Markets
Global Markets Report - 27 January
All three major US indices climbed on Thursday while Australian markets were closed.
Australia
All three major US indices climbed on Thursday. Strong economic data suggested that the Federal Reserve may be able to slow inflation without causing a recession.
ASX futures were pointing 0.4% higher as of 9am on Friday. Australian markets were closed on Thursday to celebrate Australia Day.
US stocks rose as a fresh slate of economic data and corporate earnings reports continued to paint a mixed picture of the economy's direction.
The S&P 500 added 1.10% and the Nasdaq Composite gained 1.76%. The Dow Jones Industrial Average was up 205 points, or 0.61%.
The major indices had closed nearly flat on Wednesday after a slew of earnings reports.
New data on Thursday showed US economic growth slowed less than expected in the fourth quarter of 2022, capping last year's cool-down from a pandemic rebound that fueled red-hot growth in 2021. Initial jobless claims also declined last week, indicating the US labor market remains strong, despite having lost steam in recent months.
In commodity markets, Brent crude oil climbed 1.67% to $87.56 a barrel while gold shed 0.84% to US$1,929.68
The yields on Australian government bonds were unchanged, with the 2 Year at 3.07% and the 10 Year at 3.50%. Meanwhile, yields on US Treasury notes continued to decline with the 2 Year dipping to 4.18% and the 10 Year down to 3.49%.
The Australian dollar edged up to 71.14 US cents from its previous close of 71.03. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 94.91.
Asia
The Shanghai Stock Exchange was closed on Thursday to celebrate the Lunar New Year.
Hong Kong's Hang Seng Index built on early gains to end 2.4% higher at 22566.78 as investors returned from the Lunar New Year holiday. Tech stocks were among the best performers, with Xiaomi surging 12%, Tencent climbing 3.8% and JD.com rising 2.8%. Consumer shares were also higher, likely supported by holiday-driven demand amid the festivities. Li Ning advanced 7.2%, Anta Sports added 2.8% and China Mengniu Dairy was 1.1% higher.
The Japanese Nikkei Stock Average closed 0.1% lower at 27362.75, amid worries over uncertainties in the economic and earnings outlook. Shipping stocks led losses, with Nippon Yusen falling 2.4%, Mitsui O.S.K. Lines losing 3.2% and Kawasaki Kisen Kaisha 4.1% lower.
The Bombay Stock Exchange of India was closed on Thursday in honor of Republic Day.
Europe
European stocks mostly rose after mixed Asia trading and ahead of an expected slightly lower US open. The pan-European Stoxx Europe 600 gained 0.42%, the French CAC 40 advanced 0.74%, and the German DAX added 0.34%.
Great Britain’s FTSE 100 index closed up 0.21% on Thursday, in line with global markets, driven by investment company 3i Group's shares following upbeat results. 3i lead the top performers, closing 9.2% higher after the group reported better-than-expected net asset value in the third quarter, followed by Ashtead and Hargreaves Lansdown, up 4.3% and 3.5%, respectively. Among the session’s losers, Diageo fell 5.5%, reaching its lowest level since June 2021 after reporting a worse-than-expected performance in the key US market.
"Stock markets were mixed in Asia, with the picture still incomplete thanks to public holidays in key markets such as China and Australia," IG analysts said in a note. "Investors get their first look at US Q4 GDP today and while growth is expected to slow from Q3, it's forecast to remain at an acceptable level."
North America
US stocks rose on Thursday as a fresh slate of economic data and corporate earnings reports continued to paint a mixed picture of the economy's direction.
The S&P 500 added 1.10% and the Nasdaq Composite gained 1.76%. The Dow Jones Industrial Average was up 205 points, or 0.61%.
The major indices had closed nearly flat on Wednesday after a slew of earnings reports.
New data on Thursday showed that US economic growth slowed less than expected in the fourth quarter of 2022, capping last year's cool-down from a pandemic rebound that fueled red-hot growth in 2021. Initial jobless claims also declined last week, indicating the US labor market remains strong, despite having lost steam in recent months.
Investors were also sifting through another batch of corporate earnings, with Intel and Visa among the major companies still due to report. Shares of Tesla, popular with individual investors, were up 11% after the electric car manufacturer reported a record quarterly profit after the markets closed on Wednesday.
Next week, the central bank is expected to continue moderating its rate increases to a quarter-percentage point, down from a half-percentage point at the previous meeting, after a key metric showed inflation slowed for the sixth straight month in December. The Fed's preferred inflation gauge is set to be released on Friday.
"Everything is pointing to inflation having reached that tipping point and starting to turn over. That necessitates at least a pause in some monetary tightening," said Altaf Kassam, head of investment strategy and research for Europe, the Middle East, and Africa at State Street Global Advisors.
Economists and investors are concerned that higher rates are increasing the chance of a recession in the US. However, the economy has shown greater strength than expected, boosting hopes that the Fed can manage a so-called soft landing, in which it reduces inflation by slowing growth without causing a recession.
The details of Thursday's GDP report were mixed. Consumer spending, the economy's main engine, remained solid but its pace of growth slowed from the previous quarter. Business investment ticked up at a weaker rate, with companies cutting back on equipment spending. The housing market, which has been hit by rising mortgage rates, continued to slump. Most of the report's gains came from businesses adding to inventories, higher government spending, and lower imports, analysts said.
In jobless claims, the number of people seeking ongoing unemployment benefits ticked up to 1.675 million, an increase of 20,000. Continuing claims are up from last spring's lows, suggesting it is taking longer for some to find a new job.
A wave of major layoff announcements in recent weeks could also push claims higher later this year.
