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Morning Research Notes - 12.07.24
US markets closed broadly lower on Thursday, despite bolstered rate cut expectations after the release of softer-than-expected CPI data. Brent (oil) traded 0.3% higher, with the current price per barrel sitting at $85.35. Spot gold also gained 1.8%, with the current price per ounce standing at $2413.19. Volatility, as measured by the VIX index, increased by 0.5% to $12.92.
On Thursday, US stocks experienced mixed movements despite cooling inflation data suggesting a slowdown in the economy, increasing the potential for interest rate cuts by the Fed later this year. The S&P 500 declined by 0.88% to close at 5,584.54, while the Nasdaq fell 1.95%, ending at 18,283.41, with Nvidia's shares dropping over 5.5%. Conversely, the Dow Jones Industrial Average inched up by 0.08%, closing at 39,753.75. The Russell 2000 Index surged 3.6% driven by expectations of a September rate cut.
Treasury yields dipped, reflecting increased bets on interest rate cuts. The June Consumer Price Index showed a monthly decrease of 0.1%, and an annual rise of 3%, both below expectations. Despite these figures raising hopes for rate cuts, some Fed officials remain cautious, needing further evidence of cooling inflation. In the corporate sector, PepsiCo reported declining North American demand, Delta Air Lines forecasted lower quarterly profits, and Costco announced plans to increase membership fees despite a stock drop. Meanwhile, crude prices fell after a bearish IEA report on global oil demand growth.
The ASX 200 increased 0.92% on Thursday, with Materials (1.18%), Utilities (0.25%), Health Care (1.32%), Info Tech (1.47%) and Financials (0.51%) all closing higher. Commodity markets ended the day mixed, with Zinc (1.13%) and Iron ore (1.7%) experiencing gains, whilst Copper (-0.03%), Aluminium (-0.14%) and Nickel (-0.72%) saw losses.
In other news, Citi suggests Rio Tinto could buy Arcadium Lithium, Investors ramp bets on Fed rate cut bets, US sees deflation, Iron ore miners ‘expensive’: Morningstar (Source: AFR)
Chart of the day
Today's chart shows the year-to-date returns of various asset classes. The best performing of these assets has been US equities (represented by the S&P 500), which has returned approximately 15% since the first of January. The worst performing of these assets has been fixed income (bonds - represented by the iShares US Bond Aggregate), which has exhibited incrementally negative returns.
Source: Livewire, Principal Asset Management
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