Jarden Brief: General Motors and Ford both surge in US market rally

Keeping you up to date with the latest market moves, in association with Investment firm Jarden

International

US

US markets continued yesterday's rally, with the S&P 500 climbing 2.4 per cent, the Nasdaq composite up 2.6 per cent and the Dow Jones Industrial Average rising 2.3 per cent.

Encouraged by the rally, the market appeared to return to 'risk-on' appetite. Shares in volatile sectors such as travel and cruise liners surged; also likely encouraged by an announcement from Norwegian Cruise Line (+16.0 per cent) that it would be the first major cruise line to suspend all Covid-19 requirements around testing, masks and vaccination.

Industry competitors Royal Caribbean (+14.2 per cent) and Carnival Corp (+13.3 per cent) followed higher.

Airline stocks such as Delta (+8.5 per cent) and American Airlines (+8.4 per cent) also benefited from the volatility.

Auto manufacturers General Motors (+7.0 per cent) and Ford (+6.0 per cent) outperformed after both announced year-on-year increases in their third quarter sales, albeit these figures were compared against a prior period riddled with supply chain issues and Covid-19 disruption.

Twitter jumped 12.7 per cent after news broke that Elon Musk has apparently reversed his decision to back out of his takeover of the social media company and is now reportedly proposing to buy Twitter for his original offer at US$54.20 a share.

Musk's Twitter ambitions have been riddled with controversy, after the billionaire agreed to an offer to buy the company at a value of US$44 billion but tried to back out a few weeks later – alleging that Twitter was understating the number of fake accounts in its user count.

Ford and its rival GM both outperformed after increases in recent sales. Photo / Supplied

Rest of the World

European stocks also continued to close higher, seemingly encouraged by the sudden drop-off in global bond yields seen in the past few days.

The FTSE 100 was up 2.6 per cent and the Stoxx 600 index rose 3.1 per cent on the close. The positive valuation impacts of the lower yield environment seemed to offset slightly higher inflation numbers reported in the Eurozone's August producer price inflation index, which at +5.0 per cent, were slightly above market expectations.

Commodities

The optimism around travel stocks in global markets, coupled with OPEC+'s considered production cuts reported over the weekend, appear to have driven oil another 3.3 per cent higher to US$91.80 a barrel.

Gold rose 1.5 per cent to US$1,724 per ounce, while Bitcoin recovered back above the $20,000 mark. Despite a brief rally yesterday morning, the NZD is now trading slightly lower against the Euro and USD at 57.2 cents and 57.4 cents, respectively.

Australia

The ASX 200 had its strongest performance in more than two years yesterday, soaring 3.8 per cent. Markets roared after the RBA hiked rates by 25 basis points, below market expectations of a fifth consecutive 50-basis point hike.

Despite the moderation, RBA Governor Philip Lowe reiterated the Bank's commitment to return inflation to target levels, and willingness to do 'what is necessary' to achieve that. Market expectations for the terminal cash rate fell substantially, from 4.1 per cent to 3.5 per cent.

Yields on Australian government bonds immediately tumbled. Within 15 minutes of the rate decision the one-year and five-year bonds both fell by 36 basis points, respectively, while the 10-year slid 24.5 basis points.

Just one stock in the ASX 200 fell during the trading session, while the remaining 199 finished up by the end of the day. Australian banks carried the index up, with index heavyweights CBA gaining 4.6 per cent, Westpac adding 4.0 per cent and ANZ climbing 5.0 per cent.

Meanwhile, lithium stocks led the market up as the best performing sub-sector of the day.

The Australian Department of Industry's Resources and energy quarterly September report forecasted significant price increases in spodumene, a source of lithium. This resulted in lithium miners such as Lake Resources (+14.5 per cent), Sayona Mining (+13.3 per cent) and Pilbara Minerals (+12.3 per cent) recording double digit percentage gains.

In further macroeconomic news, August home loans data from the Australian Bureau of Statistics was slightly worse than market expectations, with new home loans falling -3.4 per cent from last month.

Weakness was seen across both owner-occupier (-2.7 per cent) and investor housing loans (-4.8 per cent).

However, personal lending data seemed to show a continued solid rebound, with loans for travel-related purposes and household & personal goods both continuing to show signs of improvement.

New Zealand

The New Zealand market broke its losing streak yesterday, gaining 1.2 per cent on the close following the strong rally in Australian share markets.

Lifting the index up were large market capitalisation companies that had been sold off toward the end of September, such as Auckland Airport (+3.0 per cent), Spark (+2.7 per cent) and retirement village operator Ryman Healthcare (+2.1 per cent). The Australian banks also performed well, matching their primary listed instruments.

As one of the few stocks which ended in negative territory yesterday, Arvida fell -2.8 per cent after it provided an investor update confirming a total of 210 units sold or resold for the five months through to August.

The company highlighted average new sale prices increasing by 13 per cent, which was not enough to offset negative news around Omicron-related construction delays.

These mean that several key projects will be pushed back into the fourth quarter. The next planned update for Arvida that investors may look forward to is likely its first half 2023 result, which is expected to be released on 29 November.

This morning, the latest global dairy trade auction saw a -3.5 per cent reduction in the GDT Price Index. Another fall in whole milk powder (-4.2 per cent) weighed on the index, while skim milk powder (-1.8 per cent) held more stable.

Butter fell the most out of the commodities, with the second expiry contract clearing -7.2 per cent down.

Coming up today

The key event domestically will be the Reserve Bank of New Zealand's OCR decision, which is expected to be released from 2pm today.

The decision is likely to be especially anticipated, given the surprise 25 basis point hike from the RBA yesterday. While market analysts are generally agreed in expecting the Bank to raise rates again, there is less consensus on the size of the potential increase – with most expecting either a 25 basis points or 50 basis point hike.

Globally, US employment data, trade balance numbers and the latest ISM Services Index are expected to be released overnight.

• For more information on the latest market moves, get in touch with Jarden.

All market pricing and announcements are sourced from Refinitiv, NZX and ASX.

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