US markets
US equities extended their gains on Wednesday, with major indices ending slightly higher. The bellwether S&P 500 firmed 0.2 percent, the blue-chip Dow Jones Industrial Average gained 0.5 percent, and the tech-heavy NASDAQ edged up 0.1 percent. The market sentiment was boosted by a surprisingly cool producer price index (PPI) report, which added to evidence of easing inflationary pressures and reinforced the belief that the Federal Reserve (Fed) is done raising interest rates.
According to the Labor Department, producer prices in the US unexpectedly fell 0.5 percent month-on-month in October, marking the biggest decline since April 2020, mainly due to cheaper gasoline. Additionally, a separate report from the Commerce Department showed that retail sales dropped less than expected by 0.1 percent month-on-month in October, ending a six-month rising streak.
Most of the S&P sectors ended the day in positive territory. Consumer staples, communication services, and financials led the gains, while utilities and energy underperformed. The consumer staples sector was particularly boosted by a robust earnings report from Target, whose shares surged 17.8 percent. The retailer released consensus-beating forecasts for the fourth quarter, citing easing conditions on the supply side. Peers Macy’s and Kohls also rallied, with gains of 7.5 percent and 9.0 percent, respectively. Communication services stocks were among the other top performers, with a 3.1 percent jump in Walt Disney following reports that activist investor ValueAct Capital had acquired a stake in the entertainment company. Sirius XM Holdings advanced 6.1 percent after Warren Buffett’s Berkshire Hathaway took a stake in the audio entertainment company. Conversely, energy stocks lagged due to falling oil prices.
These price data reflect observations at market close: WTI spot crude oil dropped by US$1.60 to US$77.26 while spot gold lost US$10.30 to US$1,958.40. The US dollar weakened vs. most major currencies. The US Treasury 30-year bond yield gained by 7 basis points to 4.69 percent, while the 10-year note yield gained by 10 basis points to 4.54 percent.
European markets
European equities continued their upward trend on Wednesday, as investors cheered on slowing inflation in key economies and raised bets that major central banks will refrain from further raising interest rates. The Europe-wide STOXX added 0.4 percent, the German DAX gained 0.9 percent, the French CAC inched up 0.3 percent, and the UK FTSE 100 rose 0.6 percent.
Among the Europe-wide STOXX sectors, the information technology, consumer discretionary, industrials, and materials sectors posted the biggest gains, while real estate and healthcare declined the most. China-exposed luxury shares were among the top performers, boosted by better-than-expected retail sales data in China. Sector majors Kering, LVMH, and Richemont rose between 0.5 percent and 1.7 percent. Similarly, mining stocks rallied following an increase in most metal prices, benefitting from recovering industrial production in China. Among individual stocks, Experian jumped 7.5 percent after the credit data company reported a higher half-year profit and affirmed its revenue guidance for the year. French construction materials group Saint-Gobain rose 2.6 percent after entering a definitive agreement to acquire Izomaks Industries, a leading manufacturer of waterproofing products in Saudi Arabia. Conversely, French train maker Alstom tumbled 15.3 percent after seeking asset sales worth up to 1 billion euros and considering a capital increase to bolster its balance sheet.
On the economic data front, the annual inflation rate in the UK eased more than expected to 4.6 percent in October, marking the lowest reading since October 2021. Likewise, consumer inflation in France and Italy decelerated to lower levels, while wholesale prices in Germany had their sharpest fall since May 2020, showing signs of easing inflationary pressure in Germany.
Asia Pacific markets
Asian equities finished higher on Wednesday, with investors cheering cooling US inflation data in October, which is likely to bring an end to the US Fed’s monetary tightening cycle. Meanwhile, risk appetite was also buoyed by Chinese economic activities showing signs of improvement.
Mainland China’s equities continued to perform well amid a slew of tailwinds, including upbeat economic readings, the People’s Bank of China (PBoC)’s liquidity injection, and optimism around China-US relations. The CSI 300 index gained 0.7 percent, and the Shanghai index added 0.5 percent. Investors reacted positively to data that showed Chinese retail sales and industrial production growing more than expected in October. Market sentiment was further lifted by a move from the PBoC to pump the largest amount of cash since 2016 into the banking system as the central bank seeks to spur a recovery in the Chinese economy. A scheduled meeting between Chinese President Xi Jinping and US President Joe Biden later in the day was expected to bring a potential easing of tensions. Solar stocks were boosted by the prospect of an improving China-US relation and major solar players’ discussion on industry competition at a major conference held on Tuesday. However, short-video shares fell after regulators launched a one-month rectification campaign on COL Group’s content and production. Hong Kong’s equities rebounded strongly, with the Hang Seng index up 3.9 percent, outpacing regional peers.
Japanese stocks extended gains as cooling US inflation data spurred hope for an end to the US Fed’s rate hikes. The Nikkei index climbed 2.5 percent, and the broader TOPIX jumped 1.2 percent. Chip-related shares outperformed, tracking the solid gains in their US peers, with chip-testing equipment maker Advantest up 7.5 percent and chip-making machinery manufacturer Tokyo Electron adding 3.8 percent. On the earnings front, refiner Idemitsu Kosan surged 18.3 percent after raising its full-year profit forecast. However, banking and insurance stocks fell amid expectations of lower investment income given the falling long-term bond yields.
Taiwan’s TAIEX climbed 1.3 percent. South Korea’s KOSPI soared 2.2 percent. Indian equities closed sharply higher, with the BSE Sensex index up 1.1 percent, driven by rising hopes of an end to the US Fed’s rate hikes following softer-than-expected inflation data.
Australian shares built on the previous session’s rebound, with the All Ordinaries up 1.5 percent. Sentiment improved further in the wake of cooling inflation data in the US and encouraging economic figures from China, Australia’s top trading partner. Meanwhile, domestic data showed Australian wages increased the most on record last quarter. Mining stocks led the rally amid higher iron ore prices, given an improving economic outlook in China. Major miners BHP Group and Rio Tinto rose 1.8 percent and 2.6 percent, respectively. Information technology, real estate, and healthcare sectors also posted solid gains.