Surging Treasury yields pushed US equities into their third day of losses Thursday, as investors’ concerns about high interest rates and recession remained in the driver’s seat a day after the Federal Reserve signaled another rate increase may be necessary this year. The S&P 500 Index and Nasdaq Composite were both near lows not seen since June, after falling 1.6% and 1.1%, respectively. Recession or interest rate concerns weighed particularly heavily on sectors viewed as having greater exposure to those factors. Shares of real estate, consumer discretionary, and financial companies were among the market’s poorest-performing sectors Thursday. European shares also closed lower yesterday, with the Euro Stoxx 50 Index down 1.5%, dragged by travel and leisure shares as well as mining companies. 

Summary for 22.09.2023 

  • Most Asian shares moved in a flat-to-low range on Friday as markets continued to fret over rising interest rates, while Japan’s Nikkei trimmed some early losses after the Bank of Japan offered no changes to its ultra-dovish policy.  
  • European shares look set to drop for a second day Friday while US equity futures were little change this morning, as the surge in Treasury yields cements expectation that rates will stay higher for longer. 
  • Oil prices rose this morning as concerns about a Russian ban of fuel exports could tighten global supply outweighed fears that further US interest rate hikes could dent demand, but they were still headed for their first weekly loss in four weeks. 
  • The Bank of Japan left its monetary setting unchanged this morning and offered no clear sign of a shift in its policy stance, putting a damper on market speculation over the prospects for a near-term interest rate hike and fuelling pressure on the yen. It also maintained a pledge to add to its stimulus without hesitation if needed, a vow that offers yen bears a reason to keep betting against it. Meanwhile, the annual inflation rate in the country edged down to 3.2% in August from 3.3% in the prior month, pointing to the lowest ready in three months. 
  • Treasury 10-year yields edged above 4.5% for the first time since 2007, underscoring how this week’s Federal Reserve meeting is cementing the higher for longer policy rates outlook. Bond investors face a third year of losses after the US central bank once again raised its projections for future borrowing costs. Every benchmark Treasury bond maturity has hit the highest level in more than a decade this week. 
  • Economic updates from the US were mixed yesterday. Weekly initial jobless claims fell last week to a seasonally-adjusted 201,000, about 24,000 under expectations. That is the lowest weekly figure since January and an indication the labour market remains strong. By contrast, the Conference Board’s Leading Economic Index (LE) fell 0.4 to 105.4 in August, meeting expectations but marking the reading’s 17th consecutive monthly decline. The LEI’s extended slide is the longest since the run-up to the 2007-09 Great Recession. 
  • The Bank of England held its policy interest rate at 5.25% yesterday, keeping borrowing costs at their highest level since 2008, as policymakers opted for a wait-and-see approach after the latest inflation and labour data suggested that the accumulated impacts of previous tightening might be taking effect. It was the first pause in policy tightening in nearly two years, following the central bank’s unprecedented 515 bps hikes. The Monetary Policy Committee voted 5-4 in favour of holding rates steady. The central bank also stated that CPI inflation is expected to decline significantly in the near term. 
  • Cisco shares fell nearly 4% yesterday after the company said it would buy Splunk, a cybersecurity software company, for $157 per share in a cash deal worth about $28 billion. Splunk shares soared 21%. 
  • Eli Lilly shares fell on Thursday 4.6% following reports the company had sued several US clinics and pharmacies for allegedly selling cheaper, unauthorised versions of the company’s diabetes drug Moujaro. 
  • FedEx rose 4.8% yesterday after reporting quarterly earnings that beat expectations, though revenue fell slightly short of forecasts. 
  • Fox Corporate shares were also higher, increasing by 2.6%, while News Corp gained 1.7% following reports Rupert Murdoch would step down as chairman of both companies. This leaves his sone, Lachlan Murdoch, with a daunting task – steering the family’s cable TV and newspaper companies around two troubled industries. 
  • Paramount Global shares rose 1% in yesterday’s session following reports that the Writers Guild of America strike could be near an end. Fellow content streamer Walt Disney was up 0.3%. 
  • Apple’s latest iPhones and watches went on sale today, a test of whether a new smartphone design and modest smartwatch changes can help return the company to growth. The devices are going on sale in about 40 countries in its first wave, including in Australia, Hong Kong, mainland China, the US, UK and Fance. The iPhone 15 Pro and Pro Max models will represent Apple’s biggest sellers throughout the rest of the year – and the ability to both create and fulfil demand for the products wil make or break its holiday period.