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Wall Street’s recent rally extended into Tuesday’s session as investors welcomed the latest inflation data that came in at an annual rate of 3.2% which was below economists’ expectations of 3.3% and raises investors’ hopes that the Fed’s rate hike campaign is coming to an end. The Dow Jones rose 1.7%, the S&P500 added 2.1% and the tech-heavy Nasdaq jumped 2.5%. The 10-year US Treasury Yield also tumbled below 4.5% following the release of the soft inflation report.
Banks including Bank of America and Wells Fargo rallied on hopes that the US economy could avoid a recession all together.
Home Depot shares lifted nearly 6% on Tuesday following the release of better-than-expected third-quarter earnings results.
Over in Europe, markets also welcomed the cooler-than-expected US inflation data, as markets in the region closed higher on Tuesday. The STOXX600 rose 1.4%, led by retail stocks rising 3.1% while oil and gas stocks fell 0.2%. Germany’s DAX rose 1.76% on Tuesday, the French CAC added 1.4% and, in the UK, the FTSE100 lifted 0.2%.
Locally yesterday, ASX closed 0.83% higher on Tuesday, despite the release of Westpac consumer confidence data for November and NAB business confidence data for October both showing declines against economists’ expectations of respective rises. NAB Business confidence data for October fell a further 2 points despite business conditions edging up, driven by higher sales and profitability while employment eased. This reading indicates businesses remain cautious despite the resilience we are seeing in business conditions.
Westpac consumer confidence for November also fell 2.6% in data out yesterday to 79.9 points indicating consumers are pessimistic following the RBA’s latest rate hike for November placing additional financial pressures on Aussie households.
Energy stocks did most of the heavy lifting on Tuesday with the sector closing 2.54% higher, boosted by Beach Energy rising 5.6%.
Commonwealth Bank of Australia rallied just shy of 1% on Tuesday after Australia’s largest bank released a first quarter trading update including unaudited statutory NPAT up 1% on the PCP to $2.5bn. Operating income was flat though for CBA and operating expenses were up 3%, reflecting higher costs from wage inflation and higher amortisation.
Big bank earnings over the last weeks have indicated strength and resilience by the big four in FY23 and the start of FY24, with revenues boosted by the rising interest rates and the peak of respective Net Interest Margins. Multiple signs have suggested though that future revenue and earnings are likely to ease including slowing mortgage and business credit growth across the board, rising operating costs due to inflation, higher switching by customers between all accessible banks both big and small, and the net interest margin peaking during FY23.
What to watch today: