US markets
US equities extended gains on Wednesday. The Federal Reserve (Fed) kept interest rates unchanged while investors took a slightly less hawkish view from Fed Chair Jerome Powell’s speech. The bellwether S&P 500 jumped 1.1 percent, the tech-heavy NASDAQ climbed 1.6 percent, and the blue-chip Dow Jones Industrial Average gained 0.7 percent.
As many had expected, the Fed left the target range for the federal funds rate at its 22-year high of 5.25 percent to 5.50 percent for a second consecutive time. While keeping options open for further increases in borrowing costs, Powell highlighted the progress that had been made in taming inflation and acknowledged the central bank is probably “close to the end” of the rate hike cycle.
Almost all the S&P sectors ended in positive territory, with information technology, communication services, consumer discretionary, and utilities leading the gains, while energy and consumer staples declined. Rate-sensitive mega-cap growth stocks provided much of the upside lift, boosted by easing Treasury yields. The US Treasury Department said it will slow the pace of increases in its longer-dated debt auctions in the November-January quarter and expects it will need one more additional quarter of increases after this to meet its financing needs. Among individual stocks, chipmaker Advanced Micro Devices surged 9.7 percent on a bullish forecast for sales of chips for artificial intelligence. Conversely, cosmetics maker Estee Lauder slumped 18.9 percent after lowering its annual profit guidance. Payroll processor Paycom Software and Tinder owner Match Group tumbled 38.5 percent and 15.3 percent, respectively, after forecasting downbeat fourth-quarter revenues.
Economic data during the day was muted. The number of US job openings unexpectedly rose in September, while the Institute for Supply Management’s purchasing managers index (PMI) data showed manufacturing activity contracted more than expected in October.
These price data reflect observations at market close: WTI spot crude oil fell by US$0.58 to US$81.04 while spot gold lost US$10.75 to US$1,985.15. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield dropped by 9 basis points to 4.93 percent while the 10-year note yield dropped by 13 basis points to 4.74 percent.
European markets
European equities extended gains on Wednesday, along with a decline in government bond yields in Europe, as recent data strengthened investors’ expectations of a pause in the current monetary tightening cycle. The Europe-wide STOXX and the French CAC rose 0.7 percent each, the German DAX gained 0.8 percent, and the UK FTSE 100 added 0.3 percent.
All the Europe-wide STOXX sectors closed higher, with healthcare, information technology, and real estate posting the biggest gains. Retail stocks outperformed, helped by a 3.6 percent jump in Next after the retailer raised its full-year profit outlook for the fourth time in six months. Food producer Barry Callebaut climbed 4.9 percent after posting full-year results in line with expectations. Healthcare stocks were among other top performers, with heavyweight Novo Nordisk closing 1.6 percent higher ahead of its results. However, drugmaker GSK slid 2.4 percent, even though it raised its full-year profit and sales forecasts.
On the economic data front, the UK manufacturing PMI was revised lower in October, marking an eighth consecutive month of decline in production. Meanwhile, the nationwide house price index in the UK surprisingly rose in October, adding to signs that the property market is stabilizing.
Asia Pacific markets
Most Asian markets closed higher on Wednesday.
Mainland China’s equities gave back much of the gains from earlier in the session to end roughly flat. The CSI 300 index closed little changed, while the Shanghai index edged up 0.1 percent. The Caixin China General manufacturing PMI showed Chinese factory activity unexpectedly contracted in October, adding to a downbeat official reading released a day earlier. On the bright side, tensions between China and the US showed signs of easing. Chinese President Xi Jinping and US President Joe Biden are set to meet on the sidelines of the Asia-Pacific Economic Cooperation summit in San Francisco in November. Food and beverage stocks surged as premium liquor maker Kweichow Moutai, up 5.7 percent, surprised the markets with the price hike of its signature liquor products. Automobile-related stocks rose after data showed China’s export of vehicles surged in the first nine months of 2023, compared to the same period last year. Hong Kong equities were muted, with the Hang Seng index closing 0.1 percent lower.
Japanese stocks built on gains from the previous session to end sharply higher. The Nikkei index rallied 2.4 percent while the broader TOPIX soared 2.5 percent, outpacing regional peers. Gains were broadly based across the board, as the Bank of Japan (BoJ) was viewed as maintaining its dovish stance by holding its ultra-low interest rates steady, although it loosened its grip on long-term bond yields. Exporter-related stocks advanced on a weaker yen against the US dollar following the central bank’s policy tweak. Positive corporate results lifted sentiment further. Toyota Motor jumped 4.7 percent after releasing solid earnings and its share buyback plans. Banking stocks rose on hopes for improved profits amid the prospect of higher interest rates, with Mitsubishi UFJ Financial Group up 2.8 percent and Mizuho Financial Group up 3.7 percent.
Taiwan’s TAIEX inched up 0.2 percent. South Korea’s KOSPI jumped 1.0 percent. Indian equities fell for a second straight session, with the BSE Sensex off 0.4 percent, pressured by weakness in metals due to sluggish economic data from China and technology shares amid weak results from major companies and concerns over higher-for-longer rates in the US.
Australian shares built on last session’s rebound, with the All Ordinaries index up 0.8 percent. Mining stocks led the gains after iron ore prices strengthened on optimism around top consumer China’s latest financial meeting. Major miners BHP Group and Rio Tinto gained 1.6 percent and 2.4 percent, respectively. Energy stocks also rose on the back of firmer oil prices, given the persistent concerns over the Middle East conflict. Sector giants Woodside Energy and Santos rose 1.3 percent and 0.9 percent, respectively. However, gold stocks tracked bullion prices lower. Domestically, investors looked ahead to the Reserve Bank of Australia’s meeting next week. Hotter-than-expected third-quarter inflation, robust retail sales and rebounding house prices added to the case for the central bank to lift interest rates.