Live Markets: The Sunak effect: a day of glory for the FTSE 250
25/10/2022 16:18
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Main U.S. indexes green; Nasdaq leads the pack
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All S&P 500 sectors green: real estate out front
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Euro STOXX 600 index up ~1.4%
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Dollar falls; gold, crude, bitcoin rise
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U.S. 10-Year Treasury yield slides to ~4.08%
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THE SUNAK EFFECT: A DAY OF GLORY FOR THE FTSE 250 (1118
EDT/1518 GMT)
Equities in Europe are enjoying a risk-on day with indices
hitting fresh highs across the board, just as bond yields fall
further and a U.S. dollar slide deepened following U.S. housing
data.
But the stand-out performers on the old continent are UK
domestic stocks.
After being trashed for more than one year by investors
concerned by UK political turmoil and economic woes, UK domestic
stocks are clearly in favour today, even more if compared to the
country's listed foreign earners.
Relative to the internationally exposed FTSE 100 .FTSE ,
the FTSE 250 .FTMC index is in fact up nearly 3%, firmly on
track for its biggest one-day jump since April 2020.
"This is the Sunak effect," says one UK-based trader.
Rishi Sunak said on Tuesday he was not daunted by the scale
of the challenge as he became Britain's third prime minister in
two months, pledging to lead the country through an economic
crisis and rebuild trust in politics.
A few days ago the domestically focused UK index hit its
lowest level since the Brexit in 2016 relative to the FTSE 100.
(Danilo Masoni)
*****
A NIP IN THE AIR: GLOOMIER CONSUMERS, COOLER HOME PRICE
GROWTH (1055 EDT/1455 GMT)
A data double-header on Tuesday showed inflation continues
to sour consumer attitudes, while red-hot home price growth is
descending to earth, logging its coolest annual reading in more
than a year-and-a-half.
The mood of the American consumer, who carries about 70% of
the U.S. economy on their back, has soured more than expected
this month.
The Conference Board's Consumer Confidence index
USCONC=ECI shed 5.3 points to 102.5, a gloomier print than the
106.5 print analysts anticipated.
The drop was largely the fault of a sharp decline in the
"present situation" component, while the "expectations index"
edged down to 78.1, pulling further below 80, the level
typically associated with recession.
"Concerns about inflation—which had been receding since
July—picked up again," writes Lynn Franco, senior director of
economic indicators at The Conference Board. "Looking ahead,
inflationary pressures will continue to pose strong headwinds to
consumer confidence and spending, which could result in a
challenging holiday season for retailers."
While the report was rather grim, the gap between "present
situation" and "expectations," which tends to yawn wider when
recession waits in the wings, has narrowed."
Separately, the growth of U.S. home prices cooled down more
than expected in August.
The Case Shiller 20-city composite USSHPQ=ECI grew at a
13.1% annual rate - the coolest reading since February 2021 -
down 2.9 percentage points from July and landing well below the
14.4% consensus.
Record low supply as a result of the pandemic-driven
stampede for the suburbs, along with materials scarcity and
ever-rising mortgage rates, have lifted the cost of monthly home
payments beyond the means of many potential homebuyers,
especially at the lower end of the market.
"The growth rate of housing prices peaked in the spring of
2022 and has been declining ever since," says Craig Lazzara,
managing director at S&P DJI. "As the Federal Reserve moves
interest rates higher, mortgage financing becomes more expensive
and housing becomes less affordable."
"Given the continuing prospects for a challenging
macroeconomic environment, home prices may well continue to
decelerate," Lazzara adds.
Nancy Vanden Houten, lead U.S. economist at Oxford
Economics, agrees.
"We expect the decline in home price growth to accelerate as
sharply higher mortgage rates deliver a major blow to
affordability and home sales," Houten writes.
City by city, Miami, Tampa, Dallas and Atlanta all saw
year-on-year price growth on the hot side of 20%.
Wall Street's multi-session rally appears to have more gas
in its tank.
Generally decent third-quarter earnings, along with growing
hopes that the Fed might be approaching a pull-back in the size
of its interest rate hikes to combat inflation, continues to
fuel investor risk appetite.
The mega-cap market movers were providing the most upside
muscle, with investors favoring growth .IGX over value .IVX .
(Stephen Culp)
*****
S&P 500 BATTLING ABOVE A BARRIER (0950 EDT/1350 GMT)
Wall Street is rallying early on Tuesday, as investors
digested a mixed bag of earnings reports from a flurry of
companies ahead of results from megacap firms that could put a
recent market rally to the test. .N
Indeed, Microsoft MSFT.O and Alphabet GOOGL.O are
reporting after the close.
U.S. August Case-Shiller housing data came in weaker than
expected. Markets await U.S. October Conference Board consumer
confidence at 1000 EDT. The expectation is for a reading of
106.5, down from 108 last month.
In any event, the U.S. 10-Year Treasury yield US10YT=RR is
under pressure.
After hitting a high of 4.3380% on Friday, and ending last
week at 4.2120%, the yield has risen 12-straight weeks. That
matched its longest weekly winning streak in history using
Refinitiv weekly data back to 1980. urn:newsml:reuters.com:*:nL1N31M1ZE
However, with the yield now back below 4.10%, the streak is
in jeopardy. If the yield ends this week lower, it can suggest
the potential for a much deeper reversal - click here:
urn:newsml:reuters.com:*:nL1N31J0PO
Meanwhile, the S&P 500 index .SPX is forging above
resistance at 3.815.20. Traders will be watching to see if this
strength holds into the close. urn:newsml:reuters.com:*:nL1N31Q0U6
Here is where markets stood around 15 minutes into the
trading day:
(Terence Gabriel)
*****
S&P 500 INDEX: CORRALLED BY SOME FORMIDABLE FENCE POSTS
(0901 EDT/1301 GMT)
Over the past month or so, the S&P 500 index .SPX has been
trapped between two retracement levels of its March 2020-January
2022 advance.
One is now proving to be significant resistance, while the
other served as key support. Traders are watching for a
breakout:
The 38.2% Fibonacci retracement of the March 2020-January
2022 advance is at 3,815.20. The SPX closed back below this
level on September 21. The retracement level, then acting as a
resistance hurdle, capped strength into the SPX's October 5 high
at 3,806.91.
The benchmark index then slid to test the 50% retracement
level at 3,505.24. On October 13, the SPX briefly hit 3,491.58,
before a powerful reversal ensued. urn:newsml:reuters.com:*:nL1N31B0MK urn:newsml:reuters.com:*:nL1N31L0QK
On Monday, the SPX hit a high of 3,810.74 before it once
again backed away, and ended at 3,797.34. urn:newsml:reuters.com:*:nL1N31I0SD
Now on Tuesday, CME e-mini S&P 500 futures EScv1 are
implying around 15 points of weakness at the open.
That said, as long as the SPX can hold weekly Gann Line
support at 3,724, it can make more attempts to overwhelm
3,815.20.
In that event, a much more significant rally may take hold.
The descending 200-day moving average, and the resistance line
from the January peak, which capped strength in August, are in
the 4,100s.
Breaking 3,724 may see downside pressure intensify again
with the next support then at 3,647/3,636 and 3,612.
(Terence Gabriel)
*****
FOR TUESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT
- CLICK HERE: [ ]
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SPX10252022 https://tmsnrt.rs/3TW4eIb
Earlytrade10252022 https://tmsnrt.rs/3D96mWe
Cash Shiller https://tmsnrt.rs/3SAlHVR
Consumer confidence https://tmsnrt.rs/3D6wZeL
FTSE 250 relative to FTSE 100 https://tmsnrt.rs/3f80EvR
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)