In US economic data, the preliminary S&P Global manufacturing purchasing managers’ index (PMI) fell from 47.7 to 46.2 in December (survey: 47.8), the lowest level since May 2020. The services PMI dropped from 46.2 to 44.4 in December (survey: 46.5), its sixth consecutive month of contraction.
European sharemarkets fell on Friday on investor concerns about rising borrowing costs and an economic slowdown. S&P Global’s flash Eurozone composite PMI rose from 47.8 to 48.8 in December (survey: 48), but activity shrank for a sixth straight month. The continent-wide FTSEurofirst 300 index slid 1.1% and was down 3.3% for the week. The UK FTSE 100 index shed 1.3% on Friday after British retail sales fell by 0.4% in November (survey: +0.3%). The FTSE 100 lost 1.9% for the week.
US sharemarkets dropped for a third straight session on Friday. Comments from US Federal Reserve officials unnerved investors worried that the central bank’s campaign to counter inflation would push the US economy into a recession. New York Fed President John Williams said, “we’re going to have to do what’s necessary” to get inflation back to target. San Francisco Fed President Mary Daly said it is “reasonable” to believe that once the Fed’s policy rates reached their peak they could stay there into 2024. The quarterly triple witching expiry of equity derivatives
amplified market moves. At the close of trade, the Dow Jones index fell by 282 points or 0.9%. The S&P 500 index lost 1.1%, with the Nasdaq index down by 105 points or 1%. For the week, the Dow lost 1.7%, the S&P fell 2.1% and the Nasdaq shed 2.7%.
US government bonds were mixed on Friday, with longer-term bond yields rising in line with global bonds, while short-term paper continued to challenge the US Federal Reserve’s guidance on protracted monetary policy tightening. US 10-year Treasury yields rose by 4 points to 3.49%. And US 2-year Treasury yields dipped by 7 points to 4.18%. For the week, 10-year yields fell 8 points with 2-year yields down 15 points.
Major currencies were mostly weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0661 to session lows near US$1.0582 at the US close. The Aussie dollar dipped from highs near US67.18 cents to lows near US66.75 cents and was near US66.85 cents at the US close. But the Japanese yen firmed from near 137.37 yen per US dollar to JPY136.30 and was near JPY136.70 at the US close.
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Global oil prices fell by more than 2% on Friday as the US dollar strengthened. Fears of a global economic slowdown pushed prices lower, outweighing news that the Biden Administration will buy 3 million barrels of crude for February to replenish US strategic reserves. The Brent crude oil price fell US$2.17 or 2.7% to US$79.04 a barrel. The US Nymex crude oil price dipped US$1.82 or 2.4% to US$74.29 a barrel. Over the week, Brent gained 3.9% and the Nymex was up 4.6%.
Base metal prices were mixed on Friday. Copper fell less than 0.1% due to ongoing worries that a global recession and rising Covid-19 cases in China would depress demand for metals. But aluminium lifted 0.2%. For the week, copper dropped 3% with aluminium down 3.1%
The gold futures price rose by US$12.40 an ounce or 0.7% to US$1,800.20 an ounce. Spot gold was trading near US$1,792 an ounce at the US close. Over the week, gold slid US$10.50 an ounce of 0.6%. Iron ore futures fell by US23 cents a tonne or 0.2% to US$110.27 a tonne. For the week, iron ore dipped US21 cents a tonne or 0.2%.
Ahead: No major economic data is scheduled in Australia or China. In the US, the NAHB housing market index is released.
Originally published by CommSec
