields eased further as investors rushed to safer securities against the backdrop of an ongoing military conflict in the Middle East. Among individual stocks, oil and gas producer Exxon Mobil tanked 3.6 percent after agreeing to buy rival Pioneer Natural Resources, up 1.4 percent, in an all-stock deal. Drugmaker Eli Lilly climbed 4.5 percent, supported by the successful result of Danish rival Novo Nordisk’s Ozempic in a trial to treat kidney failure. Conversely, German footwear company Birkenstock tumbled 12.6 percent on its debut on the New York Stock Exchange.
These price data reflect observations at market close: WTI spot crude oil dropped by US$2.48 to US$83.49, while spot gold rose by US$12.26 to US$1,870.51. The US dollar fell vs. most major currencies. The US Treasury 30-year bond yield fell by 9 basis points to 4.74 percent while the 10-year note yield fell by 6 basis points to 4.60 percent.
European markets
Major European bourses closed mixed on Wednesday. Investors remained cautious about the conflict in the Middle East while awaiting more clues on the interest rate trajectory. The Europe-wide STOXX and the German DAX each added 0.2 percent, while the UK FTSE 100 dropped 0.1 percent and the French CAC slipped 0.4 percent.
Among the Europe-wide STOXX sectors, consumer discretionary and energy fell the most, while real estate, health care, utilities and consumer staples held up best. Luxury stocks were weighed down by a 6.5 percent drop in LVMH. The industry leader reported a slower growth in third-quarter sales as the post-pandemic pent-up spending waned. Other luxury majors such as Hermes International and Kering followed suit, sliding 1.5 percent and 1.4 percent, respectively. Mining stocks declined amid lower metal prices, with Glencore, Rio Tinto and Antofagasta closing down between 0.2 percent and 1.1 percent. Among individual stocks, Novo Nordisk jumped 4.9 percent after the drugmaker reported that its diabetes drug Ozempic had shown unexpectedly early effectiveness in a study on kidney failure.
On the economic data front, the annual consumer price inflation rate in Germany was confirmed at 4.5 percent in September, easing sharply from 6.1 percent in August and marking the lowest level since February 2022. Meanwhile, the core inflation rate, which excludes volatile items such as food and energy, eased to a one-year low of 4.6 percent. However, both rates remained above the European Central Bank’s 2.0 percent target.
Asia Pacific markets
Most Asian markets extended gains on Wednesday, tracking global markets on a dovish tone from US Fed policymakers. Hopes of a new round of stimulus in China also helped improve sentiment.
Mainland China’s equities bounced back with modest gains. China’s CSI 300 firmed 0.3 percent, and the Shanghai index edged up 0.1 percent. Overall sentiment was lifted by news that the government is considering issuing additional sovereign debt for spending on infrastructure, as a part of another round of stimulus to bolster economic recovery. Contract research organizations rebounded strongly following more dovish messages from US Fed officials. An ongoing recovery in global investment and financing activities in the health care sector is expected to help improve the order outlook. Online education stocks rose on news that a government-backed agency had signed a collaboration agreement with iFLYTEK, up 7.4 percent, to promote the development of after-school services. Hong Kong’s equities notched a fifth day of gains, with the Hang Seng index up 1.3 percent, outperforming regional peers.
Japanese stocks ended mixed. The Nikkei index gained 0.6 percent, while the broader TOPIX inched down 0.2 percent. Investors bought up companies with positive earnings outlooks ahead of the upcoming reporting season, while profit-taking following the recent advance kept a lid on further gains. Also capping the momentum was the unchanged Reuters Tankan sentiment index for manufacturers in October, as downside risks in global markets clouded the outlook for the export-oriented economy. Technology stocks were among the top performers, with chip-related stocks Advantest and Tokyo Electron rising 2.3 percent and 2.5 percent, respectively. Shipping tocks underperformed as investor booked some profit from two-week highs. Kawasaki Kisen Kaisha sank 6.1 percent.
Taiwan’s TAIEX closed 0.9 percent higher. South Korea’s KOSPI jumped 2.0 percent. Indian equities rose for a second straight session, with the BSE Sensex up 0.6 percent, supported by strong domestic macroeconomic fundamentals and more dovish hints from the US Fed.
Australian shares gained for a fifth session in a row, with the All Ordinaries index up 0.7 percent, helped by mining stocks on the back of solid commodity prices. Major miners such as BHP Group, Rio Tinto and Fortescue Metal Group advanced between 1.0 percent and 1.7 percent amid renews hopes of increasing demand from China. Financials continued an upward trend, with National Australia Bank and ANZ Group Holdings rising 0.5 percent and 0.3 percent, respectively. Energy shares held onto their gains as uncertainty in the Middle East added to oil supply concerns.