Market Wraps

Morning Wrap: ASX 200 to rise + The Fed is set to pause as US inflation cools to 2-year lows

Wed 14 Jun 23, 8:30am (AEST)

ASX 200 futures are trading 44 points higher, up 0.61% as of 8:20 am AEST.

Major US benchmarks rallied on cooler-than-expected inflation data, US headline inflation has now fallen for 11 consecutive months to levels not seen since April 2022, Materials stocks rally on increasing Chinese stimulus expectations, demand for European factory space surges amid a shift away from China and the likelihood of a Fed pause jumps to more than 90%.

Let's dive in.

Overnight Summary

Wed 14 Jun 23, 8:30am (AEST)

Name Value Chg %
Major Indices
S&P 500 4,369 +0.69%
Dow Jones 34,212 +0.43%
NASDAQ Comp 13,573 +0.83%
Russell 2000 1,896 +1.23%
Country Indices
Canada 19,990 +0.35%
China 3,234 +0.15%
Germany 16,231 +0.83%
Hong Kong 19,521 +0.60%
India 63,143 +0.67%
Japan 33,019 +1.80%
United Kingdom 7,595 +0.32%
Name Value Chg %
Commodities (USD)
Gold 1,956.60 -0.10%
Iron Ore 112.45 -
Copper 3.829 -0.05%
WTI Oil 69.28 -0.20%
Currency
AUD/USD 0.6766 +0.02%
Cryptocurrency
Bitcoin (AUD) 38,181 -0.42%
Ethereum (AUD) 2,568 -0.43%
Miscellaneous
US 10 Yr T-bond 3.839 +1.97%
VIX 15 -2.66%

US Sectors

Wed 14 Jun 23, 8:30am (AEST)

Sector Chg %
Materials +2.33%
Industrials +1.16%
Consumer Discretionary +1.00%
Information Technology +0.71%
Real Estate +0.62%
Financials +0.62%
Health Care +0.53%
Energy +0.47%
Consumer Staples +0.42%
Communication Services +0.27%
Utilities -0.06%

S&P 500 SESSION CHART

S&P 500 Intraday
Choppy but higher session for the S&P 500 (Source: TradingView)

MARKETS

  • S&P 500 higher, finished near best levels and continues to climb 14-month highs thanks to a cooler-than-expected CPI print 

  • Participation was broad-based, led by Materials, Industrials, Discretionary and Tech

  • US 2-year yield initially fell 8 bps to 4.49%, finished the session 9 bps higher at 4.68%

  • Copper prices rallied 2.1% to 1-month high of US$3.8/lb on Chinese stimulus hopes

  • WTI crude bounced 2.9% to US$69.3 but still down 4.4% over the last four sessions

  • Discretionary positioning in stocks above neutral for first time since Feb(Reuters)

  • Global Fund Managers afraid to miss out on AI frenzy (Bloomberg)

  • Hedge funds get sucked into stock rally ahead of inflation data (Bloomberg)

STOCKS

  • Goldman Sachs see investment banking revenues higher in upcoming quarters (FT)

  • Oracle shares hit all-time high on quarterly earnings beat (Reuters)

ECONOMY

  • US inflation slows, giving room for Fed to pause rate hikes (Bloomberg)

  • UK unemployment falls and wage growth picks up (Bloomberg)

  • Demand for Europe factory space rises 29% amid 'nearshoring' rush (FT)

  • German inflation in falls to lowest level since March 2022 (Reuters)

  • China's government agencies weigh broad range of stimulus proposals (Reuters)

  • China cuts short-term interest rates to support economic recovery (Bloomberg)

  • China credit data misses expectations, flags waning recovery (Bloomberg)

  • NYC office occupancy breaks 50% for first time since pandemic (Bloomberg)

  • Australia consumer confidence stabilises near recession lows (Bloomberg)

Industry ETFs

Wed 14 Jun 23, 8:30am (AEST)

Description Last Chg %
Commodities
Copper Miners 38.33 +2.57%
Steel 62.8 +2.40%
Strategic Metals 85.74 +2.04%
Lithium & Battery Tech 65.27 +1.89%
Nickel 28.4 +1.65%
Aluminum 45.875 +0.44%
Uranium 22.52 -0.27%
Gold 180.54 -0.74%
Silver 21.74 -1.54%
Industrials
Global Jets 20.23 +2.07%
Aerospace & Defense 115.76 -0.08%
Healthcare
Biotechnology 131.35 +1.14%
Cannabis 7.32 +0.55%
Description Last Chg %
Cryptocurrency
Bitcoin 14.48 +0.14%
Renewables
Hydrogen 10.06 +3.71%
CleanTech 15.1 +1.41%
Solar 72.31 +1.08%
Technology
Electric Vehicles 26.17 +2.87%
Video Games/eSports 56.44 +1.88%
Robotics & AI 29.3 +1.70%
Cloud Computing 20.15 +1.61%
Cybersecurity 24.56 +1.45%
Semiconductor 509.27 +1.34%
FinTech 21.81 +1.11%
Sports Betting/Gaming 17.635 +1.00%
E-commerce 18.12 +0.53%

Deeper Dive: US Inflation

US inflation came in cooler than expected at both levels in May:

  • Headline inflation was 4.0% vs. 4.1 expected (and 4.9% in the previous month)

  • Core inflation was 5.3% in-line with expectations (and 5.5% in the previous month)

As for specific CPI components:

  • Energy prices fell 3.6% month-on-month, which was the biggest drag on inflation

  • Shelter remains sticky, up 0.6% month-on-month after rising 0.4% in April

  • But at the year-on-year level, Shelter prices eased to 8.0% in May from 8.2% in March (after 25 consecutive increases)

  • Used cars index also increased 4.4% month-on-month

Plus some interesting stats from Bespoke Invest:

  • US inflation surged from 5.4% in September 2021 to a peak of 9.1% in June 2022

  • The May print represents the "largest drop in the year-on-year headline ... since the Global Financial Crisis. Before that, you have to go back to the early 1980s."

  • Marks the longest streak (11 months in a row) of decelerating inflation since 1921

Overall, inflation is cooling, especially at the headline and ex-shelter level. However, core inflation remains sticky and prints have been above 5.0% annualised over the last six months.

Still, the likelihood of a Fed pause jumped to 93.1% after the inflation print, according to CME's Fedwatch Tool.

Likewise, Goldman Sachs said "we view today's report as supportive of our call for a pause at the June FOMC meeting followed by a hike in July."

Key Events

ASX corporate actions occurring today:

  • Trading ex-div: KMD Brands (KMD) – $0.024 

  • Dividends paid: None

  • Listing: None

Economic calendar (AEST):

  • 4:00 pm: Germany Wholesale Prices

  • 4:00 pm: UK GDP

  • 10:30 pm: US Producer Price Index

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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