The RBA raised the rate by 0.25% instead of 0.5%. The US stock indices rebounded from September lows.

The US stocks rose on the first trading day of October after a challenging September. The Dow Jones (US30) and S&P 500 (US500) indices experienced their worst months since March 2020 and were dangerously close to their June lows. As the stock market closed yesterday, the Dow Jones Index (US30) increased by 0.79%, and the S&P 500 Index (US500) added 2.59%. The Technology Index NASDAQ (US100) gained 2.91% on Monday.

Shares of Apple, Microsoft, and Google pushed the tech sector up. But Tesla shares fell more than 8.5% as the company reported thirdquarter deliveries that fell short of Wall Street’s expectations.

Analysts believe that even though the longterm trend points to lower prices, fresh quarterly flows could rebound from current levels. At the same time, experts pointed out that higher US Treasury bond yields continue to discourage investors from risky assets.

Equity markets in Europe mostly rose yesterday. German DAX (DE30) gained 0.76%, French CAC 40 (FR40) added 0.55%, Spanish IBEX 35 (ES35) jumped by 1.29%, British FTSE 100 (UK100) closed yesterday with 0.22% gain.

In Switzerland, the Consumer Price Index in September 2022 decreased by 0.2% compared to the previous month. In annual terms, inflation fell from 3.5% to 3.3%. The Swiss and Canadian economies are currently among the most resilient in an environment of rising interest rates and high energy prices.

The Business Activity Index in the manufacturing sectors across Europe continues to decline. The biggest declines are in Germany (48.3→47.8), Spain (49.9→49.0), and France (47.8→47.7). Italy has a small gain (48.0→48.3), but the Eurozone Manufacturing PMI index has fallen from 48.5 to 48.4. A value below 50 for the third consecutive month indicates that the Eurozone economy is, de facto, already in recession. The main problem for the Eurozone is still high inflation, which is accompanied by rising electricity and gas prices, forcing companies to economize and cut production.

Oil prices rose on Monday. The OPEC+ meeting, which begins Wednesday, could well lead to a production cut of one million barrels a day, pushing oil traders to buy. Technically, oil is pointing to further declines, so OPEC+ countries are serious about getting prices back above $90 a barrel by cutting.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained +1.07%, Hong Kong’s Hang Seng (HK50) ended yesterday down by 0.83%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.27%.

The Central Bank of Australia (RBA) raised its interest rate by 0.25%, which came as a surprise since the expectation was a 0.5% increase. The accompanying statement said that the RBA decided to raise the monetary rate by 25 basis points this month as it reassessed the outlook for inflation and economic growth in Australia. The central CPI inflation forecast is about 7.75% in 2022, just over 4% in 2023, and about 3% in 2024. That said, further rate increases are expected in the coming months.

The Reserve Bank (RBNZ) is set to raise the official interest rate (OCR) for the eighth consecutive time tomorrow. Analysts are forecasting another 50 basis point increase in the OCR to 3.5%, the highest level since mid2015. On the other hand, if the RBNZ raises the rate by 0.25% tomorrow instead of 0.5%, as the RBA did today, it would be a great precedent for other central banks, including the US Fed, to become less aggressive, and would also indicate that we are close to the end of the rate hike cycle.

S&P 500 (F) (US500) 3,678.43 +92.81 (+2.59%)

Dow Jones (US30) 29,490.36 +764.85 (+2.66%)

DAX (DE40) 12,209.48  +95.12 (+0.79%)

FTSE 100 (UK100) 6,908.76 +14.95 (+0.22%)

USD Index 111.71 0.41 (0.37%)

• Japan Tokyo Core CP (m/m) at 02:30 (GMT+3);
• Australia RBA Interest Rate Decision (m/m) at 06:30 (GMT+3);
• Australia RBA Rate Statement (m/m) at 06:30 (GMT+3);
• US FOMC Member Williams Speaks (m/m) at 16:00 (GMT+3);
• US FOMC Member Mester Speaks (m/m) at 16:15 (GMT+3);
• US JOLTs Job Openings (m/m) at 17:00 (GMT+3);
• Eurozone ECB President Lagarde Speaks (m/m) at 18:00 (GMT+3).

by JustMarkets, 2022.10.04