Aussie Rises after RBA, Nvidia Hits New ATH

Equities

On Monday, the major indices on Wall Street concluded the trading day in negative territory, following remarks from Jerome Powell, the Federal Reserve Chair, dispelling expectations of near-term interest rate reductions. The Dow Jones Industrial Average decreased by 0.71% to settle at 38,380.12, while the S&P 500 dipped by 0.32% to close at 4,942.81, and the Nasdaq Composite edged down by 0.20% to finish at 15,597.68.

This downturn came in the wake of Powell's interview on Sunday on ‘60 Minutes’, where he emphasised the need for more substantial evidence of a sustained decrease in inflation before considering lowering rates. Further compounding investor hesitancy were comments from Neel Kashkari, President of the Minneapolis Federal Reserve, suggesting a strong economy might delay rate cuts.

The UK's FTSE 100 index was flat on Monday amidst a decline in the pound to a near eight-week low against the dollar. Conversely, the FTSE 250 index experienced a 0.8% fall. These movements were partially influenced by the latest US services sector data showing growth in January and subsequent adjustments in market expectations regarding interest rate cuts.

Several US companies reported notable stock movements. Caterpillar Inc. saw its shares climb by 2% after announcing higher quarterly profits, reaching a new record high. Estee Lauder's shares surged by 12% following the company's announcement of a workforce reduction plan targeting a 3% to 5% cut. Boeing experienced a 1.3% decline in its share price due to a new quality issue affecting some 737 MAX planes, leading to delivery delays.

Tesla's shares fell by 3.7%, touching their lowest level since May, after Piper Sandler cut the stock's price target. Nvidia, however, bucked the trend by closing up 4.8% after Goldman Sachs raised its price target, reaching a new record high. Catalent's shares jumped by 9.7% following news of Novo Nordisk parent Novo Holdings' plan to acquire the contract drugmaker in an $11.5-billion all-cash deal.

In the UK, Vodafone's shares decreased by 3.3% as the company reported a significant slowdown in service revenue growth in Germany. Conversely, CMC Markets saw an 18.2% increase in its shares after announcing job cuts that would affect 17% of its workforce. GSK enjoyed a 3.2% rise in its share price after Deutsche Bank upgraded its target price for the biopharmaceutical company.

Forex & Commodities

The US dollar sits near a three-month high amid prevailing expectations that the Federal Reserve might not aggressively cut interest rates this year. Conversely, the Australian dollar saw an uptick, rising 0.44% to $0.651, following the Reserve Bank of Australia's announcement that it might consider a further rate hike to address inflation, despite keeping rates steady this time at 4.35%.

Economic indicators from the US, including a surge in services sector growth and robust job data, have dampened hopes for immediate and significant interest rate reductions by the Federal Reserve. This sentiment has led traders to adjust their expectations, now foreseeing a mere 16% chance of a rate cut in March, a stark contrast to the 69% anticipated at the year's start. Additionally, the market has recalibrated its outlook to 115 basis points of cuts within the year, down from the previously expected 150 basis points.

Gold prices benefited from the softening dollar and Treasury yields, with spot gold climbing 0.2% to $2,027.85 per ounce. This uptick reflects investors' reactions to geopolitical tensions in the Middle East and adjustments in interest rate expectations.

Oil prices remained largely stable, with Brent crude futures and West Texas Intermediate crude futures experiencing minimal changes. This stability occurs as markets evaluate US Secretary of State Antony Blinken's Middle East visit, aimed at negotiating a ceasefire, and the impact of geopolitical developments on oil supply routes.