Wall St bounces back amid revived Fed rate cut expectations, tech rally
European markets were more mixed with softer defence firms.
Stocks on Wall Street continued their revival as Broadcom, Tesla and Alphabet led a recovery among tech companies from their slump last week, while Federal Reserve governor Christopher Wallace’s support for the central bank to cut rates was welcomed by investors.
Across the Atlantic, stock markets were mixed as defence companies such as BAE Systems and France’s Safran were weaker as the US and Ukraine edge towards a peace plan to end the war with Russia, while Germany’s IFO survey showed business sentiment deteriorated in Europe’s biggest economy.
Denmark’s Novo Nordisk sank after drugmaker said the key ingredient in its Ozempic and Wegovy drugs didn’t slow Alzheimer’s disease in late-stage trials, while Germany’s Bayer gained after reporting positive late-stage trial results in a stroke prevention drug.
And locally, Australian futures are pointing to a positive open for the S&P/ASX 200 index, while New Zealand’s shoulder earnings season continues with Pacific Edge due to report today.
Calmer markets
Stocks on Wall Street started the shortened week stronger, with the S&P 500 up 1.6% in late trading, with tech companies driving gains as the Nasdaq Composite advanced 2.6%. Broadcom surged 10%, while Tesla jumped 7.3% and Google-parent Alphabet advanced 5.6%.
Wall Street’s fear gauge, the volatility index, dropped 11% to 20.79 as fears about the booming artificial intelligence sector subsided, while Bitcoin increased 1% to US$88,344 at 7am in Auckland.
Amazon said it plans to spend US$50 billion to expand AI and high-performance computing infrastructure for US government customers of its cloud unit, and will add nearly 1.3 gigawatts of capacity.
That shift in sentiment was supported by revived expectations the Federal Reserve will cut the federal funds rate at next month’s review, with Fed governor Christopher Waller saying he will push for a reduction to provide support for a softening jobs market.
The yield on US 10-year Treasuries fell 3 basis points to 4.04%, widening the gap with New Zealand’s equivalent unchanged yield at 4.17%, while the kiwi dollar was little changed at 56.09 US cents at 7am in Auckland from 56.07 cents yesterday.
“Following Waller’s reaffirmation of support for a near-term rate cut, the market has moved to move in a slightly higher chance of a December move, with the implied probability over 70%, with 18 basis points priced,” Bank of New Zealand senior markets strategist Jason Wong said in a note.
Meanwhile, stock markets were mixed across the Atlantic, with Britain’s BAE Systems, Germany’s Rheinmetall, and France’s Safran among defence stocks declining as the US and Ukraine continued to work towards a new peace plan to end the war with Russia.
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Chinese President Xi Jinping made the unusual move initiating a call with his US counterpart Donald Trump to support efforts to end the conflict.
Brent crude oil futures rose 0.7% to US$62.34 a barrel.
The UK’s FTSE dipped 0.1% and France’s CAC 40 slipped 0.3%, while Germany’s CAC 30 rose 0.6% with drugmaker Bayer leading the bourse higher after it rallied on a positive late-stage trial for a stroke prevention drug.
Separately, Germany’s IFO survey showed a further deterioration in business sentiment in Europe’s biggest economy. The kiwi dollar traded at 48.70 euro cents from 48.69 cents yesterday.
Among other drug companies, Denmark’s Novo Nordisk sank 5.8% after saying a late-stage trial found the semaglutide ingredient in its Wegovy and Ozempic drugs didn’t slow Alzheimer’s disease.
And US commerce secretary Howard Lutnick called on the European Union to change digital regulations to get lower steel and aluminium tariffs, calling on the trading bloc needs to settle outstanding cases against Google, Microsoft and Amazon in an interview with Bloomberg television.
That positive sentiment is set to carry through to the antipodes with Australian futures pointing to a 0.3% gain for the ASX200 when trading opens across the Tasman.
No major local data are scheduled for today, while the local corporate earnings season continues with cancer diagnostics firm Pacific Edge due to report its first-half result.
Reporting by Paul McBeth. Image from István Szitás on Unsplash.
