US markets
US equities finished sharply higher on Tuesday after softer-than-expected inflation data cemented the case that the Federal Reserve (Fed) may have reached the end of its monetary tightening cycle. The bellwether S&P 500 gained 1.9 percent, the blue-chip Dow Jones Industrial Average jumped 1.4 percent, and the tech-heavy NASDAQ climbed 2.4 percent.
A report from the Labor Department showed that inflation is on the right track towards the Fed’s 2.0 percent target. Consumer prices in the US were unexpectedly unchanged in October, after rising 0.4 percent in September, mainly due to a decline in gasoline prices. The underlying annual inflation rate slowed more than expected to 3.2 percent, while the annual core inflation rate, which excludes volatile items such as food and energy, surprisingly edged down to an over two-year low of 4.0 percent.
All the S&P sectors participated in the rally, with real estate, utilities, consumer discretionary and materials enjoying the most sizable gains. Mega-cap growth stocks advanced after Treasury yields plunged as bets rose on rate cuts in 2024 following the release of weak inflation data. Amazon.com, Meta Platforms, and Microsoft rose between 1.0 percent and 2.3 percent. In corporate headlines, electric vehicle maker Tesla surged 6.1 percent after raising prices for some of its cars in China. Snap rallied 7.5 percent on news that Amazon.com will allow Snapchat users in the US to buy some products listed on the e-commerce platform directly from the social media app. Home improvement chain Home Depot advanced 5.4 percent after its quarterly profit topped estimates.
These price data reflect observations at market close: WTI spot crude oil rose by US$0.04 to US$78.90, while spot gold gained US$32.75 to US$1,968.70. The US dollar weakened vs. most major currencies. The US Treasury 30-year bond yield dropped by 12 basis points to 4.62 percent, while the 10-year note yield dropped by 19 basis points to 4.44 percent.
European markets
European equities extended gains on Tuesday as sentiment improved after cooler-than-expected US inflation readings eased worries of an overly hawkish Fed. The Europe-wide STOXX rose 1.3 percent, the German DAX gained 1.8 percent, the French CAC 40 added 1.4 percent, while the UK FTSE 100 firmed 0.2 percent.
Nearly all the Europe-wide STOXX sectors closed in positive territory, with real estate, consumer discretionary and materials leading the gains, while energy declined. Basic resources outperformed, with commodity trader Glencore jumping 4.5 percent after agreeing to buy a majority stake in the steelmaking coal business of Canadian miner Teck Resources. On the corporate earning front, German top utility company RWE advanced 3.7 percent after reporting a surge in core profit for the first nine months of the fiscal year. German online takeaway food company Delivery Hero soared 10.4 percent after beating third-quarter expectations on the gross merchandise value (GMW) and slightly raising its full-year forecast on the same metric.
On the economic data front, estimates showed the eurozone economy contracted by 0.1 percent quarter-on-quarter in the third quarter of 2023, marking the first contraction since 2020. On a yearly basis, the economy rose slightly by 0.1 percent. Contrary to the usual trend when the economy weakens, employment in the eurozone rose by 0.3 percent quarter-on-quarter and 1.4 percent year-on-year in the same period. Meanwhile, the Zentrum für Europäische Wirtschaftsforschung (ZEW) economic sentiment index for the euro area improved much more than expected to a nine-month high in November.
Asia Pacific markets
Asian equities broadly gained on Tuesday.
Mainland China’s equities ended higher, with the CSI 300 index edging up 0.1 percent and the Shanghai index up 0.3 percent. Sentiment improved ahead of a highly anticipated meeting between Chinese President Xi Jinping and US President Joe Biden on Wednesday, which is expected to deliver positive news on China-US relations. Lending data softened in October but exceeded analysts’ estimates. Brokers China International Capital Corp (CICC) and China Galaxy Securities surged 8.2 percent and 4.5 percent, respectively, amid rumours of a planned merger despite their denials. Lithium stocks fell amid a downward trend of lithium carbonate prices. Hong Kong’s equities gave back some of the gains from the previous session, with the Hang Seng index down 0.2 percent. Investors adopted a cautious approach ahead of a slew of crucial economic figures from China this week, including industrial production, retail sales, and unemployment data, to further assess the health of the economy.
Japanese stocks posted positive returns, with the Nikkei index up 0.3 percent and the broader TOPIX up 0.4 percent, boosted by continuous solid corporate results and a weaker yen. Energy stocks led the gains amid firmer oil prices. Export-oriented automakers advanced as the yen weakened, with Honda Motor up 2.3 percent and Subaru up 2.0 percent. On the earnings front, Mizuho Financial Group climbed 3.0 percent after posting better-than-expected profit in its midterm results and raising its profit forecast due to the yen’s weakness and a positive economic outlook. In corporate headlines, education company Benesse Holdings soared 10.7 percent following the news of a possible management buyout.
Taiwan’s TAIEX added 0.5 percent. South Korea’s KOSPI rose 1.2 percent. Indian markets were closed for a holiday.
Australian shares snapped a two-session losing streak, with the All Ordinaries index up 0.9 percent, lifted by mining stocks on the back of strong iron ore prices. Major miners Rio Tinto and BHP Group added 2.0 percent and 1.4 percent, respectively. Energy stocks also posted strong gains due to higher oil prices, with sector majors Woodside Energy Group and Santos rising 2.5 percent each. Financials also closed higher, with Commonwealth Bank of Australia, one of Australia’s largest four banks, jumping 1.0 percent after its quarterly cash earnings beat estimates. Investors have turned their attention to domestic wages and employment data due on Wednesday and Thursday for further clues on the interest rate outlook.